lustratus REPAMA

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As is customary at this time of year, my Lustratus Research colleague Steve Craggs has launched his 2010 predictions for the infrastructure software market.

At this time of year many people make predictions for what the year to come will hold, only for them to be long forgotten by the time next year’s predictions come round. Uniquely then perhaps amongst other crystal ball gazers, Steve first grades himself on the predictions he made last year.

So take a look at the Lustratus 2010 infrastructure software market predictions to see how he did.

Danny Goodall

I was reading Robin Bloor’s blog entry from earlier in the year recently where he makes some interesting points. But I’m not sure that I agree with all of them…

Robin attempts to identify some of the defining characteristics of cloud computing but I get the feeling that he is starting from a slightly cynical stand point. And whilst I agree that vendor and service provider marketing tactics have created a great deal of hype, I feel others must also share some of the blame for the confusion in the space.

Anyway, his 10 Defining Points for Cloud Computing blog entry is here. I tried to post a comment but as it appears that it’s still awaiting moderation, I thought I’d reproduce it below.

An interesting read as ever Robin but I can’t help thinking that you’ve defined Cloud Computing more so by the things it is not, than what it is. But perhaps that is the place to start when defining something as nebulous as Cloud Computing.

Completely agree that cloud computing is a confused set of definitions and misunderstandings but whilst I acknowledge that the marketing tactics of vendors and providers should take some of the blame – so should the market analysts. The global IT analysts have resisted the temptation to coalesce around a series of definitions and market categories for reasons of vested interest. De facto market category definitions and market segmentations are still up for grabs. So for analysts it’s currently about land grab – attempting to be the firm that defines the broad Cloud Computing categories and drivers. Their attempts to define and steer the market on their terms simply further serves to confuse prospective Cloud Computing users.

I also agree that standards are currently few and far between. The upshot of this is that market analysts and vendors can afford to go in different directions without being restrained by common understanding and artificial technical limitations. Again the impact is on the potential Cloud Computing user who is left trying to find their way in a world that is not easy to define, classify and compare.

Finally the ease at which technology vendors can enter into a hosting agreement with someone and then rename a product line and voila – they become a Cloud Computing vendor, has made the Cloud Computing market incredibly crowded, incredibly quickly. Attrition and customer cynicism should account for the weakest vendors here leaving the candidates for success in the market categories in which they compete.

For what it’s worth I’ve tried to bring some sense to the categorisation of the various market categories and cloud computing vendors/providers in the Lustratus REPAMA market landscape, taxonomy and segmentation model. Instead of ploughing my own furrow, I stood on the shoulders of giants and worked from some of the best definitions I had found in the blogosphere and beyond.

I wondered if your readership my find this useful. This is discussed here.

http://www.lustratusrepama.com/go-to-market/a-market-landscape-for-cloud-computing/

My colleague Steve Craggs has also attempted to define cloud computing in lay-terms based on the categories above.Steve’s piece is discussed here.

http://www.lustratusrepama.com/marketing/cloud-computing-explained-without-the-hype/

Danny Goodall

My Lustratus Research colleague Steve Craggs has taken a step back from the hype surrounding Cloud Computing and has defined it for the layman.

Steve’s premise was that the Cloud Computing hype had reached fever pitch and that some of the claimed benefits had become pretty difficult to believe. He wanted to strip it down to the basics, define it and look dispassionately at the likely benefits and the trade-offs involved. Steve has also put some of the vendors and service providers in the space into the right context based on the Lustratus REPAMA Market Landscape / Taxonomy / Segmentation model.

The document is embedded below and can be downloaded from Scridb or the Lustratus web store.

Danny Goodall

I’ve just uploaded a document to Scridb which is based on a series of blog entries from the REPAMA blog.

In this series of 8 blog postings I described the format of the positioning statement that we use to help our clients capture their company or product strategy. I’ve finally got around to committing the description of the 7 elements…

• target customer/ideal client
• main pain/need or desire
• product name
• product category
• main reason to buy
• primary competitor or alternative
• the unique selling proposition – USP

…to ‘paper’. The document is embedded below and can be found on scribd.com.

Enjoy!

Danny Goodall

I see that Progress Software is in the midst of another restructuring and that to achieve this it will shed 12%-14% of the workforce.

This article details the problem and describes how “One Progress”, an alignment of the different divisions under the same banner, is the plan to turn the company around. I for one really hope that Progress can find some upward momentum. I worked for Progress for many years and still have some close friends at the company and its demise and inability to capitalise on the excellent technology it produces frustrated me then and it saddens me now.

President and Chief Executive Rick Reidy is tasked with a tough mission. To turn around a company whose main product line has reached maturity and whose growth initiatives and acquisitions have failed to gain traction. All of this in ultra-competitive markets and a pretty tough economic climate. My colleague Steve Craggs asked the question a little while ago whether the time is right for Progress to be acquired. It obviously wasn’t then but surely that point is getting closer.

In another article, some detail is provided on how the company plans to turn things around. It plans to:

1.Enhance Progress Software’s product strategy by focusing on growth opportunities in the enterprise software market and bring new products and solutions to market;

2.Change the way Progress Software takes its products to market by becoming more customer and solutions driven. This strategy will enable the company to be even more focused on ensuring customer and partner success.

3.Increase Progress Software’s market awareness, leveraging its more visible product brands that carry strong recognition in their respective markets.

It looks like a good to-do list. The question is whether it can be done.

The last two items struck a chord with me. Historically Progress always saw the technology as primarily important and the marketing function as a necessary evil and cost-centre. Instead of viewing marketing as the creative engine room that could give its products the platform they deserve, the engineering team had a disproportionately loud voice.

This approach came from the previous leadership’s engineering roots coupled to a negative attitude to the very concept of marketing. Instead of listening to the needs of companies and aligning all sales and marketing efforts behind them, products were developed to solve internally perceived technical problems or to match competitors’ functionality. Products were marketed based on esoteric features which resulted in ephemeral technology leadership but not continued sales dominance. It was still great technology because Progress is an engineering company but it was technology for technology’s sake.

I must say that whilst I worked with Rick years back, since he’s taken the helm I really don’t know what priority he places on strategic marketing within the new One Progress. But to achieve 2 and 3 on that list above will involve a fundamental change of corporate DNA.

I just hope that they try to sell and market their way out of the problem and not engineer their way out.

Danny Goodall

I’ve just uploaded the first draft of my latest Cloud Computing REPAMA Segment Analysis Study.

This time I’ve looked at a couple of vendors in the Cloud Software / Cloud Management / Application Services Management segment (using the Lustratus REPAMA Cloud Computing market taxonomy / segmentation model). Specifically I’ve reverse-engineered the key go-to-market strategies of 3Tera and Appistry. I will add another couple of vendors to the study as time goes on but for the moment I thought these would be two good candidates to start with. They are very different companies with very different product approaches to solving similar, if not quite the same problems. I wanted to spend a little time here highliting some of the interesting findings.

Differentiation

I’ve already blogged on my concern that Cloud Computing vendors/ providers are currently differentiating themselves against previous paradigms as opposed to creating differentiation strategies versus their real competitors – i.e. other cloud computing solutions. So it’s no surprise to see that this trend continues in this study with 3Tera. Looking at where 3Tera fires its competitive differentiation fire power in the UNLIKE element of the positioning statement we can see that the focus is:

traditional dedicated infrastructure

To be honest this is an implied competitor/alternative because whilst 3Tera is very clear on its value proposition and target audience, it doesn’t appear to engage in traditional competitive differentiation. Nowhere does 3Tera clearly define what type of solution they feel they are a better alternative to. There is an obvious implied competitor / alternative which is the traditional ways of doing things. But this is never called out explicitly by 3Tera.

Appistry is clearer on its competitive situation. It believes that its competitive differentiation lies versus:

infrastructure approaches to cloud computing

The implication here is that Appistry focuses on the application and not the infrastructure which they believe yields many benefits.

Existing Applications

One area of strong correlation between the vendors in this study is that they both stress their ability to work with existing applications. This correlation suggests that this is a key customer requirement in this particular market segment. As shown in the chart below:

As you can see from the dashed pink line on the chart above (which represents the market mean – the average marketing strategy for this segment) there is strong support for existing applications in addition to the somewhat obvious “table stakes” feature of automated application deployment and management.

Value Proposition

Another strong area of correlation is in the value proposition. The first chart below shows the raw claims made by each vendor for the value they ascribe to their product offer.

Much of these categories of benefit/value are fairly generic and are all very similar to the the value propositions I would expect to see for a cloud computing product. When these value propositions are interpreted against our MITICOR value proposition classification, we can see a very strong correlation between the products of the different vendors as the chart below shows.

The value proposition for both of these products boils down to operational improvement and cost saving which again is very much as I would expect for a cloud computing technology in this segment.

Positioning Statements

I’m not completely 100% happy with either of these positioning statements as both of these companies appear to aim everywhere and focus nowhere. This lack of focus is important to note in itself as it is common in immature markets, but it does make nailing down a semi-accurate reverse-engineered positioning statement a little tricky. But here they are:

3Tera AppLogic Positioning Statement

FOR organisations looking to deploy successful online services to millions of users WHO are struggling to manage the complexity of the infrastructure required to serve online services to online users OUR AppLogic IS A grid operating system for web applications THAT PROVIDES the ability to assemble existing software into portable applications that run on any grid and scale from a fraction of a server to hundreds of servers with a single command UNLIKE traditional dedicated infrastructure OUR PRODUCT makes it extremely easy to deploy scalable web applications without dedicated IT resources and personnel

Appistry CloudIQ Platform Positioning Statement

FOR enterprises seeking to take advantage of cloud computing WHO need to migrate existing applications to the cloud and virtualized environments OUR CloudIQ Platform IS A Cloud application platform THAT PROVIDES enterprises with the ability to move multiple existing applications to the cloud and manage them across multiple cloud environments UNLIKE infrastructure-focussed approaches to cloud computing OUR PRODUCT allows existing applications to be packaged and deployed to a cloud without re-architecture

Both statements are weak in the target customer and their respective pain, need or desire reflecting the lack of clarity in their outbound marketing.

Slides

I’ve placed a slide deck which expands upon this research on Slideshare.net and this is embedded below. If you’d like more information on this study or a copy of the slides, please contact me. Details of  how to interpret REPAMA studies can be found in the Lustratus REPAMA Guide here.

Danny Goodall

I’ve been working on a way of categorising value propositions for some time. I’ve arrived at something I refer to as MITICOR which I believe represents the atomic value proposition elements.

By this I mean that all business to business value propositions can be broken down into these 7 base elements. I’m sure I will refine this over time but for our purposes these elements allow us to analyse and categorise the different value propositions that vendors use in their go-to-market efforts.

So what do these categories refer to?

Market

Elements categorised as “Market” include value propositions that relate to the organisation’s market or competitive situation, new product or service introduction as well as the organisation’s marketing efforts such as awareness, public relations or image.

Income

“Income” includes any offer that proposes to increase or sustain existing revenue. In addition new revenue streams fall into this category.

Time

“Time” relates to any value proposition that reduces the time it takes to achieve some organisational objective. Importantly this does not refer to reducing the time to achieve a tactical objective as this would likely be categorised under Operational below.

Institutional

Institutional value propositions relate to the organisation as an entity. Chief amongst these are value propositions that deliver value to shareholders. Taxational or political issues such as “green” policies also come under this heading.

Cost

Reduction in costs, offsetting costs and cost restructuring all fit under this value proposition category.

Operational

Propositions that deliver positive changes to the operational efficiency of the organisation come under this classification. Included in here would be propositions that provide visibility into the current operational effectiveness of the organisation.

Risk

The removal or mitigation of risk at a corporate, personal or project level falls under this value proposition classification.

Multiple Categories

Specific value propositions that vendors create will break down into one or more MITICOR category. It may be that a value proposition from a vendor relates to only one MITICOR category but it is likely that it will break down into more than one MITICOR category.

Examples

I’ve listed below some examples of vendor value propositions and the MITICOR categories that they break down into.

I wanted to document this classification in this blog because I will refer to them in future REPAMA research. I’ve also noticed during the course of my research that there are some very predictable value propositions/MITICOR element combinations. In a later blog I will try to document these MITICOR “chains” and specifically how they relate to the members of the decision making unit (DMU).

Danny Goodall.

I had a meeting with a prospective client earlier in the week and we were chatting about how differentiation and positioning in Cloud Computing has to mature.

The contention was that cloud computing vendors and service providers today are too inwardly-focussed and that they should look at the external market to determine their competitive marketing strategies. Cloud Computing differentiation bears all the hallmarks of early market strategy and is very limited. It got me thinking. Imagine if competitive differentiation was carried out in other walks of life the way it is currently carried out by most Cloud Computing vendors and service providers.

Imagine if Porsche for example had spent 7 years perfecting its new sports car, a car that was specifically engineered to be better than the comparable Ferrari in many very specific ways, a car that can do many things for its prospective owner. Imagine then if at the car’s launch it’s main differentiation was:

The Porsche 912 – you no longer need a horse to pull it along the road

Imagine if Xerox copiers, in an attempt to differentiate itself within the highly competitive markets in which it is present made the bold claim that:

The Xerox X987 – eliminates the need for corporations to maintain a typing pool full of typists to make copies of documents.

When the car was a disruptive new technology it was important to explain to its potential users how it was different from the paradigm it was replacing – the horse and cart. Likewise this was true with the discontinuous innovation introduced with the photocopier / photostat / copier. But once these technologies matured to the point where the paradigm was accepted and there was a genuine choice of suppliers to source it from, vendors then had to focus on their real competition and their real differentiation.

But today this is exactly how much of the differentiation in the various segments of the Cloud Computing market is currently carried out. Vendors and service providers have not yet made the leap that Cloud Computing is “an idea whose time has come”. So instead of aiming their fire at other cloud computing vendors, their differentiation strategies focus on the thing that they are replacing – the corporate data centre, on-premise hardware, non-virtualised operating systems, non-scalable web applicatons, etc.

Don’t get me wrong, it is absolutely essential that the prospect knows how cloud technologies differ from traditional technologies, but Cloud Computing vendors must also realise that they are in real competition for this business and lead with clearly drawn lines of differentiation between themselves and their actual, cloud-shaped competition.

The good news is that there are many “positions” still available to cloud computing vendors. And once these positions are established in the minds of  prospects, it will be doubly difficult for their competitors to change these perceptions.

Taking such a position now will give some vendors a great advantage in the nascent Cloud Computing market but others will just feed the horse and call “walk on”.

Danny Goodall

I’m kicking off some research into the Decision Making Unit (DMU) for Cloud Computing services and software.

I’m interested to see how much, if at all, the cloud computing decision making unit differs from that of tradition data centre or infrastructure software sales. And if it does differ (as I suspect it does) then what is the impact on traditional marketing elements like audience, message, value propositions, supporting materials, etc.

I want to examine the decision making units for each of the different high-level segments in the Lustratus REPAMA market landscape / taxonomy / segmentation model for cloud computing.

For each of these segments, the basic question I want to answer is:

Within a B2B Cloud Computing transaction, what job roles are involved in the decision making process, what do these individuals need in order to arrive at a decision and how does this differ from traditional enterprise software sales?

It’s important to first stress that “marketing”, in the sense of the departmental responsibilities of the marketing team within a vendor or service provider, can only achieve certain things with respect of the decision making unit. Much of the responsibility for managing the technical and commercial sale obviously lies with the “sales” team. So in my analysis I will limit myself at the moment to exploring the influence that the marketing discipline can bring on the decision making unit.

First some terminology. We think about the roles of the DMU in the decision making process in the following way and refer to it using the acronym – IGIDBU (because the world needed another acronym).

IGIDBU – Initiator, Gatekeeper, Influencer, Decider, Buyer, User. I recognise that it isn’t the most simple or memorable acronym or mnemonic to remember, but saying it that way preserves some of the implied “chronology of contact” in the sales process. First we meet the initiator, then we deal with gatekeepers, etc. until the user “uses” the software or services.

This categorisation of the roles in the decision making process is quite common and is documented in many places – a good piece of background can be found in Strategic Marketing Planning and Control -Drummond, Ensor, Ashford published by Butterworth-Heinmann. I have seen some models that add another entity that owns the budget – “budget holder” or “Financier” but for our purposes we’ll wrap that role up in the Decision Maker because in my experience in infrastructure software sales the decision typically comes from where the budget is.

As I mentioned above, for each cloud computing market segment I’m going to identify the most likely job roles that fall into the IGIDBU categories above. Alongside them I want to map their needs and the likely marketing materials and messaging that is needed to help them arrive at the “right” decision.

The Change in Perceived Risk

Of particular interest to me is the change in the perceived risk of the ‘purchase’ with Cloud Computing. With an enterprise software licence, the degree of perceived risk in purchasing comes from a number of key areas including:

• Will the product meet the functional needs of the users?
• Will the performance of the product match the requirements?
• Is the vendor stable/credible/’suable’?
• How large is the capital outlay – and can we afford to write it off if the project fails?
• etc.

Cloud computing adds or at least adjusts a number of these categories of risk:

• Will the committed service level meet our needs?
• Will the service level delivered match what was committed to?
• etc.

With an on-premise purchase of licensed software, hardware, etc. the onus for ensuring performance and functional fit after the sale is with the company making the purchase. However, in a cloud situation where performance and more than likely functional capabilities will be documented within a service level agreement, the risk is mitigated to a degree. As long as the SLA is specified correctly, the onus for ensuring that the service level is met now lies with the service provider.

So the question is, will this perceived lower risk, speed-up or otherwise streamline the decision making process? And if so how will that change the way vendors/service providers market to the DMU?

The Change in Expense Accounting (Cap-ex to Op-ex)

Another significant change that Cloud Computing introduces is how the cost is accounted for. Instead of tying up significant capital expense and watching it depreciate on an on-premise solution involving physical hardware and software licences, a comparable cloud solution can be paid from operating expenses, based on actual usage over time.

As mentioned above in traditional sales, the size of capital outlay and the thought of having to write that off if the project fails is a key determinant of the level of perceived risk in arriving at a decision to ‘buy’. Again, the rhetorical question is whether this reduced capital commitment will change ‘purchasing’ behaviour and if so what impact that will have on vendors’ sales and marketing efforts.

I plan to publish the research later in the year. I am in the process of recruiting a number of vendors/services provider who are willing to provide input anonymously in return for access to the research. If you represent such an organisations, please contact me for more information.

As usual I will document the process in these pages.

Danny Goodall

...falling in 2009. No great surprise there then as marketing budgets have been used by many struggling organisations as a “profit shock absorber” .

But what is of interest is what that reduced budget has meant to the shape of marketing organisations and their priorities. How are they actually allocating remaining budget in these tough times? What has this meant to marketing headcount? etc.

That is the focus of IDC’s Michael Gerard in his annual analysis of marketing spend. Some snippets of the study have been released publicly and I’ve listed some of these below:

• Large organisations’ marketing budgets have on average reduced by 8.3% and their headcount has reduced by 10%
• 6000 IT vendor marketing roles have been lost worldwide in 2009
• Lack of budget has forced process improvements and in particualar has meant closer collaboration with sales
• Broader, product portfolio marketing has been sacrificed to allow for more tactical themed campaigns.
• Sales enablement has become a focus

Michael makes some other general observations and recommendations in his blog which is well worth a read.

Danny Goodall