Lean Marketing: No Muda!

Marketing Awards for Plex and Markit Strategies

2009-06-19T11:06:00.011-04:00

Last night, the International Assocation of Business Communicators (IABC) Detroit chapter held their annual Renaissance Awards, and recognized several programs that were executed this last year by Plex Systems' marketing team in conjunction with Markit Strategies and PR, our marketing agency. The awards bestowed upon Plex and Markit Strategies were:

Two Awards of Excellence (their top award) for our Media Relations (PR) program and our Direct Email Marketing program.
An Award of Merit for PowerPlex 2008 (our annual customer conference) in the events category.

Congratulations to everyone on the marketing team, both internally and externally, and thanks to everyone who has supported these programs.

Does SaaS ERP Exist?

2008-12-30T09:21:00.003-05:00

A few months back, I came across a question on an IT Toolbox message board asking "Does SaaS ERP really exist?" The original poster said that the only company anyone had told him about was Netsuite. Of course, I took the opportunity to respond, and I've copied my notes here (with minor edits to update info). The entire thread is an interesting read for anyone in the software as a service industry, as it indicates a lot of confusion about what SaaS is, and some common misperceptions about the limitations and benefits of the SaaS model.

My response to the original poster was:

Alan, I'll respond to question #3 - Why are there so few SaaS ERP vendors? First, let me give you my caveats: I'm VP Marketing at a SaaS ERP vendor, Plexus Systems (thanks Molly for mentioning us!) We're not appropriate for your situation, so I feel like I can make a few points without coming across as "salesy."

I speak at conferences about SaaS on a regular basis, and when I describe my company as a provider of ERP systems for manufacturing, you can almost hear the groans. In the high tech community, ERP is widely considered to be a mature (i.e., dull) market with very slow growth, and the industry is dominated by a few very large players. At the same time, writing a new full-blown ERP application is a massive undertaking. Given that confluence of circumstances, why would any hot young company (the majority of SaaS companies are startups or first-stage growth companies) want to attack that market? That leaves you at the mercy of the large providers who are already in the market (e.g., SAP and Oracle) who will slowly bring SaaS solutions to market, trying not to cannibalize their existing sales, and a small group of upstarts (like my company) who have already made the transition and are focused on one specific market (for us, discrete manufacturing).

Because most SaaS companies are new(ish), most of the solutions they are providing are focused on individual departments (e.g., sales) or functions (e.g., transaction processing). They simply haven't been around long enough to offer an enterprise-class solution that spans multiple departments, as an ERP system does. So, my list of SaaS ERP solutions would include: 1) SAP's Business ByDesign (a huge boost to the market, when they finally launch it) 2) My own company, Plexus Systems 3) Glovia (although their SaaS solution seems to have vanished recently) 4) Workday (though this is really human capital management for now, they will be a more full-blown ERP solution eventually) 5) NetSuite (when they started, they weren't really an ERP system - they competed with Quickbooks more than anything else. However, they've been adding functionality and trying to go up-market with these new functions, and they're a smart company, so I expect them to succeed) And, of course, there are dozens of very small companies that offer very specialized solutions for individual markets.

I hope this is helpful.

The Online Marketing Cycle and Marketing Automation Software, conclusion

2008-12-16T11:12:00.007-05:00

In a couple of posts last week, I described our recent success in putting into place a lead generation program using a marketing automation system from Marketo. It's been very successful, and each week we are turning over a record number of qualified leads to our sales organization. The first two posts dealt with how this whole thing worked. However, there were some bumps along the road, and I'm going to talk about those bumps today.

The first problem we had is that we had no experience in a few key areas: best practices around landing pages, and "lead scoring," the system whereby points are assigned based on activities people take on your website, downloading papers from direct marketing, etc. But the more pressing issue was one of content: if we were doing to take our direct marketing program to a higher level, we needed content (white papers, case studies, etc.) with which to entice our email recipients.

As soon as we deployed Marketo, replacing all of our web forms and landing pages, we discovered an annoying problem: junk responses (AKA spam). For those of you not familiar with this issue, it turns out that hackers have created a series of bots that can search websites for forms, and then fill in those forms with spam. You think it's annoying to get Viagra ads in your inbox? Imagine how annoying it is to get it inside of a marketing automation system. (Just to be clear: these bots are not actually filling in this forms, but rather they capture information about the program that reads the forms, and they send spam data directly to that program in a format that gets through).

There is a simple, though inelegant, solution to form-spam: a captcha. Captchas are those images of distorted letters that you must read and fill in in order to confirm that you are a live person rather than a bot. Annoying, yes, but entirely useful. You would think that any software that is routinely used to build web forms would have this capability built-in, but it's absent from Marketo - an absence that the companys says it will address. In the meantime, we've been working on deploying our own captchas on the Marketo forms, which requires custom programming, which takes time. In the meantime, we're stuck with lots of junk being entered into our system every day.

The long-term issues focused on our lack of experience in deploying landing pages conforming to best practices, maximizing our return on investment for our ads. We could have hired a consultant to help us, but in fact it's difficult to find consultants with expertise in these areas - especially in the midwest. Additionally, I'm a firm believer in letting my people stretch themselves, and I was interested in learning more about this anyway. So our solution? Read a bunch of articles, try something, watch the results, and improve it. That's what we've been doing - we post two landing pages for each ad, with one variation between each pair (e.g., different offers, different graphics, one short page and one long page, etc.), rotate them equally, and we watch the results. When there's a clear performance advantage to one, we update all of our landing pages with that new change, and then we test something else. To that end, we've been doing fairly well with our conversion rates.

The other lack of experience was in lead scoring. As I mentioned in an earlier post, the real value of lead scoring builds up over time, and so I wasn't expecting much out of this in the first few months. Our target customers take their time in deciding to launch a new project, and they do lots of investigation before they're really ready to talk to us - in some cases, they can spend a year or two thinking about it before they're ready to talk to us seriously. (Really, no joke - our record is 4 years between the time someone first made contact, and when they were ready to launch a project to evaluate and deploy a new ERP system.)

As I wrote in my earlier post, we decide to make lead qualification a manual process for the time being, rather than relying on lead scoring. We'll continue to learn more about lead scoring as we go along, and hopefully the scores of our visitors will start building up over time in a meaningful way.

In the meantime, I am exploring additional tools that may be useful. My wish list is as follows:

1) Data append service, so when someone fills out the minimal information that we request on the website, the other fields that we want (e.g., industry, revenue, etc.) gets automatically added in.
2) Web site visitor tracking. While we use an analytics package, there are more advanced packages like the one from NetFactor called VisitorTrack that captures data about browsers on your website and appends info from several sources, so you see a record of the companies (but not the individuals) that browse your site.

Ideally, this would all be integrated into a single package with an automation tool like Marketo. That would be the killer web marketing solution, in my opinion.

The Online Marketing Cycle and Marketing Automation Software, cont'd

2008-12-03T10:52:00.003-05:00

As I described in my post yesterday, we've had great success in putting together an online marketing process, based primarily on search engine marketing, and using a marketing automation software as a service (SaaS) package called Marketo for follow-up and activity tracking. The results have been a flood of conversions (new contacts asking for information) in the last couple of months. However, we had previously had trouble in handing these contacts off to our sales team, as the quality varied widely, and the sales team looked with a jaundiced eye at the "leads" we were passing them. So what to do?

Marketo and other marketing automation packages have one solution for this. It's "lead scoring" which allows you to assign points to different activities, and track them for individual visitors to your website. For example, they might get 5 points for visiting the site, 10 points for downloading a brochure, and another 10 points for a repeat visit. It's not limited to the website, either; we are using Marketo extensively for intelligent direct marketing programs, and clicking on a link in an email newsletter can also cause points to be added to someone's score. You can then set up the system so that when someone reaches 100 points, for example, it automatically raises a flag and the lead gets forwarded to sales for follow-up.

While this sounds like a great solution, and can help you uncover people who are really interested that you might otherwise miss, it takes some time to get your scoring system set up, and for your targets to accumulate enough points to trigger the follow-up events. So what can you do in the meantime?

Our solution, while not the most elegant, has helped us reap great rewards very quickly. We hired someone to call all of the new contacts that are in our geography and "qualify" them with a series of questions. This isn't cold-calling, isn't a sales job, and isn't compensated the way sales reps are (no commissions). Instead, we hired an intelligent young woman with a very nice phone voice and manner to call them up, ask them a series of questions, and pass along those with real interest and real projects to our sales team. She also contributes to our direct marketing program, has been working with the rest of the team on automating different processes (e.g., automatic responses to those out of our geographic areas), and other work that requires

The results in the first full month of operations have been great. Out of the 800+ conversions, a little more than 5% turned into qualified opportunities that we passed along to sales. (Everyone else stays in the marketing database and receives newsletters and special offers on a regular basis.)

So our numbers went like this:

Pre-project:
10,000 unique web visitors per month, leading to
100 conversions per month, leading to
unknown number of qualified opportunities per month (but less than 5)

Post-project:
30,000 unique web visitors per month, leading to
800+ conversions per month, leading to
40+ new qualified opportunities per month

Just after the first full month of this program, our national sales manager came into my office and high-fived me for the number and quality of the leads his team was receiving. For marketers, how often does something like that happen in your career?

There have been plenty of bumps in the road, and there are still lots of areas for improvement and cost savings, and I'll go over those in my next few posts.

The Online Marketing Cycle and Marketing Automation Software

2008-12-02T10:01:00.004-05:00

It's planning season for 2009, and as part of that I'm reviewing the successes and failures of 2008. The most frustrating thing? Those areas where we've spent money and I can't judge the value because metrics are lacking. The best part? The one area where we've enjoyed considerable success.

Our success has been the fulfillment of our plans for lead generation and hand-off, focusing on search engine marketing. Back in the first half of the year, we were averaging between 8,000 and 10,000 unique visitors to our website each month, and fewer than 50 of those would find our contact page and either call us or fill out a web form to request more information. All of those would immediately get handed off to sales, with little or no feedback on how qualified they were, which ones turned into real opportunities, etc.

At the end of August, we made several decisions that have resulted in drastic improvements. First, we put new personnel in charge of our search engine advertising, which had previously fallen short of expectations (and wasn't even hitting the planned budget numbers each month). The results were immediately apparent: in the first week our traffic spiked 50%. So we increased our budget, and we doubled our traffic in September, and tripled it in October. Confident that we could maintain or improve this level of traffic, we moved on to the next step: capturing information from a greater number of visitors. This took some strategic thinking, investigation of best practices, and quite a bit of work on the implementation side.

First, we dividied our keyword advertising into discrete groups of keywords, all focused on individual topics (e.g., terms about lean manufacturing, terms about inventory management, etc.). We ended up with 15 groups, replicating these groups on all three major search engines advertising networks. This grouping enabled us to do several things:

1) Create and test variations on advertisements with phrases and messages specific to each topic.
2) Create and test variations on landing pages with information specific to the topic. (Not surprisingly, shorter pages tested better than longer pages.)
3) Offer downloadable white papers or case studies appropriate to the topic, in exchange for contact information from the visitor.
3) Offer deep links to detailed information, taking people from the landing pages to the sub-pages on our site that provided extensive information on our capabilities in each area.

This was a HUGE amount of work, with several people working full-time for several weeks to get the content organized, the landing pages created and tested, etc.

During this process, we realized that the tools that we were using for tracking all of this information was not designed for our type of marketing and sales process, and was not streamlined to handle the amount of data we were generating. Upon a tip from a member of our board, we investigated several different marketing automation tools, including Eloqua, Vtrendz, and Marketo. All of these are online tools (which we love, since that's our business model), all are integrated with Salesforce.com (which we don't currently use, but which our sales team would like to use), and all are designed to optimize and automate online marketing campaigns, including search engine marketing, newsletters, and automated follow-up. I won't go into our decision-making process in detail, but in the end we chose Marketo.

The Marketo system enabled us to easily create and post the landing pages, with web forms that go directly into the Marketo database. Once someone fills out the webform, we track their entire history of web browsing on our site, as well as all outbound marketing to them (e.g., follow-up emails, newsletters, etc.) - and it's all done inside the Marketo database, including sending emails blasts and newsletters, scheduling automated follow-ups, etc.

Neither the Marketo system nor our internal process is perfect. Marketo doesn't offer captchas on their web forms, for example, and we still need to work on requiring the right information on web forms, and on focusing our efforts on the countries where we do business, etc.

Even so, the results have been simply amazing. For November, we maintained our high level of daily web traffic (though with the US holidays there were very few business days in November), and we received requests for information from over 800 unique individuals via our website ("conversions" in the Google/Yahoo vernacular). That's a tenfold increase over previous levels - yes, a TENFOLD increase in three months.

So, of course, the question is, what the heck do you do wtih all these requests? I'll write another post about what we're doing, and what we've learned, shortly.

More About SaaS Myths: Talk About Timing!

2008-08-07T10:25:00.005-04:00

On the same day that I posted my article on "The 10 Myths of SaaS", Gene Marks, a BusinessWeek guest columnist, posted his own article titled "Beware the Hype for Software as a Service". Marks is an executive at a systems integrator that sells on-premises software exclusively, so it's apparent he has an axe to grind.

He's getting a lot of flack from other bloggers who write about the SaaS market, including 2 Levels Above.

In my opinion, the article in BusinessWeek doesn't meet any kind of journalistic standards. There are no hard arguments - it's mostly argument by analogy. There are much better arguments both for and against SaaS all over the 'net, and I am dumbfounded that BusinessWeek would bother to post such an article. However, if you continue on and read the comments on the article, I think you'll be educated and amused. I especially like the comment that compares the author to "a girl being stood up on her first prom." :-)

The 10 Myths of Software as a Service

2008-08-06T10:23:00.008-04:00

I've been working on this material for a white paper we're publishing, and I'm interested in hearing any feedback on the topics below.

The 10 Myths of SaaS

As SaaS has become more widespread, a set of perceptions about SaaS have become accepted as “common knowledge.” The list below presents these assumptions, and provides data for judging their accuracy.

Myth #1: SaaS is only for small companies
Because the SaaS model was pioneered by startups in the software industry, early acceptance was widespread among small and midsize companies. However, according to research published by Saugatuck Research in March of 2007, “Large enterprises are now more likely than small companies to leverage SaaS in their core computing environments, even for business applications considered to be mission-critical.” According to Saugatuck, there are three drivers behind the adoption of SaaS by large enterprises: 1) The establishment and expansion of SaaS aggregation, development and integration platforms (SIPs) by leading vendors; 2) the increase in the number of SaaS environments certified with regard to their integrity based on such auditable standards as SAS-70; 3) increasing verticalization and specialization of SaaS solutions. In addition, 95% of IT executives at companies with 500 employees said they were satisfied with the SaaS programs they are using, up from the already high 84% at companies of all sizes.

Myth #2: The cost-advantage is only in the short-term; long-term, SaaS is more expensive
Total cost of ownership calculations are notoriously complex, with end results varying widely based on small changes to the assumptions used for the calculation. However, SaaS costs usually compare favorably to large organizations providing robust implementations of enterprise software, with regular upgrades and patches. SaaS costs may be less advantageous to a small or mid-size company that skimps on its IT operations.

One area that is often overlooked in comparisons, however, is the time value of money. In essence, SaaS keeps cash in the hands of the customer longer, freeing it to be used for other critical operations. According to Bruce Guptill, managing director at Saugatuck Technology, “SaaS is a means to increase the capabilities of the company at a faster pace and at lower costs…. [companies] want to put money into growing,” rather than infrastructure.

Myth #3: Security is a concern with a SaaS application
According to IDC and Gartner Group, the two biggest threats to IT systems are not hacker attacks, but disgruntled employees and ex-employees with access to internal systems, and a lack of control for critical data.

The top SaaS providers (including my company, Plexus Systems), undergo regular audits to the SAS-70 standard, an auditing standard developed by the American Institute of Certified Public Accountants (AICPA). An accredited SAS-70 audit is widely recognized as a vital benchmark in security measures, because it represents that a service organization has been through an in-depth audit of their controls over information technology and related processes.

Additionally, top SaaS providers typically have advanced biometric controls for access to the system infrastructure, advanced anti-hacking systems to record all attempts to access the system, and a dedicated security team that monitors these systems 24x7. In fact, the security measures employed by mission-critical SaaS providers are usually far more advanced than those used by Fortune 100 companies.

Myth #4: SaaS is only for group or departmental solutions, not for enterprise applications
Early SaaS offerings were generally targeted at small groups or departments within larger organizations, focusing on costly applications that had shown low ROI in the past, such as CRM. However, according to a report issued by Saugatuck Research in July of 2008, “SaaS is expanding well beyond its early low-cost, easy-to-deploy niche application roots to become an important business computing force that is fully integrated with broader enterprise architectures.”

In other words, SaaS has gone from point-solution curiosity to mission-critical applications for enterprises, because the benefits offered by the approach are being matched to enterprise-class applications, such as ERP.

Myth #5: It’s impossible to integrate SaaS applications with my other systems
In direct contrast to the “science projects” required to integrate traditional on-premises applications, many SaaS applications utilize industry standards such as XML to easily swap data and integrate with other systems. For a software application with a well-documented API, integration with a SaaS solution may take a few days – or even a few hours – vs. the weeks and months required for traditional applications.

Myth #6: Using a SaaS application gives me less control over my business and my data
When evaluating a SaaS application, some people fear a loss of control over their data, and in turn their business. In fact, quite the opposite is true.

The contracts and service level agreements utilized in conjunction with SaaS applications almost universally guarantee an organization the right to access and download its data at any time, and SaaS providers almost universally define ownership of data as belonging to their clients. Additionally, SaaS providers like Plexus Systems provide a flexibility in accessing, displaying and analyzing data that is difficult to replicate with legacy on-premise systems.

This combination of guaranteed ownership rights, flexibility of usage, and anytime/anywhere access give users MORE control over their data and businesses, not less.

Myth #7: Multi-tenant/single-tenant/virtual technology is not important
A multi-tenant architecture, combined with an agile development methodology, is the only SaaS solution that delivers long-term advantages beyond cost and resource use. Because a multi-tenant architecture removes the requirement of testing all software updates against multiple hardware/OS configurations, development of new features is greatly accelerated. This allows the SaaS provider to roll out new features upon request, rather than waiting until they can be bundled in the next software “upgrade”. In fact, with the multi-tenant model, there are no “upgrades” required; a single software installation is used by all users, and new features are automatically incorporated into this installation as they are delivered by the development team, rather than being relegated to a one-off “customization” that may not carry forward to the next major update.

The single tenant or hosted model may be advantageous for a company with limited IT resources, but hosting does not offer any of the long-term advantages of a multi-tenant SaaS solution. Because three parties are involved (customer, software vendor, hosting company) the costs may even be higher than running a system internally. Moreover, because each hosted application is an island unto itself, the model suffers the same challenges surrounding upgrades and customizations as the on-premises model.

Myth #8: I can wait for my current software company to offer a SaaS solution
Major software providers have no incentive to launch a SaaS solution until they are forced to by market competition. In fact, many market forces are pushing these companies to NOT develop a SaaS solution: their sales channel is not optimized for SaaS, their financial model is dependent on large sales of perpetual software licenses, and if they are publicly traded, they may be punished by investors for changing their current business model.

When one of these legacy software vendors does finally make the decision to move to SaaS, it can take them two years or more to launch the first version of their SaaS solution – sometimes much longer. Moreover, for a traditional software company to transform itself from a product development company into a service organization is a major undertaking: think about the quality of service most customers receive from their current software vendors, and you’ll get an idea of the challenges facing these companies as they seek to transform themselves.

In summary, companies who choose to wait for their current software vendors to develop a SaaS offering have a long wait in front of them, and will be missing out on the financial and operational benefits that a SaaS solution provides.

Myth #9: SaaS reduces the authority and value of our IT department
To paraphrase Rodney Dangerfield, most IT departments “don’t get no respect.” The complexities of running sophisticated enterprise systems are lost on non-technical personnel, and so IT organizations suffer from the dreaded “C/F” syndrome. That is, when things are running well, their users grade them with an average “C” – after all, the systems are supposed to be running smoothly, right? And when things go wrong, the IT organization immediately gets graded an “F”, whether it’s their fault or not.

It’s no wonder that some IT professionals are defensive when it comes to anything that may infringe on their responsibilities. However, the IT professionals who have embraced the SaaS revolution are finding something surprising: SaaS empowers IT organizations in a way that traditional on-premises applications do not.

For IT professionals, installing and maintaining applications and systems are laborious, but relatively low value, responsibilities. When these responsibilities are removed by the use of a SaaS solution, IT professionals can find themselves freed to focus on adding value as business process professionals; that is, SaaS removes the humdrum portion of the IT department’s responsibilities, and focuses the team on adding value by focusing on business processes and operations, rather than maintaining hardware and installing patches.

For IT organizations that embrace this new role, the prestige and authority of the department can be much higher than with their previous role.

Myth #10: SaaS might be a good interim strategy as I go through some major changes, but it’s not a long-term solution
Over the past few years, many companies undergoing a major business change (e.g., merger, acquisition, spinoff, etc.) have evaluated a SaaS solution as an interim option, until their new operational parameters are well-defined and they have the capabilities and budget available to do a large on-premises deployment. However, most of them have changed their minds after using the SaaS solution for a period of time, and have indefinitely tabled the long-term on-premises project.

This shouldn’t be surprising. According to research published by Saugatuck Research in July of 2008, customer satisfaction with SaaS applications far exceeds that of traditional enterprise software – a whopping 95% of customers are happy with their SaaS solution, while some other studies have measured satisfaction among on-premise software users at approximately half that. In fact, some studies have shown that traditional on-premises deployments of enterprise solutions such as CRM and ERP are considered failures a majority of the time. This is not true with SaaS solutions, where the renewal rate for enterprise SaaS providers remains above 90%.

The lesson: SaaS is a long-term solution that delivers superior customer satisfaction.

Winning Against the Big Guys (Or Why Microsoft Doesn't Get On-Demand)

2008-03-14T10:15:00.001-04:00

A colleague brought an article to my attention this morning, wherein a Microsoft product manager and a director at Avanade (a joint venture between Accenture and Microsoft that provides IT services based on Microsoft technology) discuss why Microsoft isn'g going full-tilt into the on-demand model for ERP. It's very interesting in what it reveals about the mind-set within Microsoft about the on-demand model.

First, the article's author and the people quoted continually confuse the "on-demand" or "software as a service" model with the "hosted" model. To reiterate an earlier post, let me clarify these definitions:

Hosted applications: this simply means someone else is managing the application on a computer that is remote from the user. Hosted makes no promises about the applications being delivered in a multi-tenant mode, nor about the delivery method - even client/server solutions can be hosted, given enough bandwidth. (This is a new spin on an older outsourcing model made popular by EDS and other providers.) Hosting ADDS complexity to the buyer-vendor relationship by introducing a third company, the hosting provider - and thus adds cost. It does nothing to address the issues of upgrades, new feature rollouts, maintenance, etc., except to transfer the requirements to the third party hosting company, who charges for all of these services.

Software as a service (or on demand) applications: the idea of delivering software as a network-based service has evolved into web-native applications with an invisible back-end - the users know nothing about the infrastructure, there is no requirement to buy or lease hardware, and in the best cases, there isn't even a client application that needs to be installed. Application developers forego the traditional waterfall development methodology (V 1.0, 1.1, 1.2, 2.0, 2.5, etc.) in favor of agile development methodologies, which create versionless software. Think about Google: when did they last change the software? When did they last do a backup? What kind of software do you need to install on your PC to use Google?

The advantages of SaaS or on demand are ENORMOUS when compared to both the on premises software model, and to the hosted model. It's not just about cost, though there are terrific cost benefits to SaaS applications; it's about agility and flexibility in getting and using new features, and about the software getting better each and every day.

There are two quotes that surprised me in the article. The first:

Brad Wilson, general manager for Microsoft Dynamics CRM, said, "Companies have shown themselves willing to take marketing, sales and service online, less so supply chain, less so financials." Tell that to NetSuite, Intuit (with Quicken Online and Turbotax Online), and supply chain companies like Procuri, Ketera, E2Open, and many others that are showing phenomenal growth. Even SAP is getting into the on-demand ERP market with Business ByDesign.

The second surprising quote is: Michael Merfeld, Avanade's director of customer systems for Microsoft Dynamics, said, "There is a segment of the market out there that views ERP as a necessary evil. They want to buy it like a utility. They don't conceive of it as a strategic weapon. Those customers are very contrary to the whole Dynamics message."

Frankly, that is self-serving BS of the first degree. Companies don't look at the software as a necessary evil; they look at the old software model as an UNnecessary evil! When comparing a package like Dynamics, with a license cost of $1 million and an implementation project of >$2 million, to a package like Plexus Online, with NO upfront license costs and a smaller and faster implementation project, which would you choose? However, the cost argument just gets some attention, and it doesn't sway many companies; it's when they realize that they don't have to plan for a major upgrade before the implementation project is even over (commonplace with large on-premises systems) and don't have to worry about applying maintenance patches, doing nightly backups, etc., that you see a fog lifting from around them. Additionally, if they find a feature that is missing from a legacy package like Dynamics, they have to figure out a work-around for the next 1-2 years until the feature is added (IF it's ever added); with on-demand systems like Plexus Online, we can literally deliver the feature in a few days or a few weeks, often before they even make the decision to sign a contract. That simply blows companies away.

To his credit, Merfeld acknowledges that they're losing deals to Plexus on a regular basis. It's his dismissive attitude about WHY they are losing deals that is somewhat amusing, and somewhat frustrating. He clearly doesn't understand the advantages of the on-demand model that has emerged in the industry, and that's not that unusual. We SaaS evangelists have an enormous educational task in front of us - but the SaaS snowball has been rolling downhill for some time now, and it's gathering speed, mass and momentum.

Final note: it's ironic (and indicative of the challenge in front of Microsoft) that Plexus Online is built entirely on top of Microsoft technologies, including SQL Server and .Net.

Buying vs. Selling: Lead Generation (cont'd)

2008-03-11T17:01:00.006-04:00

Continuing on the track of my post earlier this week, I have an experience that I wanted to share that I think is an excellent illustration of two companies: one that is stuck in the "push" model, and one that was founded on the "pull" model.

First, let me set the stage. I hate tradeshows. (Wow, I just realized that a lot of my posts are about things I hate.) I don't mean I hate them with a burning intensity - just that I strongly dislike them for both personal reasons (I have a bum knee, and standing around on thinly carpeted concrete floors in a non-descript convention center is physically and mentally painful) and for professional reasons (high cost in dollars and resources, difficult to measure ROI). But we still do them, and as I wrote last year, we're actually doing MORE shows this year than last. We're also spending considerably less to do this higher group of shows, because we've downsized our presence - fewer people, smaller booth. Doing these small (10x10 booths and tabletops) required a different type of display, and that's where my story starts.

I defined our requirements for a pop-up booth, a table-top display, and a couple of ancillary things (banners, etc.) to my team this past week, and pointed them at a very large, long-established providers of tradeshow exhibits. (I'm not going to name this company, but it begins with S.) A week later, the team came back with a quote for one of the components (window-shade banners) and a turn-around time of a few weeks for the item. I pushed back and said that we were now 3 weeks away from an important event, and I wanted us to have the pop-up booth ready in time so we could have a more professional presentation, as compared to a couple of banners, a table, and a pipe-and-drape space. Instead of going back to the big company, however, we thought we'd do a quick search for used booths on eBay, saving a few bucks. (FYI, tradeshow booths in all of their forms must be the fastest depreciating asset ever owned by a company. An exhibit that costs $10k to buy new is worth about 1/10th of that 30 days later - IF you can actually sell the damn thing.)

I shouldn't have been surprised by the number of options I had on eBay, but I still think of eBay as a collection of individual people selling personal stuff (like a garage sale), rather than as a storefront for real web businesses. Clearly, I need to change my impression of the company. One business using eBay as a storefront jumped out at us with the number of options they had, their clearly publicized pricing, and the creative options provided: Displays on the Net. I had one of my team members call them with our requirements, and in one phone call we had confirmed pricing, an acceptable delivery schedule, and well-defined graphics requirements all done - and turnaround time was going to be well in advance of our tradeshow (in 3 weeks).

So here is the contrast:

1) an established brick and mortar company where we had to call for pricing, took up to a week to get back to us with details, and had a turnaround time of several weeks, vs.
2) a new, web-enabled company where pricing was obvious, took care of all business in a single call, and had a turnaround time of several days.

Guess who we did business with?

The larger, established company seems to think it has a monopoly on providing the materials in question, when in fact it's a highly commoditized market where the largest players have been trying to maintain their high margins by acting as if ordering these materials is a lot of work, creating the graphics is requires expertise beyond mere mortals, delivery takes a long time, etc. This industry was ripe for someone with a web-centric view of the world, who embraced the "pull" attitude of the market and accelerated the entire process.

So we pulled the product right out of them! I'll post some photos of our new booth as soon as we receive it.

Buying vs. Selling: The Power Shift, and How It's Affecting Lead Generation

2008-03-11T09:30:00.007-04:00

I'm obviously not the first person to make observations about the shift in power from sellers to buyers, and this isn't the first time I've talked about it on this blog. But I have to return to it today, because of a couple of recent experiences.

First, we've had a series of internal discussions about the marketing-to-sales handoff process for new leads. Deciding whether or not a lead is "qualified" is not a trivial task in most cases, and when it becomes qualified enough for a sales rep to spend time on is an even trickier question. There are "classic" marketing metrics about how many times you touch a prospect before they become ready to talk with you about a real proposal (somewhere between 6 and 9 seems to be the common wisdom), about what percentage of people who visit your website are "just looking for now" (in excess of 90%, according to most accounts), etc. HOWEVER, (and I put that in bold caps because this is so different than everything else that has happened during this internal discussion): in discussing the source of the contacts that fill out the form on our web site to rquest more information or to download a white paper, the sales reps involved in the discussion unanimously agreed that all people who found us via Google and proceeded to fill out the web form should be forwarded to them as qualified leads immediately! All other criteria don't matter - they want to talk to those people NOW.

Our lead tracking is not sophisticated enough for me to say this with 100% confidence, but it looks to me like those sales leads close at a higher rate and at a faster rate than all other lead sources. (I'm working on fixing those metrics.) This makes sense because these are the people who are out there looking for a solution like yours. They wouldn't be looking if they didn't need it, right? This is in contrast to how we get other people to fill out the form on our site: downloading a white paper or research report are the most common ways, and while that action informs me that these people are interested in the topic of the paper, it does NOT say that they are ready to talk to us about a proposal. It suggests that they are in our target market, however, and so most of those people end up in a lead nurturing program, until they are ready to ask us for a proposal (or they recommend us to someone else).

That is an amazing thing. In my somewhat lengthy career, lead generation programs have run the full gamut from being completely ignored by sales (early in my career, when sales reps were gods), to the sales organization being 100% dependent on the leads my team generated (at my last company, where we were selling a hosted service aimed at small and mid-sized companies). Looking back, there seems to be a correlation between (on the one side) the size of our targets (e.g., small companies to large enterprises) and the sophistication of our product (e.g. simple, commodity product vs. complex enterprise application), and on the other side, how dependent our sales team was on the lead gen program. To boil it down: companies selling complex products via a highly paid sales force seem to be less dependent on lead generation programs, while companies selling commodity products to small and mid-sized companies seem entirely dependent on lead gen programs.

My current company, Plexus Systems, sells ERP software and manufacturing execution systems to mid and large size discrete manufacturers (via the software as a service model). Historically the sales cycles have been measured in months, and sometimes years. This seems like the last place you would expect Internet marketing and lead generation programs to have a significant effect - but au contraire! As described above, these efforts are prized by our sales team.

The funny thing to me is that Internet marketing can be seen as a corollary to one of the major principles in lean manufacturing and the Toyota Production System (TPS), which is part of our DNA as a solution provider to discrete manufacturers: the concept of "pull" vs "push". In lean manufacturing (to greatly simplify a concept), parts are "pulled" by one operation from their suppliers, as they are needed. This is in contrast to a supplier "pushing" large quantities of parts to their customer, to be used up over months. Pull leads to streamlined operations and reduced inventory, and all sorts of efficiencies for the operation. It also signifies a significant shift in power from the seller (pushing goods) to the buyer (pulling goods only as needed).

Internet marketing (and search engine marketing in particular) is based on the pull principle, while the old-fashioned sales model is based on the "push" principle. That is, companies "pull" information from us when they have a need, rather than us "pushing" a product on them that they may not need for months or years. (For the lean manufacturing geeks out there, you might consider my companies's search engine advertisements and natural results to be a form of kanban cards that allow companies to pull information from us as needed.) That simple change in philosophy has a huge impact on the efficiency of the sales process, measured in how fast they make a decision and move to deployment.

The second experience I mentioned in my intro above: I recently had an experience with two very different companies selling the same basic items. One was a traditional brick and mortar operation, the other a new-ish web operation. In my next post I'll describe how interacting with these two types of companies was radically different, and I'll try to tie that to the pull vs. push argument.

Is a Downturn in the Economy a Good Thing for SaaS?

2008-02-28T14:27:00.004-05:00

In a recent company meeting, our management team received this question from a coworker: "Is a downturn in the economy going to hurt us?" It provoked some interesting discussion, and I'll try to summarize it here.

First, a little background. My company, Plexus Systems, provides ERP and manufacturing execution systems (e.g., quality management systems, inventory management, production scheduling, etc.) to discrete manufacturers, with a large concentration of customers in the automotive industry, and a lesser (but fast growing) concentration in aerospace & defense, medical device manufacturing, and packaged food manufacturing. How's that for being in the bullseye of a recession? (As with all economic data, the recession in manufacturing is a complex story, but if you worked in the automotive industry in Michigan you would certainly feel like you've been in a recession for more than a year.) Rather than being a Silicon Valley or Boston/New York-based company, we're based in Michigan, in suburban Detroit - again, the bullseye of the recession (and one of the worst spots for the housing downturn). As you can see, our employees see the world quite a bit differently than Silicon Valley developers do, for example.

The Obvious Answer
Now, on to the answers to the question. Obviously, some sort of a slowdown/downturn in the economy (or a recession in our target market: discrete manufacturers) is happening. And, again obviously, that means smaller IT budgets for companies, and fewer major IT projects (such as an ERP upgrade or swapout). So at the top level, a recession is definitely bad for technology companies overall.

Other factors come into play here also: businesses who are facing a downturn tend to buy from large, established providers rather than from emerging companies; financial stability of vendors becomes a higher priority, and small vendors like most emerging SaaS companies are viewed as inherently risky. Additionally, during a recession people are looking out for their own jobs and are less prone to take risks, and selecting a relatively small SaaS provider is seen as riskier than going with Microsoft, Oracle or SAP.

The Counter-Argument
There is a counter-argument here, at least as it pertains to subscription-based pricing. In a recession, preservation of cash becomes very important for companies, and they begin to worry about "over-buying" software - that is, purchasing an enterprise system that goes far beyond what they need (and paying for all of those unusable features). The subscription pricing model addresses the cash preservation issue, and the modular nature of many SaaS services help with the second issue.

And, as I mentioned in a previous post, companies that face a real business crisis (e.g., operating in bankruptcy) will often surprise you with how willing to take a risk they are - and thus how willing to adopt a new technology model they are.

So, in the end, it may be a wash for SaaS companies. While there may be fewer IT dollars spent during a recession, I think that there's a pretty good chance that a higher percentage of those dollars will be spent on SaaS applications.

The Wildcard: Inflation
There is a wildcard in the economic picture for SaaS companies: inflation. Many of the Gen Xers who have started the current crop of SaaS companies don't remember the double-digit inflation of the 1970s and early 1980s (nor the 11% national unemployment rate of my high school graduation year, 1982). The rising price of commodities such as oil, steel, etc. is having a marked effect on the global economy, and is starting to lead to broadly higher prices for consumers in the U.S. For SaaS companies, there are two effects: first, during an inflationary period, smart companies tend to spend faster, as their cash reserves may be worth considerably less in 6 months. (This is in direct conflict with what I stated above about how companies spend in a normal recession, but that's why this section is labeled as a wildcard.) Second, annual contracts for SaaS services that do not include a provision for raising prices at or above the Consumer Price Index (CPI) are going to be the death of some companies. If inflation rises to 10%, and you do not have the option to raise your prices by 10%, you are essentially giving ALL of your customers a nice, fat discount - without them having to lift a finger.

And finally, we should note that SaaS providers who price on a per user basis are more susceptible to downturns. As their customers lay off employees, they will likely see lower revenues from existing customers. Other pricing models (site licenses, per transaction basis, etc.) may be more recession-proof.

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Since this question is all about predicting the future (i.e., the impact of a recession on SaaS companies) I am particularly interested in hearing other opinions on this subject. Feel free to post comments, and I'll respond to them as appropriate.

I Hate The Beatles, Conclusion

2008-02-27T14:30:00.000-05:00

I finally got a funny/nasty note from a Beatles fan (see yesterday's post) about this ongoing series about why I hate The Beatles and all things boomerish, and I'll take that as the signal to move on. I'm going to conclude this series, drop this title line and start working on some new posts. First, however, I'll respond to some of the questions I asked myself yesterday regarding the impact of this "generation-centric" view of software development and marketing.

To summarize those questions: what impact does the generation of your team or your target audience have on your software marketing efforts?

To summarize the answer: although it may seem like younger IT people would be more likely to adopt newer technologies, and older IT people would generally stick with the tried-and-true approach, in my experience it doesn't pan out this way. (Unfortunately, I've never had marketing metrics that are detailed enough to track the age of our targets, so I'm talking about my impressions only.) The key thing to look for is whether the IT managers (CIO, VP IT, etc.) act as owners of the company, balancing risk vs reward and recognizing the business impact of their IT decisions, or whether it's just a job and they're going to keep doing the things they've always been doing. In other words, the enemy of new technology marketing is not age, but inertia. Things that encourage inertia are danger signs; things that punish complacency are welcome signs.

During the last 9 years I've spent marketing applications delivered via the software as a service model, I've been consistently surprised at how many troubled companies make the leap to SaaS. My initial bias was that I wanted visionary companies as my customers - those that saw the SaaS model as the wave of the future and were determined to embrace it early and be pioneers. But you know what? A lot of pioneers get killed. When somebody is about to get killed anyway, you'd be surprised at how big of a risk they're willing to take. Companies facing bankruptcy (or in some cases already in bankruptcy), companies who are laggards in their industry, and companies in declining industries all have very strong incentives for change - and change is what SaaS represents. So I've learned to stop being a snob about the kind of customers I want, and embrace any company that wants my services - as long as they can pay the bills.

To bring this full circle: I do believe that it's very, very easy to learn something early in your career and then just keep doing it over and over. In my profile here on Blogger, you'll see that somebody asked me a great question one time: "Do you really have 20 years of software marketing experience, or do you have 1 year of experience repeated 20 times?" That one question fundamentally changed the way I think about marketing. Just as IT managers can get complacent, it's easy for marketing people to get complacent - no matter what generation you were born into. And it's natural for a generation gap to occur, and for each generation to assume that the one that preceded them is hidebound and stuck in outdated modes of working and thinking - but making gross assumptions about large groups of people is a big mistake, as I mentioned previously.

The generation you were born into certainly has an influence on what kind of company you will found (if you are the entrepreneur type), and perhaps what kind of company you'll gravitate towards (if you let your career drift without a destination). However, if you realize that whatever you learned in the first few years of your career are as obsolete as the desktop system and big VGA monitor you used at that job, and you start thinking about where to go next with your marketing efforts, I think you'll head towards SaaS (for now), and eventually wireless (as the primary mode of carriage for new applications) and socially-engaged applications (to embrace the collaborative style of Gen Yers, who are going to dominate the workforce for the next 20-30 years).

New and younger isn't always better, but in the technology world, old = obsolete, and none of us can afford to be obsolete.

I Hate The Beatles, part IV

2008-02-26T09:49:00.003-05:00

Continuing down the road of my burning hatred for the Beatles and all things boomerish (and what lessons can be gleaned from that for software marketing):

In the "thinking out loud" mode of writing that I employ for this blog, it surprised me to discover in my last post that the major software/hardware architectures of the last 40 years of information technology can be mapped almost perfectly to the generations of their founders, and the stereotypical characteristics of those generations. That is:

Veterans (founders born before 1946): this generation had a very high percentage of military experience, and placed a correspondingly high value on organizational structure and hierarchy. Information was shared on a need to know basis. (In other words, do what the boss says and keep your head down.) Not surprisingly, these values led to the formation of mainframe and minicomputer companies and highly centralized IT departments. Companies founded by Veterans include: IBM, Honeywell, Wang, and Digital Equipment Corp.

Boomers (founders born between 1946 and 1960): the "Me" generation, all about individual empowerment and gamesmanship. Hierarchy and lines or authority are still important to Boomers - as long as that hierarchy includes them. (In other words, if you know an egomaniac, he's probably a boomer.) These values led to the formation of client/server companies that challenged the centralized authority of IT departments, companies like Apple, Microsoft, Oracle, etc. - the giants of today's computing world. Some typical boomers include Bill Gates and Steve Jobs. (Interestingly, Larry Ellison, the founder of Oracle, was born on the cusp of the boom, as was Hasso Plattner, the founder of SAP. Yet Ellison's egomaniacal style pushes him into the boomer camp, while Plattner's German background and love of hierarchy and centralized control push him into the Veteran camp, in my opinion.)

Generation X (founders born between 1960 and 1980): iconoclasts, Gen X never met an establishment, guideline, rule, organization or process they couldn’t find a way to challenge. (Yes, we're know-it-alls, sarcastic and skeptical.) These values led to the formation of software-as-a-service companies, including Google and Salesforce.com, Netsuite, and a rash of other startups - there were so many boomer clowns clogging the hierarchy above us in the workplace that we just had to go and found our own companies, and we just HAD to do it differently than those boomers would. I just discovered that Marc Benioff, founder of Salesforce.com, is the same age as me, born in 1964 - a classic Gen Xer, although he carries the ego of a Boomer. Evan Goldberg, founder of Netsuite, is 41 - born in 1967. Rob Beatty, founder of my company, Plexus Systems (a SaaS provider of ERP for manufacturers), was born in 1963.

Generation Y: Sometimes called the new "Me" generation, Gen Y has gotten a bad rap, in my opinion, simply because there aren't enough of them in high level positions to change that reputation yet. This generation is used to everything being digital and online, and they were born to the idea of working 24 hours a day - there is no division between work and play for them, so don't criticize them for texting at work, because they're just as likely to be working on Saturday night at midnight. Even their incredibly successful startups (YouTube, founded by Jawed Karim b 1980, and Facebook, founded by Mark Zuckerberg b 1984) are derided as childish, when in fact they are the first technologies to tie together work and play in a seamless package. I don't think there's a technology delivery model that can be tagged to Gen Y (yet), but you just know that it will be online (there is no offline world to them) and social in nature. I found a great article from a Gen Yer that I recommend you read to get a bead on the tidal wave of workers that are heading your way.

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So, what are the implications of this for software marketing? Think about these items:

1) If you're a VC, would you invest in a SaaS company founded by a baby boomer? If you're looking for executives for a SaaS company, would you hire anyone other than a Gen Xer?
2) If you're marketing client/server technology, do you focus on CIO's that are older? Conversely, if you're marketing SaaS, do you target younger executives?
3) If you're marketing to Gen Xers, is it okay (or even required) to be skeptical in your marketing messages, and sarcastic about the older style companies?
4) If you're marketing to Gen Yers, how the heck do you find them? Of can you trust them to find you when they need you?
5) If you're a marketing professional that is a boomer or an X-er, how the heck do you keep on top of these shifting trends (and keep your job, or keep your career moving forward)?

I'm going to explore some of these points in more depth in my next few posts.

I Hate the Beatles, part III

2008-02-22T09:00:00.006-05:00

Continuing down the road of my burning hatred for the Beatles and all things boomerish (and what lessons can be gleaned from that for software marketing):

According to Wikipedia, a "generation gap" is defined as a popular term used to describe wide differences in cultural norms between members of a younger generation and their elders. In the workspace, the differences are glaringly obvious. I saw a great speech by Leah A. Reynolds, a consultant in Human Capital Management with Deloitte, where she defined major differences in the four major generations in the workforce today: Veterans, Boomers, Gen Xers, and Gen Yers. She graciously sent me the notes from her speech, so I'm going to crib from those (with some major areas snipped out). If you get a chance to see her speak, I highly recommend her!

Veterans: (born before 1946)
Over 50% of the males in the Veteran generation had military service experience. Their military training provided the grounding for much of the way they developed our modern organizations. Information was shared on a need to know basis. Command and control styles of management were the norm. And, if it took 10 or 15 years to make it to the next box on the org chart, no big deal. Veterans are known for their patience and perseverance. If you’re going to communicate with a Veteran you would most likely do it in writing, possibly put it in the mail and—here’s the really weird part—he (or she) would probably read every word of it!

Boomers: (born 1946-1960)
Boomers inherited the work world as the Veterans created it. Because there are so many Boomers (80 million here in the States), they’ve elevated corporate gamesmanship to new levels in their drive to achieve and excel. They are an optimistic and somewhat idealistic group. To communicate with Boomers, you’d need to recognize that Boomers are the original “Me” generation. You need to frame your message in a way that relates to them. They’ll no doubt pay attention to who sent the message, because hierarchy and lines of authority are extremely important to Boomers.

Gen Xers: (born from late 60s to 1982)
Xers have never met an establishment, guideline, rule, organization or process they couldn’t find a way to challenge. Xers created the notion of “Me, Inc.” which is the belief that no one can rely on a company to take care of them. Each person has to own their respective career, maintain marketable skills and put self interest ahead of the organization. After all, these are the same organizations that downsized the parents, relatives and neighbors that Xers grew up with. To connect with an Xer: be honest. No B.S. Cut to the chase. Tell it like it is. Put it on-line. And, make it fun. Life is short.

Gen Yers: (born between 1980 and 1995)
The precious, hovered over, encouraged, coached, educated, enlightened, enriched and outstanding offspring of Boomers. They’re flooding into our workplaces—all 78 million of them—with boundless energy and ambitions to match. And, chances are, mom and dad aren’t far behind - just ask the HR professionals around the country who are beginning to get phone calls from parents who want to discuss their child’s performance review!
To communicate with a Yer, you have to keep in mind that Yers are the children of the “Me” generation. Some people have even referred to them as the new “Me” generation. So, your message needs to relate to them. And, what you say to a Yer will be judged against what they view as meaningful and credible.

[end of quoted section]

Here's the funny thing: the generation gap between each one of these means that the younger generation generally has disdain (and disrespect) for the previous generation, especially if it was a dominating cultural force. Think of the boomers rebelling against their parent's generation, and you'll get something of the feeling I have about the boomers.

Now, here's how this relates to software development and marketing:

The latest software-as-a-service business model can be seen as the "next generation" of software, seeking to displace (and disrupt) the older generation of on-premises software, as embodied by giants like SAP, Oracle, and Microsoft. The successful new companies are generally founded by Gen Xers (e.g., Larry Page and Sergey Brin from Google), while the older companies were definitely founded by boomers (Bill Gates is a classic boomer) - or, in the case of IBM, by Veterans. So, in order by generation, we have:

Veterans: IBM (mainframe), Honeywell, Wang, Digital Equipment Corp (minicomputers/terminals)
Boomers: SAP, Microsoft, Oracle (client/server)
Xers: Google, Salesforce.com (I just discovered that Marc Benioff, founder of Salesforce.com, is the same age as me) (SaaS)
Yers: YouTube (Jawed Karim b 1980), Facebook (Mark Zuckerberg b 1984), and a million startups that are going to change everything.

It's interesting to view these companies through the generational lens - and I'll spend the next couple of posts doing that.

I Hate The Beatles, part II

2008-02-21T08:39:00.003-05:00

Now that I've had a good rant about why I hate the Beatles, I feel a lot better. The question before us is, Who cares? What does this have to do with software marketing? In fact, there are several lessons that can be learned from this.

1) Miscategorization of prospects: The funny thing is that many people assume that I'm a boomer. The off-the-cuff definition of the baby boom is '46 to '64, which puts me in the group. However, census demographics and cultural definitions are more complex than that, and more importantly I don't define myself as a boomer. So if Ameriprise Financial thinks they can appeal to me with their commercials featuring Dennis Hopper talking about how that generation redefined American culture, they are dead wrong; in fact, they are doing exactly the opposite of what they intend!

In most cases, when we are working on defining our marketing plans, we define our targets using broad categories. In my case, I think about a matrix with three dimensions in it: the type of manufacturing a company does (e.g., stamping, forging, injection molding), the market(s) they sell to (e.g., automotive, aerospace & defense, consumer packaged goods), and the role of the person within their organization (e.g., CFO, CIO, plant floor manager, quality manager). This matrix gives me a very detailed idea of who I am talking to and the specific messages we want to communicate to them. However, even with all of the work that goes into this, it's less than 50% accurate. Why? Because companies and people don't fit neatly into categories. In fact, I've never met a company that thinks that they are "typical" or "average" - or even normal!

So, my hatred of the Beatles and all things boomer can be seen as an example of how important it is to recognize that your target customers don't fit into the neat little boxes you like to categorize them in - and, moreoever, they may strongly resent your categorization of them!

I'm of the opinion that most marketing does no good, and that a small portion really harms the company doing the marketing. This is one example of how that harm takes place: by making mistaken assumptions about the needs and key issues of your target customers, based on miscategorization. We need to start treating each prospect like an individual, and provide a path for them to educate themselves, and identify their requirements and concerns - and then we can engage with them.

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More to come in the next couple of days, including why a younger generation always underestimate an older generation (i.e., SaaS providers underestimating legacy software providers), and much more.

I Hate The Beatles

2008-02-20T16:18:00.006-05:00

I hate The Beatles. There, I said it. Other than saying something derogatory about religion, is there anything that can get me in more trouble?

And I really do. I hate their hippy-dippy music. I hate all of the "British invasion" terminology that came into our language because of them. I hate the way that John Lennon has been sainted in martyrdom. I hate Ringo's and Paul's pruny old faces. But most of all, I hate what they represent: the total domination of American culture by baby boomers. (Aaarrrgggh, I just Googled "baby boomers" and came up with 5.3 million results - and the second result has the URL http://www.aginghipsters.com/!!!!!)

My problem is that I'm a "tweener" baby. Born in 1964 (just 6 weeks after The Beatles landed in NYC), I don't fit into the baby boomer generation, yet I'm a few years too old to be considered a Gen Xer (though my personality definitely fits the Xer generation better). As a former colleague go mine described it: "Too old to be cool, too young to cash in." I should print that up as a t-shirt.

Let me describe what the baby boomers left me and my cohort:

1) The double-standard of "do as I say and not what I did when I was a young stoner" when it comes to drug use
2) The bankrupt Social Security and Medicare system. (Do you think it's a coincidence that current projections put these systems into insolvency in the '30s, just as I turn 65?!)
3) The forced viewing of 65 year old Mick Jagger and friends dancing on stage ad nauseum. (Enough already! You're old - stop prancing around get off the stage!)
4) A legacy of STDs that would forever transform the definition of "free love" - and now that they can't get it up anymore, we're stuck with these horrifying ads for Viagra, Levitra and Cialis!
5) Ruined inner cities in most of America, after the riots of the late 60s
6) Some guys in their 60s who still dress and live like stinky hippies driving Volkswagen Microbuses. (By the way, check out that link to the Ted Nugent interview. He's nuts - and a Boomer himself - but amazingly, he and I agree on this!)

In summary, these guys ruined a bunch of things for me and my cohort. We've lived our entire lives in the shadow of the baby boom, forced to listen to the Beatles when we really wanted to hear The Talking Heads and Prince and The Violent Femmes, and forced to watch movies with an ever-balder Dennis Hopper and Jack Nicholson trying to bed younger and younger women. We're stuck with our professor's veneration of Jack Kerouac's "On the Road" (wouldn't you really want to punch his characters in the face if you met them in person?) and the overblown "genius" of Allen Ginsberg's "Howl". It's nauseating - and moreover, it's maddening. I nearly get violent when I think about it, and I'm forced to think about it every day, as I see this on television, hear it on the radio, read about it in newspapers, etc. (Interestingly, some are claiming that Barrack Obama is the first Gen X presidential candidate, but I think he's really a tweener like me - born in 1961, and definitely raised outside of mainstream US culture. That alone makes me want to vote for him; at least we won't have a Fleetwood Mac themesong for his campaign!)

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"So who cares?: you might be asking. "What the heck does that have to do with software marketing, agile development, and the on-demand model?"

A lot, as it turns out. The implications for how we market and deliver services to our customers are large, and I'm going to take a few posts to explain my views on this.

The Hype Cycle, the "Trough of Disillusionment" and SaaS

2007-10-24T10:07:00.000-04:00

Thanks to all who wrote or posted comments with congratulations on the birth of our twins, Kathleen Marie Fetterman and Patrick Henry Fetterman, born October 9th. They and their mother are doing very well. I'm trying to get back to my regular work schedule, and should be posting here more often again.

- Patrick

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I've written previously about the value of industry analysts such as Gartner, Forrester, AMR, etc., but today I'd like to explore something that Gartner has published: The Hype Cycle. If you are unfamiliar with The Hype Cycle, please click the link above, which will take you to the Gartner site and give you an overview of this.

Generally speaking, it's an interesting take on the adoption cycle for new technologies, which are usually overhyped, then over-trashed, and then go through widespread acceptance. There are many good ideas in this model, and the it does match well to the adoption of some well-known technologies. I'd like to explore this in the context of software-as-a-service.

SaaS is currently portrayed by Gartner and others as being in the Trough of Disillusionment, that dark period when the technology has already been overhyped and is not living up to its initial promises, and is searching for a new role in enterprise IT. I certainly agree that the SaaS model has been overhyped (Peak of Inflated Expectations), and to some extent this continues today. However, what these analysts (and some fellow bloggers) miss in positioning SaaS in the trough portion of the Hype Cycle is that SaaS has already gone through the full hype cycle, under other names - the ASP period, the "hosted" period, etc. The complexity missed in the Hype Cycle model is the rapidly evolving nature of new technologies, which means that the model that was originally hyped during the Peak of Inflated Expecations is completely different a few months later.

And that's where we are with Software as a Service. The ASP and "hosted" and MSP models have gone through the entire Hype Cycle, I believe, which has dramatically shortened the cycle for the latest model, the SaaS or on-demand model. My personal belief is that we are past the trough of disillusionment with SaaS and are on a rapid path upwards over the Slope of Enlightenment.

However, this has led to an interesting moment in the software industry, especially in the manufacturing ERP space where my company, Plexus Systems, competes. While we are totally on-demand, a few of our legacy competitors are starting to embrace an outdated version of this model; e.g., QAD is now offering a hosted version of their software that adds to the cost of the system and does nothing to improve the deployment of new features or keep the software up to date. Because the model has evolved so rapidly, they are embracing a technology delivery model that was virtually abandoned in the Trough of Disillusionment segment of the cycle, and for good reason.

I'm open to counter-arguments about SaaS - I may be too much inside the model to give a completely fair and accurate view of the market - so please feel free to post comments, which I'll respond to as quickly as possible.

Birth Announcement: The Twins Have Arrived!

2007-10-10T21:31:00.000-04:00

Top photo: Kathleen Marie Fetterman (we're calling her Katie)

Born 6:39 PM, October 9, 2007
5 pounds, 9 ounces; 18 3/4 inches long.

Bottom photo: Patrick Henry Fetterman (we're calling him Henry)

Born 6:40 PM, October 9, 2007

6 pounds, 2 ounces; 20 inches long.

They arrived about a month early, but they're a good size and are doing well.

I will be offline for a week or so!

Software Marketing and Cognitive Dissonance

2007-10-08T09:01:00.000-04:00

A few weeks ago, I read a very interesting article on "cognitive dissonance" on the Dilbert Blog. I don't know if Scott Adams is using the term correctly for what he describes, but it's an interesting concept from a marketing point of view:

"Cognitive dissonance is, at its core, the inability to recognize and accept other explanations. I’m oversimplifying, but you get the point. " In other words, people have their mind made up BEFORE they seem to be making a decision, and they cannot accept the fact that their underlying assumptions may be wrong.

The effect of cognitive dissonance on marketing can't be overstated. There are two areas where I think this impacts marketers:

1) Among your sales prospects, many people with a great amount of experience have very set opinions on what their job is, and how they should do it. When you are trying to tell them to do something different, you're going to run into a great deal of resistance - simply because they can't wrap their mind around the fact that something they've been doing is not the best way of accomplishing their job. For example, with the software-as-a-service model, IT people are having a VERY hard time coming to terms with it. In my company, Plexus Systems (a provider of on-demand manufacturing software), we often joke that there are two kinds of IT people: those who want to add value to the business operations (and thus function more as a technical operations consultant), and those who want to spend their time babysitting servers and applications. If I could find a way to identify that first group, I'd have the perfect group of prospects to pitch our service to; on the other hand, trying to sell our service to the guys whose jobs are going to be changed radically by the software-as-a-service model is an uphill struggle at best, and impossible at worst.

2) Internally, in your department, you must recognize and root out cognitive dissonance. Doing things the same way you've always done them WILL NOT WORK anymore, and being open to true analysis of metrics and root cause analysis when looking at your marketing programs is a requirement of the job. The reason I started this blog is because I saw some fundamental flaws in traditional software marketing, which are highlighted by agile programming methodologies (including the rapid application development or extreme programming that Plexus does) - and which will lead many marketers to the unemployment line if they don't change their ways. Embracing the new software marketing model requires a truly open mind, and a pragmatic approach: try something, measure whether it works or not, spend some time figuring out WHY it works or not, and then use what you learn to make your next program better.

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I have a backlog of topics that I want to write about, so I'll try to get back on a 3-4 times per week schedule over the next month. Please check back for updates.

2008 Marketing Plan: Lean Thoughts, Lean Plan (cont'd)

2007-10-01T11:00:00.000-04:00

As I mentioned last week, I am working on my 2008 marketing plan. I've always hated this process, as it seems so artificial - how can I possibly know what I'm going to be doing a year from now? This is the first plan I've created since I started with Plexus Systems, and I am dedicated to doing it a different way. Also, because we've embraced rapid application development to deliver our on-demand software service, I CAN'T do a marketing plan the same old way. I described why in one of my very first posts, but short recap is appropriate.

Because we use an agile development methodology, there are no product launches during the year; instead, the on-demand service gets better each and every day, with new features rolled out continuously. The lack of product launches eliminates the artificial calendar that marketing historically uses to build an annual marketing plan; that is, the marketing plan is usually mapped around major launches for the year, and without it, there is no central organizational theme for the marketing plan. This creates a problem for marketing.

However, it's a GREAT problem to have. The traditional way of doing marketing plans is an ass-backwards model where the execution drives the strategy, rather than vice-versa. As I mentioned last week, I'm organizing my plan differently, based on a three-tiered model: strategy, content, and execution.

So the question has been, where to begin? I started by looking at different types of businesses that are content-driven, rather than execution driven. And, being in the marketing department, that line of thought drove me straight to the industry publications and websites that I work with, and which cover my company - pubs like Managing Automation, IndustryWeek, and Manufacturing Business Technology. Each of these comes out with an editorial calendar at the end of the year, letting people know what their main subjects are for the next year, month by month. My PR agency uses these to plan their pitches for inclusion in articles for each issue, and I use them for deciding on advertising in each issue.

The editorial calendar model strikes me as particularly apt for the marketing plan I'm trying to create. Why not create a month-by-month content calendar, matched up (in part) to some of these publications, and including some of the events where we will participate next year? So, for example, if one month Managing Automation is publishing articles on lean manufacturing, we could take a spin off that for our content theme for the month. For a month when we're participating in an automotive event, our content theme would be focused on automotive quality initiatives.

While this is still somewhat dependent on artificial external forces, at least they are market forces, rather than some artificial internal construct that has nothing to do with what our customers will be interested in. The convergence for our customers is that the same month they're learning something new about a specific technology or business issue, we'll be publishing additional information on that topic - so when they finish an article in IW and want to learn more about it, they'll do a search and (hopefully) find us.

Using the editorial calendar model gives me the organizational principle, and the execution falls out naturally from that. With each new theme comes a white paper, a webinar/webcast, one or two case studies, etc., etc. And I can choose to ratchet up or down the spending on execution each month.

I like it, but I'm open to suggestions and comments.

2008 Marketing Plan: Lean Thoughts, Lean Plan

2007-09-25T07:30:00.000-04:00

In working on my 2008 marketing plan and budget this week, I'm struck once again by how non-lean the marketing process is - how laden with "muda" or waste the typical marketing plan is.

For example, the genesis of most marketing plans is: I create a spreadsheet with labels for each of the marketing sub-departments (events, advertising, PR, etc.), schedule all of the major activities throughout the year (major tradeshows in the events category, product launches, advertising commitments in the ads category, etc.) and build my budget around those events, then I build "the plan". In my mind (and I think in lean principles) this is ass-backwards - and it reflects the problems that I've discussed in earlier posts, where I described the fundamental flaws in typical marketing. (In fact, this problem is the reason I launched this blog in the first place.)

The problems with this planning process are manifold:

It is driven by external forces that have little or nothing to do with the primary goals of marketing
The calendar is generally an artificial constraint that also has little or nothing to do with customers
The long-term commitments required by some of these categories go against the flexibility that I'm looking for in my marketing program - I want to be able to react quickly to changing market circumstances and to change my budget allocations if I find something that is working extremely well (or not working at all)

To properly create a marketing plan (note that I did NOT say to "create a proper marketing plan" - I'm talking about the correct process, not the correct plan), you first have to decide what the goal of your marketing department is. Most departments think in old-fashioned terms like "brand awareness" or "lead generation," and focus their efforts around those topics, overlapping though they may be. I'm taking a different tack, however, based on a very interesting post from David Crankshaw, which is in turn based on a book and blog from Michael Webb. These two discussions define the goal of marketing in completely new terms.

In summary, the goal of the marketing process is to add value:

In the same way that manufacturing is a process of adding value to raw materials until it produces a finished product, marketing and sales is a process of adding value to the buyer until the buyer becomes a customer. Every marketing and sales investment must add value to the buyer.
Marketing and sales is a production process that provides measurable value to the company. Marketing and sales activities should be measured at each step of the process; cause and effect should be studied to improve the process; value is determined as that which the customer will use time and/or money to take action and obtain.

(Quoted from David Crankshaw's blog.)

So now the discussion around a marketing plan changes from "How do I create brand awareness and generate more leads?" to "How to I create value for customers?" That fundamental change is what I'm trying to do with this marketing plan.

First, I'm changing how the plan is created. Rather than going through "department by department" as is traditionally done, I'm creating three buckets for my plan:

Strategy
Content
Execution

In smaller companies like mine (Plexus Systems), the strategy is usually decided by the lead marketing person (myself) along with other executives in the company. Strategy is our best thought on who we're selling to, what's important to them, and what value is lacking from the market today.

Content, the second leg on this marketing tripod, is all about value. Where are customers looking for more value? What content can we deliver that is valuable to customers? I tend to think about this as educating the customer, but that is a prejudice of mine that comes from working in emerging technologies for 20 years - the truth is that adding value via content goes far beyond education. Toolkits to help customers do their jobs - especially analysis tools, evaluation tools, and planning tools - are another big part of this. In my opinion, content is the single most important part of any marketing plan. With the right content, you have the option of doing dozens of different activities, all of which can be measured for results and tracked to your sales process. With the wrong content, even the best execution is a waste of time and resources.

Execution, the third leg in this tripod, is what is typically though of as a marketing plan - the events, the webinars, the advertisements, etc. - and this is where the bulk of marketing costs usually are. But I define execution a little differently: it is what you do with the content you have created. So in the end, what is typically thought of as the entire marketing plan is actually the least important of the three portions of a marketing plan. Granted, you can still screw up on execution, but with the right content, customers will usually find you, no matter how badly you execute.

So that's where I'm starting - and I have only a few days to get the rough draft done. Thinking in these terms, however, the plan almost writes itself. Once I have the content defined, I can be extremely flexible on the execution of the plan, thanks to Google and the power of the Internet.

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Tomorrow (Wednesday) I will be in Chicago at the National Manufacturing Week conference and tradeshow.

Additionally, sometime in the next 4 to 6 weeks, I'll probably take a full week off from posting, as my wife is due with twins (a boy and a girl, our 2nd and 3rd child) in that time frame. I'll do one quick post to let everyone know what's going on when the time arrives.

This Week: 2008 Marketing Plan

2007-09-24T08:36:00.000-04:00

"In preparing for battle I have always found that plans are useless, but planning is indispensable." - Dwight D. Eisenhower

I am working on the rough draft of my marketing plan for 2008, including a proposed budget and hire. I'm going to post my thoughts and some details this week as I work through the planning process, though of course I'm not going to post hard dollar figures.

To start off: my belief is that because my company (Plexus Systems) is an on on-demand provider, and thus people who find us online are more apt to believe in our delivery model and our core advantages than people who find us via other means. This, coupled with the fact that greater than 90% of IT projects start with a search on the web, leads me to balance my budget so the greatest bulk of the dollars and efforts are focused on online projects.

I started with the company in late January 2007, so I've had to live with a budget and plan that was put together by my predecessor - who came out of the print advertising industry, and so the plan was heavy on print ads and traditional events, and light on other areas. I've been able to adjust some of it, but these are the numbers from the original plan:

Print Ads 22%
Online Ads/Sponsorships/SEO 16%
Events 27%
Market Research 5%
Public Relations 15%
Direct Marketing 8%
Design/printing 7%

Note that the "events" category is overweighted because of our annual user conference, which gets carried in this category - and which has accounted for up to 50% of our event budget for the year.

My targets for this year are very different - and even within a category, the expenditures are going to be very different. In direct marketing, for example, more than 50% will be focused on email marketing, which had zero items in the budget this last year. And in events, we'll produce several webcasts which end up on our website.

So, the new rough goals are:

Print Ads: 0%
Online ads/sponsorships/SEO: 25%
Events: 20%
Market Research: 8%
Public Relations: 22%
Direct Marketing: 20%
Design/printing: 5%

Additionally, content generation is very high on my list, and I'm going to spend money to create more content, which can be spread across several different categories: a white paper that can be used as the fulfillment piece in a direct marketing campaign and online ads, and which will then be turned into a webcast, etc. There's no good category for that, so I'll have to adjust these targets this week as I move forward.

One other note: starting only 90 days before our user conference this year, we were able to defray about 15% of the costs by selling some sponsorships. We're going to take that to an entirely different level this year, and try to recoup more than 50% of the cost of the event - which means that my events category will have a net percentage much lower than the target listed above.

And, of course, I'll try to keep in mind the lean principles as I create the plan. I can tell you that one of the difficulties is trying to figure out where we'll be spending money by the end of next year, as I'm not sure what's going to be giving us our biggest return on investment in the first half of the year - but I'll be careful to keep my options open, and not lock the company into any long-term contracts that prevent the flexibility I'll need in the second half of the year.

I'll keep you posted as I work this out. Suggestions are welcome.

Preview: How to Piss Off Your Customers With Pricing

2007-09-21T13:55:00.000-04:00

On Thursday, October 4, I'll be in Santa Clara at the "Marketing and Selling Software as a Service" conference, organized by SoftLetter. I am speaking on the topic of pricing for SaaS applications - specifically, how to gain additional revenue from customers after the initial sale. Historically, this is something that legacy on-premises software vendors have done very well, but it's an area where SaaS vendors are falling short. Is it inherent in the model, or is there a missed opportunity here?

I'm not going to go into full detail on my presentation - otherwise, who would come see me speak? - but I will give you a preview of some of the information I'm going to talk about. So the short answer is: both. SaaS companies are missing some opportunities to gain additional revenue from existing clients, but most of the old opportunities do not exist for SaaS vendors. For suggestions on how to get additional revenue, you're going to have to come to the event. But for now, let me give you one of my favorite slides from the presentation, along with some exposition about the bullet points.

The overall condundrum faced by SaaS vendors can be summed up as: customers choose SaaS exactly because it does NOT have all those extra, hidden charges - so, can you get additional revenue from your customers without pissing them off?

The slide I'm going to present to you hear tells you how you CAN piss them off. If you follow any of these steps, you'll end up with angry customers:

1) Charge high prices for storage - I don't care if you're using the most expensive, redundant SANs in the world, mirrored in real-time to a data center halfway across the world - customers think storage is cheap or free, and they are NOT willing to pay for it. Partially, we have Google to thank for this bit of misinformation - if they can give away 2 Gb mailboxes to everyone at no charge, then why should YOUR company charge me for high amounts of storage? However unrealistic this expectation, it's one you're going to have to face. Remember, too, that your users are undoubtedly going to use storage faster and faster over the next couple of years - the acceleration curve on storage usage is incredible. My company, Plexus Systems, is doubling our storage usage every 3-6 months at this point! So you'll have to factor this into your cost of doing business, and figure out some other way to recoup the cost - customers will NOT pay for it.

2) Track and charge for data transfer - This is a holdover from the early days of web site hosting, from which many "ASPs" and application hosting companies sprang. Website hosting companies put limits on the amount of data transfer available (especially free hosting services), and this model carried forward into many early software-as-a-service vendors. Let me be blunt: customers HATE this. Like the data storage issue in number 1 above, they think that bandwidth is incredibly cheap, so why should you be charging them for it - or worse, turning off their system after a certain amount of bandwidth is used?! Unthinkable.

3) Charge for upgrades - One of the big money-makers for traditional software vendors, long-term, is selling upgrades to the licenses. (In fact, I recently heard that SAP gets up to 70% of its new license revenues from existing customers!) To get around this, many large enterprises pay "maintenance fees" which include the right to upgrade the software in the future. To get around THIS, many software vendors are in the habit of breaking off a piece of the software into a new package, naming it as a standalone product, and then selling it back to customers as an upgrade or add-on. Not cool. Customers hate this - and if you're truly on-demand, using an agile development methodology, they don't want to see ANY upgrades. They just want the service to keep getting better and better every day.

4) Undersell them on the number of users, and then go back and sell them more users later - Do I even have to explain this one? It's a shell game played both by sales reps (trying to get the sale done within the budget set by the customer) and by customers (trying to buy the system within their existing budget). It never works, and it gets the purchaser's boss very angry. "What do you mean, I don't have a license to use the reporting function of the software?!" My company, Plexus, gets around this problem by selling only 1 tier of user (everybody gets all functionality) and be selling site licenses instead of user licenses; i.e., everyone at a site can use the software, not just a restricted group of people in a few departments.

5) Charge exorbitant prices for emergency services (e.g., restoration of accidentally deleted data) - I actually did this at my last company. We had a 4 page list of special requests, including mailbox restoration, folder restoration, etc., that we would perform on demand for VERY high fees. And even though we forewarned people about these charges, in the heat of the moment - when they thought that all their work for the last 2 months had disappeared due to a stupid error on their own part - they felt like their data was being held for ransom, and that they had no choice but to pay. This did not make for happy customers.

6) Nickel-and-dime them with small charges until their actual per-user charges are TWICE what they thought it would be - the cell phone companies are great at this. Remember signing up for the $29.95/month plan, then opening your first bill and being shocked when it totaled $75? Not a pleasant feeling, was it? This is a danger for all subscription pricing, and you should avoid this at all costs. "No surprises" should be one of the promises you make during the sales process.

I'm sure there are lots of other ways to piss of customers with pricing and billing practices, so if you have any suggestions, please post a comment. If I think the suggestions are good, I'll incorporate them into my presentation!

Salesforce.com Dreamforce Summary

2007-09-20T08:00:00.000-04:00

I've been at Dreamforce since Monday early afternoon, and I have to say that it's been a strange sort of conference. It's full of "true believers" in the Salesforce.com platform, and I suppose that makes sense: a lot of these small companies have built their entire businesses on the platform, and with only 2-3 people, they've been able to build a business generating a couple hundred thousand dollars in revenues per year - sometimes more. That's not bad.

In talking to a financial analyst at the conference, however, he indicated that my company, Plexus, was by far the biggest company even considering partnership with Salesforce.com. On the one hand, that surprised me - you would have thought that they'd attracted more large companies by now. On the other hand, it's not so surprising; most of these partners are very small companies who have created small, highly useful add-ons for Salesforce; they are NOT large companies who have already invested millions of dollars in developing their own infrastructure and software (on Java, .Net, or one of the other dev platforms out there).

This is a huge headache for Salesforce. If they want to expand beyond CRM and become Force.com (getting rid of the "sales" portion of their name), they need to start working, somehow, with other large companies, or attracting them to the platform. What company that has already developed 5 or 6 million lines of code (e.g., Plexus) is going to port all of that code to the AppExchange platform? None, I daresay.

My take on the matter is that we need to build a consortium of large on-demand companies, who have proven that the solutions work together - even if there is some overlap among them. This would leapfrog the SOA model currently talked about in enterprise software, and would further legitimize (and energize) this hot market - just as the entry of a company like SAP (with their launch of Business ByDesign yesterday) is legitimizing and energizing the market. No one company can go it alone, and there are already a few clear leaders emerging - none of which are really ready to challenge Microsoft (afraid of Google), SAP (afraid of Salesforce.com) or other top 10 software providers.

The next 12 months are going to be VERY interesting to watch!

Legacy Software Vendors (SAP, Oracle, etc.) and Their On-demand Problem

2007-09-19T09:05:00.001-04:00

Today is launch day for the SAP A1S on-demand application, and as promised, I'm going to recap why I think it's incredibly difficult for legacy software vendors like SAP and Oracle to successfully launch and sell an on-demand application - and why I think that smaller, emerging companies like mine (Plexus Systems) have the advantage.

First: I believe that most of these companies use the older "waterfall" development methodology, which is unsuitable for on-demand applications. Transforming to the agile development methodology required for a true on-demand application is very, very difficult for a large company.

Second: as I've mentioned over the past few days, the sales channel/distribution problem is paramount. Even if the company can get a service launched, their traditional way of selling software does not work with the on-demand model. They will need to create an entirely new sales channel, and it is going to create conflicts with their existing sales team and their channel partners.

Third: the mid-market is highly suspicious of these large vendors. The nightmare stories (such as Ford Motor Company cancelling their SAP implementation after spending hundreds of millions on the project) scare the bejesus out of these companies. In fact, it is the market issues created by these large legacy vendors that have paved the way for the success of the on-demand market: bloated products with too many features and poor user interfaces, ridiculously long and expensive deployment projects, license models that cause users to pay and pay and pay, etc. So it's ironic and a bit troublesome for these companies to try and utilize the software-as-a-service model to overcome the problems that they have created!

Fourth: from a financial point of view, companies like SAP are wedded to the traditional software licensing model, where they get a large chunk of their payment up front, and then charge maintenance fees for several years. Transitioning to a subscription pricing model is beneficial in the long run, because it is highly predictable; however, in the short term it siphons off those up-front fees and spreads them out over several years - and this will materially affect the financial results of the company. The WORST thing that could happen to a company like this is for their customer base to move whole-hog to the on-demand delivery model and the subscription pricing model - their financial projections for the next year would be way off, and since it's a publicly traded stock, their stock price would likely get hammered.

These are enough reasons for now, I think. I'm going to wait until SAP gets the details about A1s (including its real name!) later today, and I'll log on again and post some thoughts.

UPDATE
This article on Bloomberg News has some details about the new service, now named "Business ByDesign". Pricing is Business ByDesign costs at least $149 a month per user with a minimum requirement of 25 users.

Not a lot of details yet on how they will be selling it, but they see $1 Billion in sales by 2010 - just 3 years from now - in the midmarket where this offering is targeted. And they're going to spend up to 400 million euros to get there. Amazing. Predictably, all of the stories I've seen so far are comparing this to Salesforce.com and to NetSuite, neither of which are apt comparisons - Salesforce makes CRM and a dev platform, and NetSuite offers a suite of financial applications (calling it ERP would be generous) that focuses on the smallest portion of the SMB market. My company's offering, Plexus Online, is by far the closest thing to the promise of A1S/Business ByDesign, and as I've said, we have seen rapid uptake in the midmarket.

Here's another blogger, Dennis Howlett (no relation to my wife, whose maiden name is Howlett), and his take on SAP's offering: "On the one hand, SAP is readying itself for a volume play, looking to ramp up to ‘thousands of customers.’ On on the other hand, he is not promising investors Web 2.0 style viral sales miracles.
Viewed from an investment analyst position, nothing could be worse." Of course, I've taken this completely out of context, so go and read Dennis's blog on the topic.

Here's another blogger, Woodrow, with an interesting take on the announcement.

The Problem With Partners for SaaS Companies, Cont'd

2007-09-18T08:28:00.001-04:00

In yesterday's post, I started to lay the groundwork for a discussion about software-as-a-service companies and the challenges they face as they seek to build partner channels. There are two events that led me to discuss this topic this week: I am at Salesforce.com's Dreamforce conference, talking to the appropriate partner people about getting our companies together, and one of the largest companies in the world (with one of the largest partner channel programs) is announcing the SaaS offering tomorrow: SAP is going to launch their on-demand offering for the mid-market, code-named A1S, tomorrow.

As I mentioned yesterday, SaaS companies face a major problem with traditional systems integrators and consultants, who have been marketing a message that is in direct conflict with the SaaS message. SI's say, "Buy through us, and we'll build you an incredibly easy to use, incredibly stable platform that is perfectly tailored to your business needs." The SaaS companies say, "Long, expensive deployment projects are unnecessary at best, and a waste of time and money at worse. Best practices are already built into our product, so start using it, and we'll help you tailor it to your custom needs over time." Additionally, there are no software licenses to resell in the SaaS model (and no upgrades next year!),which are both significant sources of income for SI's and consultants.

So how does a SaaS company build a sales channel? For those offering point solutions and focusing on smaller companies, this isn't an issue; customers come to their website, maybe make a phone call into their 800 line, and they purchase the software online. But for companies like mine, Plexus Systems, who are selling broad-ranging enterprise software to larger companies, the direct sales vs. indirect sales channel is a difficult one. We can't possibly build a global sales organization quickly enough to scale with our business growth, but traditional channel partners aren't interested in partnering with us for the reasons I've explained above.

The few successful SaaS companies selling to larger enterprises are taking different approaches to this problem. Salesforce.com, in their bid to become a true enterprise-class provider, has decided to build their own partners from the ground up. As part of the AppExchange program, they provide programming tools, hosting, and an online sales channel to help new partners develop applications on the AppExchange platform. However, it's obvious from walking the expo floor at Dreamforce that what they've created is a bunch of very small companies with very small add-ons to the primary Salesforce.com application. Rather than expanding their sales channel, they have expanded the product with hundreds of small add-ons, making their direct sales process more complicated.

NetSuite is taking a different approach. Since they are selling financial software, they are going after the people that recommend financial software to companies: accountants, auditors, etc. They are not signing them up as resellers, but instead are trying to get them to be "recommenders." I've seen companies build recommender programs where the recommender gets compensated for the referral, but in many cases this is a conflict of interest - the companies you really want in a referral program generally can't accept payment for referring your service. My company is pursing this approach as well, and because there are implementation projects that go on with our software (though much smaller projects that are typical with enterprise software systems like Oracle or SAP), we are gaining some traction with this model - the partners do get something out of this. (Somebody reminded me of an old adage recently that I like: "The godfather always makes money for his partners.")

Now, along comes SAP with A1S (or whatever it will be called). How are they going to sell this? Their existing sales force will generally gravitate towards where they can make the most money - large enterprises buying the existing on-premises software. Their channel partners will face the conflict (and the lack of opportunity) that I described above. And the software is going to be too complex to sell via the web. So how are they going to sell it?! This is one of the great questions that I am looking to be answered at their launch event tomorrow.

Any suggestions for how they are going to make this a LARGE-SCALE success (as opposed to a few sales here and there through their existing direct and indirect sales channels) would be very interesting to me - please post comments below.

The Problem With Partners for SaaS Companies

2007-09-17T07:00:00.000-04:00

The channel partner concept has been done very well by come large high tech companies, but in most cases they channel program is created after they are already a sizable entity, and their is market demand for their products - e.g., Microsoft. In most cases, the channel partners are really a distribution channel, and they take orders rather than proactively sell the software.

In enterprise markets, it's different. Software is so big, so complex, and the implementations so problematic that most enterprise software is sold by the company doing the implementation, rather than directly by the software developer. For example, SAP sells some of their software directly, but most of their software license revenue goes through consultants and systems integrators - and the amounts spent by companies on implementation projects for these types of systems are often 4x1 or greater, as compared to what they spent on software licenses. In other words, if a company buys $500,000 worth of SAP software licenses, they are going to spend 4X that on the implementation project - $2,000,000. In many cases, in fact, the multiplier is often 5x1 or 6x1, meaning that same software project could cost $3,000,000 for implementing $500k worth of licenses!

For the systems integrators selling this enterprise software, this is a great deal. SAP has already created a demand for their software, and they usually get great training from SAP on how to sell and support it, they get the software licenses at wholesale and get to charge a great markup on the licenses, and they get to charge ungodly fees for selling it. And SAP loves it, because they have hundreds (or thousands) of consultant companies selling their software, meaning they have a significantly higher revenue than they could achieve with just direct sales. Who wouldn't like this business model?

I'll tell you who: CIOs at large enterprises. They are catching on to what the people at mid-sized companies have known for years - that these humongous deployment projects are often a waste of money, and they hopelessly compromise the ROI of any software purchase.

Now, along comes software-as-a-service - and it explodes that model. First, there are no software licenses to resell, so there's no markup to be made there. Second, the "implementation" projects are often very limited - it's more like a 1:1 ratio (or less!) for implementation of even enterprise-class systems. So there are no big fees to be earned by resellers or consultants - just highly specialized projects. So who WOULD like this model?

So is there an opportunity for channel partners (or partners of any type) for companies selling enterprise-class software-as-a-service? I think there is - obviously, as I wouldn't be writing about this topic otherwise. And, of course, I think it has to be done very differently from traditional channel marketing programs.

In general, I like to work backwards: start with the customer and their needs, and then move backwards through the buying decision, the influencers, etc., to find out the best way to reach our customers. In the SaaS world, this generally leads back to the Web - and usually Google. However, in larger enterprises, this isn't always so. They often turn to specialized consultants who help them build RFPs and walk them through the decision making process. Just as often, however, they turn to a different group of consultants: the accounting firms and other "high value" service providers who are the trust advisors of the CEO, CFO and others.

In the case of manufacturers (the target market for my company, Plexus Systems), this group of service providers includes accounting/auditing firms, lenders (commercial banks), and other people who touch their money. From a contractual and ethical point of view, almost all of these companies are prohibited from reselling technology to their customers. However, they can and do help them decide on technology directions, and refer them to vendors with whom they've had successful relationships in the past.

I'm going to write more about the best partners for SaaS companies this week, as I'm heading to the Dreamforce conference put on by Salesforce.com. I'll blog from the conference itself, and I'll continue discussing the partnership theme.

I think this is an especially appropriate week to talk about channel partners for SaaS companies, as SAP is going to be launching their much-talked-about "A1S" on-demand service on Wednesday the 19th. I think it's especially difficult for large, traditional software vendors like SAP to make the change to the on-demand model because of the channel conflicts it creates for them - and I'll talk specifically about that on Wednesday, the launch day.

Lazy vs. Easy to Use

2007-09-13T16:21:00.000-04:00

Twice in the last week, I've run into older professionals who said the same thing to me - and the thing they said was something of a shock. Let me give you the context:

In a discussion about the changes in software over the years, including the emergence of the on-demand model, the conversation inevitably drifts towards the expectations of younger users (new to the workforce) vs. older users (been in the workforce for >10 years). The idea that is discussed is that younger users, who grew up with Windows and video games, expect cool interfaces, good performance, and a system where they don't have to go through advanced training classes to start using software - after all, nobody trained them on how to use Google or Halo, right? But the comment that I've heard in response to this discussion (twice) is:

"Younger users are just lazy."

In other words, old green-screen technology worked just fine, and these young kids are just whiners who don't want to work hard.

Is anybody else shocked by this?! It got me to thinking about why someone would condemn a trend that is making software easier to use (thus reducing training costs, making users more productive quickly, etc.)

First, as an aside, let me say that EVERY generation thinks that the next generation is stupider, lazier, ruder, etc. than their own generation. There are lots of reasons for this, but it stems primarily from the different values and modes of communication that each generation claims for their own. But that's for a sociology blog, not this one.

Now, on to the big question: why condemn software for being easy to use? I see several reasons:

Historically, the easier software was to use, the less powerful it was, or the less business-like it was. The Mac is easier to use than a PC, but Macs are used by "creative types," not by real business people. (In fact, if you look around your office, if there are any Mac users, chances are they are in the marketing department.) Games are easy to learn, but that is NOT business software. Real business software is like Excel or SAP or Oracle: it takes advanced training classes to use it, and certification in order to actually change it!
Someone who has spent years learning the esoteric commands of a terminal-based application thinks that what they've learned has value. If you take someone and tell them that all of that learning was a waste of time, and that somebody with better software can do the same job with little or no training, how do you think they're going to feel? Pissed off, and defensive - especially defensive. "It can't be true that what I've learned was wrong or a waste of time, so this new challenge must be wrong instead - and the motivation behind it is wrong, too!"
There is a direct relationship between how hard it is to learn something, and how proud people are of learning it. (This is a corallary to the rule about how loyal people are to organizations that are difficult to join - which is the reason that fraternities and hospitals treat their pledges and interns so badly.) So the harder it was to learn the old software, the more loyal people are to it - and the more condescending they are to something that is easier. (There's a good post from Scott Adams today about how we all think that people who agree with us are geniuses, and people who disagree with us are mental defectives.)

In a perfect world, all of this emotional B.S. wouldn't matter when you're marketing and selling software - but in the real world, it does. People with these attitudes are everywhere in the industry - especially the industry where my company, Plexus Systems, competes: manufacturing. It is dominated by older, white men. (I think that other on-demand providers, such as NetSuite and Salesforce.com, might have it easier, because they started out in small companies in different industries, where the purchasers may or may not be old white men.)

This affects the messages I have to deliver in my sales pitch: I have to focus on "increasing productivity" instead of "easy to use." If I'm talking to an older CEO at a company, I shouldn't be making comparisons to Google or video games, that's for sure. We must focus on features and functions that are beneficial to his business, and then discuss how the new delivery model overcomes some of the headaches associated with his current IT infrastructure (updates, backups, integration, etc.)

I'm interested in hearing stories from others about generational issues in selling software - especially from smaller companies with new technology competiting against established players with older technology. Does the generation gap matter as much as I think it does? Does gender matter? Should I be focusing resources to find CIOs and VPs of Operation who are below a certain age threshold? All comments are welcome!

Software as a Service: Big Companies Getting in on the Act

2007-09-12T10:44:00.000-04:00

Microsoft and SAP, two of the largest software companies in the world, are going full-tilt towards launching their own software-as-a-service offerings.

Microsoft has been doing it for the last couple of years, albeit with a confusing message. Windows Live, Office Live, their own hosted CRM service (to compete with Salesforce.com), and other services are definitely SaaS, although they're not pitched that way. Microsoft seems to think of them primarily as a way to counter Google's power, which Microsoft has perceived as a major threat for a few years now.

With SAP, however, it's a different story. They have resisted the siren call of the software-as-a-service model, primarily because they haven't faced any major competitors offering this type of service. However, they've been losing deals to smaller companies like mine (Plexus Systems) for the past few years, and they've been completely unable to make inroads into the mid-sized market, no matter how they change their offering. But now they are ready to launch a highly secret service, which has been code-named A1S, at an event in New York City on September 19.

The big question is: Can one of the largest software companies in the world, which is completely dependent on the perpetual software license model (and its accompanying "spiky" revenue model) and the waterfall development methodology, successfully compete in the on-demand world? By now, you know I'm biased, but I would answer that question with a resounding "No way!"

Why not? Let me count the ways:

Sales compensation and channel partners: the entire SAP direct sales team is compensated in a way that guarantees they will favor perpetual licenses over SaaS, and that they favor large companies (and the accompanying revenue) over mid-sized companies (which often require the same sales efforts for a much smaller chunk of revenue). Additionally, the SAP channel partners are addicted to the same revenue model, plus the revenue they get from reselling hardware, maintenance and support contracts, etc. All of that disappears with the SaaS model, as do the big-ticket, multi-year deployment and customization projects. So how the hell are they going to sell it - or better yet, why would they?!
SaaS demands faster upgrades and delivery of new features: the waterfall development process, wherein companies announce major upgrades on a semi-annual or annual basis, will not work for the long haul in the SaaS world. Customers want new features faster than ever before. Transitioning the development process at SAP to a new model is a Herculean task.
Customer Service: as pointed out by many analysts and SaaS evangelists, SaaS disempowers the software vendor and returns the purchaser to his rightful place of power. SaaS providers must provide excellent quality of service (e.g., uptime, performance) and customer support on a daily basis, or they risk losing customers. Does ANYBODY think that a major software company (Microsoft, SAP, Oracle, etc.) has a history of providing this kind of service? Transitioning the largest software vendors in the world to a service-oriented culture is even harder than transitioning them to an agile development environment!

I could write all day about the problems for these large companies. And in a funny aside, it seems ironic to me that companies like SAP, which helped create the frustration among IT buyers that is one of the primary drivers of SaaS successes, are now embracing the SaaS model!

On the other hand, I welcome their entries into this space. That may seem counterintuitive - why would a marketing executive at an emerging software-as-a-service provider welcome the largest software companies in the world as competitors?! But the truth is that they bring resources to bear that I cannot: educating the market, further legitimizing the delivery model, and providing a range of opportunities that a company the size of mine could not do on their own. One of the mantras of software sales is, "Change presents an opportunity." So if SAP can convince hundreds of mid-sized companies that they should be considering the on-demand model, my company will be pulled into a very large portion of those new projects, at least for consideration and comparison. And we welcome that!

So bring it on, SAP! Welcome to the on-demand world, and good luck with the launch. Just try to keep up with the rest of us, please.

In Remembrance: September 11

2007-09-11T07:59:00.000-04:00

I can't post about business today.

I was living in Brooklyn, New York in September of 2001 - my wife and I moved there in August of 1998. Both of us were working in Manhattan on September 11; her office was uptown, on 63rd and Park Ave., while my office was in Chelsea, on 26th and 11th Ave. I had a view from our 11th floor windows of everything that happened that day, and my wife and I were among the silent throng that walked through the cloud and across the Brooklyn Bridge on our way home that evening.

A lot has happened in my life since then: I've become a father (in June of 2003) and I'm about to become a father again (of twins, due in the next couple of months). My wife and our daughter and I now live in Michigan, about as far away from NYC as you can come, culturally.

And yet every year, my thoughts drift back to that day that started out so beautifully, with the sun shining brightly in a cloudless sky, and a light autumn breeze - it was one of those gorgeous early fall days that you wait for all year, still holding the heat of summer yet hinting of the bright chill of autumn. That beautiful morning clashes with my memory of the rest of the day; the smoking hole left in the first tower, the sight of the second plane crashing, and later, of the towers falling, and the cloud that hung over lower Manhattan for weeks. The worst part was not the planes, nor the buildings coming down, nor the ambulances and emergency rooms that waited anxiously for a flood of injuries that never arrived; the worst was the fliers that sprung up overnight in the city, thousands and thousands and thousands of xeroxed photos - school photos, wedding photos - with contact information, searching desperately for any word of loved ones gone missing. These paper memorials were harsh reminders of the loss all around us, and they stayed up for months afterwards - nobody dared to tear them down.

My wife and I were lucky. We weren't injured, and remarkably, we didn't lose any close friends in the attacks. Friends of friends, friends of family, and most of the firefighters in our Brooklyn neighborhood died when the towers came down. It was only later that I discovered that a former coworker from Boston was on the American Airlines flight that morning.

And yet, for all the horror, I am glad that we were there. I would rather have been living there, in New York City, than any other place in the world at that moment, and for those weeks. It restored my faith in humanity, and cemented in my mind that New York City, with all its faults, is the greatest city in the world.

------------------------------------------------------------------
In memory of Phil Rosenzweig, who I worked with at
Xyplex in the late 1980s. Phil died on American Airlines
Flight 11 on September 11, 2001.
------------------------------------------------------------------

The sequence of events on 9/11/2001:

7:59 AM: The first flight, American Airlines Flight 11 from Boston, takes off from Logan International Airport.
8:46 AM: American Flight 11 from Boston, with 80 passengers and 11 crew members, strikes the WTC north tower at an estimated speed of more than 400 mph.
9:02 AM: United Airlines Flight 175 from Boston, with 56 passengers and 9 crew members, strikes the WTC south tower between the 78th and 84th floors.
9:37 AM: American Airlines Flight 77 from Dulles, with 64 people on board, strikes the Pentagon.
10:03 AM: United Airlines Flight 93 from Newark, with 44 passengers aboard, crashes into the ground near Shankville, PA.
10:05 AM: The south tower of the WTC collapses into the streets below.
10:28 AM: The north tower collapses from the top down, pancaking the floors below.

Marketing to Industry Groups and Associations

2007-09-10T09:30:00.000-04:00

Industry groups and trade associations are funny beasts. I was thinking of this last week when my company, Plexus Systems, presented an overview and detailed case study along with our partner Kors Engineering and our customer Ralco Industries at a breakfast seminar put on at the offices of Automation Alley, in Troy, Michigan.

The organizers at Automation Alley and the representatives from the sponsors (Plante & Moran) were very professional and extremely well-organized. They had marketed the event via their website, direct mail, press releases, etc. In the end, we had about 25 people attend - smaller than we anticipated, but not bad for a 7:30 AM event.

It's not the organization of the event, or the turnout that has me pondering. Instead, it's the profile of the attendees. As soon as we finished the presentations, all three presenters were flooded with attendees who wanted to talk with them. Normally, that's a very good sign. In this case, however, more than 90% of them were sales reps trying to sell something to the presenters! They were not potential purchasers, except for a very small minority - perhaps 3 people out of the 25 who attended.

I've found the same thing to be true at many previous events, whether they are "professional networking" events put on by groups like Automation Alley or the Public Relations Society of America (PRSA) or the Ad Club, or whether they are briefings that my company does. Most of the attendees of these types of events fall into one of two categories:

Sales reps looking to sell my company something
People looking for jobs

I don't mind the second group so much - that's what a lot of professional organizations are all about, right? These are just people trying to further their careers by building up their network (although personally I'm skeptical that this works for a junior person). It's the first group that I can't understand.

Let me recap: three companies, a vendor, an integrator, and a customer, put on a joint presentation. The CEOs of all three companies are the presenters. Immediately after the presentations are done, they are flooded with sales reps trying to get their attention. Has this sales technique EVER worked? It's as if they expect the CEO to say, "You know, we DO need a couple more T1 lines, and even though we have an established vendor in this area and I've never heard of your company before, great, let's sign a contract!" I find that these sales reps tend to be from companies where the products are highly commoditized - long distance service, data connectivity, etc. - which makes them more desperate than those selling high-value goods and services.

As a side note, it's funny to me that this also happens whenever my company appears in the local press, like the Detroit Free Press, the Oakland Press, or Crain's Detroit Business. As soon as the article appears, everyone in the company gets flooded with phone calls from sales people - and the execs (especially if they're quoted in the article) get a couple dozen phone calls from stock brokers. It's incredibly annoying, and let me repeat: THIS DOES NOT WORK!

In the end, marketing through groups and industry associations can work, but it requires a long-term commitment to be an active, participating member who adds value to the core group of other members - and you have to put up with a lot of bullshit in the meantime. It's important to remember that most groups are not full of representatives of the best companies; instead, they are full of "joiners," the people who like these types of groups and have the spare time to attend meetings. The highest percentage of members are people looking to make a deal of some sort. So put this on the list of to-do items, but rank it very, very low - in my opinion.

Myths & Misperceptions about Software as a Service

2007-09-06T12:15:00.000-04:00

I read an article from "CRM Buyer" this past week that cracked me up a bit. It was titled "Good Reasons for Sticking with In-House," and was the first of a two-part series about why companies should NOT consider the software as a service or on-demand model. It's worth a read, if only for a chuckle or two.

CRM is not my core market today, although I've been involved in the CRM market previously, including call center technology, customer service software (trouble-ticketing), product configurators, etc. And CRM in the late 90's and early 00's was the epitome of what was wrong with enterprise software: bloated, over-designed systems that were incredibly expensive, and which people hated to use. Total cost of ownership (TCO) skyrocketed, and return on investment (ROI) plummeted.

There's a reason why Salesforce.com was the first breakout on-demand company: because they chose the perfect market to attack with the benefits of software-as-a-service.

Funnily enough, this is the exact same situation that the ERP market faces today - and it's why I'm glad to be at an on-demand company (Plexus Systems) that is going after this market.

The critics of the on-demand model, as explained in this article, still cite the same concerns today as they were seven years ago:

1) Integration issues
2) security concerns
3) Customization issues

These perceptions are understandable, from the newbie point of view. However, it's been shown again and again that security, uptime, and performance of on-demand systems are far better than industry averages for on-premises systems. (Of course, I've never talked to a company that thought it was average or below average in these categories, but that's a discussion for another day.)

As for integration and customization, the truth is that the major on-demand developers generally provide an easier integration and customization path than on-premises software. XML and well-defined APIs are delivering on what Service Oriented Architecture (SOA) has been falling short of for years - fast, seamless, easy-to-accomplish integration of major data processing systems. For customized applications, I can tell you that most of our manufacturing customers at my company would barely even recognize the application as its used at other customers; the GUI remains the same, but the screen layout, the data integration, and the workflows are completely different from customer to customer - AND deployments of the system are measured in weeks (or a few short months) rather than the years that are typical with legacy on-premises software.

I can certainly see why some users are behind the times in terms of understanding the the current state of on-demand software - it's hard to keep up with new technology in general, and this market has been moving incredibly rapidly, even by technology standards. However, as more users catch up on the current state of on-demand solutions, the myths and misperceptions are going to disappear, and legacy software vendors are going to have a major revolt on their hands.

P.S.: I was happy to see that CRM Buyer posted another story on software-as-a-service today, with a much more positive tone about the successes the industry has been enjoying.

Lean Development Leads to Lean Marketing & Sales

2007-09-04T09:35:00.000-04:00

Sometimes I read something written by someone else, and I wonder why I'm even writing a blog, since there is someone else out there writing on a similar topic who is handling it so much better than I am. As an example, one of my coworkers pointed me to an incredibly interesting article last week, titled "What Engineering Has in Common With Manufacturing and Why It Matters."

You're probably thinking, "Wait a minute, this blog is about marketing, and that article is about engineering and manufacturing. WTF?" But I think that marketing people - especially product marketing and product management people - will find the article a must-read.

What's fascinating to me is two-fold here:

1) The writer, Dr. Alistair Cockburn, walks us through his thought-process of applying lean principles to engineering (product design), and how he analyzes for wasted time - usually time waiting for someone to make a decision. (This is one specific type of muda, as defined in lean principles.) What he comes to realize is that the outcome of his engineering process isn't code, or widgets, or pieces of something: the outcome is decisions. That analysis and realization changes the entire process of product design. His point about decisions having a finite useful lifetime was an eye-opener to me - it is an excellent explication of my earlier post on all of the muda in the traditional "waterfall" software engineering process, and of course, it's explained in much greater depth and clarity than I could have accomplished.

2) The end result of this article, a streamlined engineering process, is a perfect example of a large step forward on the path to lean. It's caused a lot of discussion among the team at my company, Plexus Systems.

Dr. Cockburn is working in a traditional software environment, not an on-demand software environment, and I think that some of his issues would be addressed in a software-as-a-service developer - but by no means all.

I encourage you to read his article, and to think about how it applies to the entire marketing process. And I leave you with this question: What is the output of the marketing process?

Is Market Research Worth Anything?

2007-08-31T08:25:00.000-04:00

As I discussed in earlier posts, I'm acutely aware of conflicts of interest in sales and marketing, and one that often gets my bile up is the inherent conflict of interest propagated by "industry analysts" like Gartner Group, IDC, Aberdeen Group, AMR Research, Forrester Research, and others.

The conflict goes like this: the analysts at these companies use their industry experience and vast research and analysis tools to keep up on industry trends, to stay current with new technologies, and to predict where the market will go over the next few years. They package these up in reports, which they sell - typically to the "global 2000", but occasionally to others also. These reports often contain descriptions of key market players (i.e., vendors) who are going to participate in the market in a material way. And here's where the conflict comes in: these same analysts are selling their consulting services to the vendors. So, in essence, the analysts are getting paid by vendors to write about the vendors, and then they sell the reports to the end users. If that's not a conflict of interest, then I don't know what is.

Regardless of the conflict, they have become so embedded in the high tech market that it's very, very difficult for a company to get ahead without paying at least one or two of them. (Full disclosure: at my company, Plexus Systems, we subscribe to research from Gartner, AMR, and Aberdeen.) In fact, I've seen peers get fired (or severely threatened) when a Gartner "magic quadrant" report comes out an their company is poorly positioned, or missing altogether.

However, my problem with the analysts goes deeper than this. That is, the analysts are so focused on large, established vendors and the technologies that they sell, that they completely miss the hot startups and the game-changing new companies until it's too late.

If you're selling a completely new technology (remember, this is my bag - startups and small companies that are trying to do something new), then market research about a bunch of established players that are peripheral to your market is marginally useful, at best. If you go to one of their sites and start searching for a specific statistic or an analysis of your particular market, you'll never find it - they just don't look at the market the same way you do.

And in the end, that's the major problem. I spend a lot of time talking to analysts (some of them I would even consider friends), but it's mostly me educating them about what we're doing, rather than them adding value to the conversation. I read somewhere recently that if you read a piece of market research and say to yourself, "Hmm, that's interesting," then it's a completely failed piece of research. It's only a success if you read it and say to yourself, "Wow, that is a useful piece of information!" The difference between "interesting" and "useful" is key here.

In the end, nobody knows your business like you do. You are forced to play the industry analyst game, but be skeptical, and leverage it where useful. Of course it's infuriating, and it's the exact definition of muda - it's a waste of time and money - but because the waste is part of a larger system that is beyond your control, it's almost impossible to eliminate this waste.

As a final note, I have to say that I'm very impressed with the new direction that Aberdeen Group has taken this past year. They don't sell "advisory services" anymore; they are now owned by Harte Hanks, one of the largest direct marketing firms in the world, and they position themselves as a lead generation service. They are, essentially, creating reports that you can sponsor, and when someone downloads it, you get their information. It's like a massive white paper generation system, which can be extremely useful. (They also do webcasts, etc.)

The Smartest, Most Interesting Marketing Bloggers

2007-08-30T09:00:00.000-04:00

I promised a few weeks ago to reference some of the marketing people who have influenced my thinking, and who prompted me to launch this blog. I'm doing that today, but I also thought I would reference some of the blogs that I've been reading lately, and which impress me in their thinking about marketing.

David Meerman Scott
I saw David speak at two different conferences this spring and summer, and it was his writing on "The New Rules of Marketing & PR" that pushed me over the edge to start writing my own blog. David is not some radical theorist; he's a pragmatic guy who says, Hey, this stuff works, so you should give it a try. His ebooks are excellent, and I highly recommend that you visit him.

Matthew Glotzbach, Director of Product Management at Google
Matt has a family blog, but no dedicated professional blog, though he does post sometimes at the Google Enteprise blog. I saw Matthew speak at the SIIA Software Strategy Summit this past April, and his presentation was incredibly interesting. He talked primarily about how consumer technology has overtaken corporate IT, and how consumer technology has influenced Google, and the sales and marketing of all new technologies. If you get a chance to hear him speak at a conference, I urge you to do so.

David Crankshaw
David writes about online marketing and search marketing for B2B (business-to-business) and technology companies. His article about home page design was a real eye-opener for me, and very timely, as we're redesigning our site. I like the way David thinks.

John Dodds
John describes himself as "a marketing deviant", one of my favorite professional descriptions of all times. His posts are short, to the point, and always interesting. With titles like "Cutting the Crap," I like the way John writes and his blunt points of view. To get a taste of his style, read his "The Rules of Blog Club." But the most important thing he's written this year, in my opinion, is "Geek Marketing 101". Every engineer who is starting their own company should print this out and post it over their desk.

Brian Carroll, CEO of InTouch, Inc.
Another pragmatic guy, along the lines of David Meerman Scott. His blog is completely focused on lead generation, and what to do with leads once you get them.

Steve Yegge
While he's really a developer, not a marketing guy, his long post about "Good Agile, Bad Agile" is a must read for software marketers trying to figure out what is changing in the software world.

Scott Adams, Creator of Dilbert
C'mon, who doesn't love Dilbert? The surprising thing about Scott's blog is that because it's online, and not written for "family oriented" newspapers, he can say whatever the hell he wants. And he's much dirtier, much more twisted, than most Dilbert fans would suspect. He's also a broadminded skeptic and an iconoclast of the first degree.

There are more, but these are the guys I read just about every day. I hope you find their posts interesting and useful.

Better Servicing Sales Prospects = Faster Sales

2007-08-29T09:10:00.000-04:00

The marketing lesson I'm going to preach about today may seem obvious, but it seems to be missed very often. That is, the better service you provide during the sales process, the better impression you make on the prospect. Specifically, better service during the sales process equates to better service once they become a client, at least in their minds.

And yes, this does seem obvious, doesn't it? But companies miss it all the time! Here's one example that I see all the time:

When someone fills out a form on your website or sends an email to your company requesting more information, how long does it take you to respond? According to several industry reports, the average response time is greater than 24 hours, and often stretches into 2-3 days. Personally, I've seen people send a second email asking why they haven't received a response to their first email! This is awful; people that want to talk to you about buying something getting no response. Automated responders saying that you've received their info and they will be contacted quickly are easy to set up, and that at least lets the senders know that their question has been received. I've also noticed that this breakdown often happens at the point of hand-off between marketing (who has collected the lead) and sales (who is tasked with responding to the lead). If your team isn't responding within 1 hour, you're missing a chance to make a good impression with a new prospect.

I've tracked metrics on this in the past few years, and when a prospect is responded to within the first hour after they submit a request, the closing rate on those deals nearly doubles, and the sales cycle is shortened by a considerable percentage. This is true even in extended sales processes (e.g., 3-6 months). Why is this? I suspect it's because of the old adage, "You don't get a second chance to make a first impression."

I've heard from sales professionals through the years that there are three things that are required for selling: trust, credibility, and interest. In the example above, the prospect has already shown interest, which is a great situation for a sales rep. So you need to establish trust and credibility, and do it quickly. Responding quickly demonstrates that you genuinely value his interest, and that you can be trusted to do what is asked of you. Being informed and answering questions in an intelligent manner is what establishes credibility, but that's a topic for another day.

At my company, Plexus Systems, our EVP of sales is totally on board with this. In fact, we're working on our sales process and our organizational structure to provide resources to respond more quickly to clients - in some cases instantaneously - and I'm convinced it's going to have a huge impact on our sales in the long-term.

I'm sure there are dozens of other examples of service in the sales cycle and how it impacts the sales cycle, and I'm interested in hearing about any examples you might have. Feel free to post comments, or email me with your experiences.

Utility Computing, ASP, Hosted, Software-as-a-Service, On-Demand - What the Hell?

2007-08-28T08:50:00.000-04:00

As I mentioned in my previous post describing the terminology in the market, software as a service has some highly confused definitions today. Like any new technology, the "software as a service" delivery model has gone through several name changes and modifications to the core model before it started gaining widespread acceptance in the markets. And, of course, as soon as it starts gaining widespread acceptance, companies that aren't able to deliver the latest and greatest version of the technology start purposely confusing the game with misstatements of fact, mis-applied labels on their technology, etc.

For the SaaS market, it goes like this:

late 90's: "utility computing" becomes the theoretical darling of the technology press. Harking back to the old mainframe "time-sharing" model, this approach to corporate computing is based on the idea that "CPU cycles" are now a commodity, with storage and bandwidth rapidly approaching that mark. And since most servers and desktops sit idle for most of the day, why pay for capacity that isn't used? This dovetails with grid computing, the idea of tying together all those unused desktops during the overnight hours and creating a virtual supercomputer.

2000: Y2K proves to be a total non-event, even in countries where nothing was done to abate the problem. CEO's and CFO's wonder, "Why the hell did we spend all that money? Screw IT - their budget is getting cut next year."

2000: "application service providers" or ASPs become the new darling. In most cases, these were companies that were taking existing client/server applications (such as my previous company, Mi8 Corp., taking Microsoft Exchange Server), doing some voodoo to the app to make it multi-tenant, and then delivering it as a service over a VPN or the Internet.

2003: ASP is now a dirty word - many have gone out of business, leaving companies without their application or data. The new word is now "hosted." Although technically this term simply means that the server is sitting in a third party data center, and is managed by someone else, it picks up steam and becomes widely associated with all variations on the software as a service model.

2004: Salesforce.com goes public on NYSE, with it's slogan "No Software". Mark Benioff, the CEO, sports a lapel button with the word "software" surrounded by a red circle and a slash going through the word. The financial media picks up the drumbeat, and the term "software-as-a-service" gains widespread acceptance in the industry.

2006: Software-as-a-service is now well-established, primarily in small and mid-sized companies, but larger organizations are starting to consider it for many applications. As the term "Web 2.0" grows in popularity, all kinds of other terms get stuck with the "2.0" appellation - and thus SaaS 2.0 is born. But it doesn't gain much steam. Older software vendors who don't have a SaaS offering start setting up dedicated servers in a third-party data center and calling it (incorrectly, and somewhat disingenuously) SaaS.

2007: A new generation of software-as-a-service company begins to emerge (including my company, Plexus Systems), combining new software development methodologies (e.g., agile development, rapid application development) with the SaaS delivery model. These companies start using the term "on-demand". And, of course, companies that STILL don't have a SaaS model start calling their dedicated, hosted servers "on-demand."

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So, while I guess we should be flattered that old-style software companies are starting to steal our terminology, it's frustrating that they are confusing the market. In my market (manufacturing software), companies like QAD, which has a very old client/server application with lots of good features, confuse some clients by claiming to have an "on-demand" application, which is really just a dedicated server hosted in a third party data center. It's not multi-tenant, it's not scalable, it's not web native, and it doesn't employ any new software development methodologies - and thus it doesn't deliver any of the advantages of an on-demand application.

It's interesting to see that SAP is finally jumping on the bandwagon as well. They have been talking about a project that is code-named A1S for over a year, and word is that they are having a press and analyst event on September 19 to "launch" the service - although it's still in beta, still is missing lots of functionality, and they haven't quite figured out how to sell it through their standard channels. It will be interesting to see how this launch goes - watch this space for an update on September 20th.

Marketing Tools - What's the Highest Priority?

2007-08-27T09:00:00.000-04:00

I realize I'm starting a lot of these posts the same way (i.e., "When I started in this industry 20 years ago ...), and I'm sorry for that - however, as I write about the recent high-impact trends in software marketing, it makes more sense for me when I put it in the context of my experience. So...

When I started doing software marketing 20 years ago, there was a fairly limited number of tools that we could use:

1) Print advertising (especially in the industry publications)
2) Direct mail (paper mail!)
3) Sales brochures (actually printed on paper)
4) Public relations (really editorial relations)
5) Tradeshows

In fact, at one of my earliest jobs in the industry, with a company called Xyplex (now owned by MRV Communications), this was how the department was organized: there was an advertising manager, a brochure writer (me), a tradeshow manager, etc. And we weren't even doing any PR until I read an article about it and figured out how to do press releases! Then, of course, the management team fell in love with PR, because it was so cheap in comparison to all the full-page ads we were running.

And there were many different ways we leveraged this limited set of tools: channel marketing (in conjunction with partners), co-op dollars (provided by our suppliers), etc.

Fast-forward to present day: every one of these marketing tools has changed dramatically, and in some cases have diminished or increased in importance dramatically. Sales brochures are rarely printed anymore, but PDFs are downloaded from websites or emailed to prospects at an enormous rate. Tradeshows have dramatically diminished in importance, while webinars and other online events have changed the way companies interact with their sales prospects.

And, of course, there is an entirely new set of tools that are available to marketers - most of them web-enabled:

1) Website, with all of it's content and interactivity
2) Online events (webinars and webcasts)
3) Social networking (e.g., Linked-in)
4) Viral networking
5) Search engine optimization and advertising
6) Knowledge center sponsorships and listings
7) Email marketing

Etc., etc.

What all of theses have in common, to a certain extent, is that they all require content - and expert content at that. I've thought about this as "the rise of the subject matter expert", as creating this expertise is more important than anything else a marketing department does. Producing all of these materials and events doesn't do you any good if you don't have good content - informative material with a unique point of view. You might think that the social networking and viral networking areas are not content-driven, but I'd argue that you are wrong. Social networking in a business context is driven by your area of expertise, not by how nice you are. People want to connect with you if you know a lot about a specific subject, or if you can help them in some way. And viral marketing is dependent on content for its existence - whether it's an amusing anecdote, image, video, etc., that becomes viral, the content must come first.

So, as we get into the fall planning season (working on the 2008 budget and marketing plan) at my current company, Plexus Systems, I'm going to focus on subject matter experts - hiring them, and leveraging their expertise. All of the tools I mentioned above are exactly that - TOOLS - and executing well with those tools is a challenge. However, executing well with those tools depends first and foremost on having valuable content, and then using that content in multiplicative ways - e.g., a white paper becomes a webinar/webcast, becomes a presentation at an industry tradeshow, becomes the subject for an email marketing campaign, etc.

Are Tradeshows Worth Your Time and Budget?

2007-08-23T09:03:00.000-04:00

As promised, I've done some research on what other bloggers are saying about tradeshow strategies. Not surprisingly, many of the bloggers work within the tradeshow industry, so we have to take what they say with a grain of salt.

For example, Marshall Yard (a great name for someone in this industry) posted a research report from Catalyst Exhibits, Inc and the Business Marketing Association about "the importance of tradeshows." However, there is a fundamental error with the research: it polls the exhibitors and their impressions of how important tradeshows are, rather than polling the buyers and their impressions of the importance of tradeshow exhibits.

Read these stats from the report:

77 percent of respondents indicated their companies exhibit at trade shows.
Companies that exhibit at trade shows exhibited at just over 18 in 2006, and 36 percent plan to exhibit at more trade shows in 2007.

What that tells me is that they polled people at companies that already exhibit at tradeshows, and that they talked to people whose jobs focused on tradeshows. However, there's another VERY interesting stat from the report:

Almost half of those organizations believe they are not seeing results from their exhibit efforts - yet they still plan on exhibiting at more events in the coming year!

That is bizarre to me, and it's a perfect example of why I started this blog: to challenge the status quo, and to get marketers thinking about why they do things, and whether or not they should be doing them.

If anyone else has links that you suggest I read regarding the true value of tradeshows, let me know. I'm about to start my 2008 planning for the marketing of our software, Plexus Online, and events could be a HUGE portion of my budget.

From the Show Floor - AIAG Autotech Day 2

2007-08-22T11:24:00.000-04:00

11:25 AM - Here we are at the Rock Financial Showplace again, for day 2 of the AIAG Autotech conference and exhibition.

Day 1 resulted in about 20 scanned badges and business cards, of which a half dozen or so are "qualified" leads that are actually interested in our on-demand application, Plexus Online, according to our sales team. However, these include contacts at Toyota, TRW, and Chrysler - contacts that would have been very difficult for us to make in any other way. Thus the tradeshow conundrum - an "old marketing" tactic that still has some relevance in the "new marketing" model.

Additionally, we received good coverage in today's edition of the Great Lakes IT Report, after Matt Roush stopped by yesterday to chat for a while. We would not have received this coverage if we weren't here at the show.

I'll definitely be working on some ideas about how to calculate the value of an event like this, and how to appropriately plan and budget for this event. If anyone has any ideas, I'm open to hearing them.

More posts later.

4:30 PM: The afternoon has been dead. It has been mostly other exhibitors walking around collecting trinkets and toys "for their kids", of course.

There has been a trickle of qualified prospects coming by, but not more than 1 at a time, and not more than 1 or 2 per hour. Still, these are people that we would have missed if we weren't at the show.

A former boss of mine once said that marketing was like dust; it trickles down one nearly invisible mote at a time, but after a while there's an inch of dust on the table. I like that metaphor - it's never just one thing that makes your marketing program work, but rather it's the sum of the whole, and the multiplier factor (how each program makes the other programs work better.) The caveat to the whole thing, this guy used to say, is that you sneeze once, and the whole think is f***ed.

So are tradeshows:

Completely useless, and should not be part of any modern marketing campaign?
A necessary evil, confirming brand identity and reassuring your sales prospects that you're a real company?
An integral part of any good marketing plan?

I'm very interested in hearing opinions on this topic, and I'm going to search out some fellow bloggers to see what they have to say.

From the Show Floor - AIAG Autotech

2007-08-21T08:00:00.000-04:00

8:00 AM: Today and tomorrow, I'll be posting from the show floor of AIAG Autotech, supposedly "the most relevant conference in the automotive industry." I'm skeptical.

Our presence at this show was committed by my company, Plexus Systems, last year, before I started. My general opinion on large industry tradeshows is that they are outdated, as I've written before - and this show in particular has made some huge errors that are going to make this year a flop, in my opinion. First, they took a year off - in 2006, the conference/tradeshow did not occur. Second, they've moved the venue from Cobo Hall in Detroit to the Rock Financial Showplace in Novi, Michigan - about 30 minutes from downtown Detroit. These two factors spell doom, in my opinion, but I will post at least a few times throughout the day to see how I've judged. Check back later.

9:25 AM: The parking lot has about 200 cars in it. There are no lines at registration. As the conference portion of the event started at 8:30 AM, this isn't a good sign. Most of the cars probably belong to exhibitors and show organizers, who have arrived early to get ready for the event. As I arrived on the show floor, I found that the exhibitor registration system is down - I can't get a couple of people registered until later. I ran into a guy I know from Covisint, and he says they have 20 people scheduled to work their booth - and he estimates that they have more than double the people they need. One of the show organizers claims that they have 1,000 attendees pre-registered for the event. Taking a 25% discount off that to account for exaggeration, and another 30-40% for registrants who are no-shows, my math says that there will be no more than 400 people attending this over the next two days. We'll see.

10:15 AM: The exhibit hall opened 15 minutes ago, and there are people walking around and checking out the booths. Our booth is right in the front, so it's easy for us to judge the traffic at the start of the day. So it has started better than I had opened - probably 50 people walked in right away, and a few of them stopped in our booth.

Did I mention that only about 2/3rds of the show floor space has been sold? But it's nicely organized.

11:00 AM: The first hour has had a nice flow of traffic - surprisingly strong. We haven't been swamped, but everyone that has stopped by has been a good prospect - and that high percentage is one of the key things I look for in a tradeshow. Additionally, Matt Roush from the Great Lakes IT Report stopped by to chat and to take a few photos.

It's been a stronger start to the show than I anticipated, which makes me happy. But we are not swamped by any means, and I'm sure that once the early-morning fast-start is over, that we're going to settle into the dog-days of the show.

11:30 AM: Dead. The initial group has moved to the booths at the back of the hall and have started to rotate out of the hall and into the conference. There are zero attendees in our booth and the booths around us. On a funny side note, there is another company called Plexus here: Plexus Corp., which makes training systems.

1:00 PM: Still dead. Lunch is just about done, so we expect a small rush of people shortly. In the meantime, there are a few rules that I'm relearning at a tradeshow:

If a very attractive woman walks up to you, looks you in the eye, smiles brightly, and sticks out her hand to shake, be careful! She's trying to sell you something.
Your competitors may be in the booth right next door, but they're not your enemy, and most of them are probably sales reps that have worked at previous jobs with some of the sales reps on your team. They're not trying to steal your secrets, they're just trying to kill time - just like you.
Smarter tradeshow organizers give strongly color-coded badges out to attendees, so you can easily judge who is an attendee, who is another exhibitor, and who is a reporter or analyst. You need to learn these color codes before a show opens, and teach them to your team on the show floor.

One of the big arguments I hear from sales reps, when I explain my dislike for tradeshows, is, "It only takes one or two really good leads from a show to make the investment worthwhile!" This drives me crazy, but I don't have time to delve into it right now. But you can bet that I'm going to tear this one apart sometime soon.

5:00 PM: The show floor closed at 5, but there is a cocktail reception this evening - in the lobby of the convention center. It's sure to be mostly a bunch of sales reps talking to each other.

First day total: about 25 people scanned their badges with us, and somewhere between 5 and 10 of those are "qualified" leads - including a couple of the large automotive OEMs. Tomorrow I expect more of the same. It will be interesting to do a calculation of lead cost between this show and other forms of lead generation.

A couple of final notes:

The largest ERP providers in manufacturing, Oracle and SAP, were not exhibiting at this event.
Another large ERP vendor, Infor (built by acquiring literally dozens of other ERP players) had a presence at the show - but it was just a 10x10 booth, much smaller than the 20x30 booth that we had. Microsoft's space didn't have a booth - it had a car, showing off their new automotive software.
A mid-sized player, QAD, had the identical booth to us - same size, same position, etc. They also sponsored lunch for all of the attendees - a scoop of tuna salad on some mixed greens. (Exhibitors were not allowed in to the lunch!)

This confirms my belief that there is a lot of ego and wish-fulfillment in the decision to exhibit at an event like this.

It's been a long day, and we have to get through tomorrow as well. I'll post from the show if anything interesting happens, but I'm definitely going to spend some time thinking about the best approaches to these kinds of events, and how to overcome the argument that "a couple of good sales leads from a show like this justifies its cost."

You Are What You Publish

2007-08-20T08:30:00.000-04:00

Truth be told, I hadn't thought about starting my own blog until I saw a couple of eye-opening presentations that helped gel my thinking about the new marketing model. One of those presentations was by David Meerman Scott, who has written several books about marketing. His latest book, "The New Rules of Marketing and PR," is an excellent download (it's an ebook), and I highly recommend it to those of you figuring out how to do marketing for your company. In the presentation given by David, he presented several of his new rules, but I'm going to focus on one of them:

Rule #1: You are what you publish
Going back to my discussion about the new purchasing model and the empowered decision maker, this makes perfect sense. I've had this discussion at several companies in the last few years: if we don't explain it explicitly on our website and in our literature, people just aren't going to make assumptions and leaps of logic. For example, if one of our sales reps is talking to someone about our software, Plexus Online, and how it fits in perfectly with the requirements of the aerospace & defense industry, then we BETTER have information about how this fits someplace on our website for them to read - hopefully with a case study about an existing A&D customer and how they're using the software. We better talk their language (correct industry terms, including abbreviations/acronyms) and we better know the players. I've seen cases where a sales rep complains because this exact thing has happened: they try to sell into a new industry, the prospect goes to our website and their is no info about our fit with the industry, and so the deal is dead. Think about that: the sales prospect trusts the information on our website more than they trust what a sales person is telling them! That is remarkable.

This week, I'm going to talk about some of the other people who helped these thoughts gel, and I'll provide links to their blogs or their presentations where I can.

How On-Demand Software Changes Everything

2007-08-17T08:00:00.000-04:00

A lot of companies are jumping on the "hosted" or "software as a service" bandwagon, whether they belong there or not. I've spent the last 9 years working in this arena, and I feel like somebody needs to clear the air of all the confusing messages that are being bandied about - and get to the point about the real benefits.

First, there is an enormous difference between a "hosted" application and true "software as a service," although the two are often used as synonyms. In my little world, any application could be hosted. "Hosting" simply involves moving the infrastructure from an internal data center to an external data center, managed by a third party. The hardware and software remain dedicated to a single user, although the hardware and different layers of the software may be owned and/or managed by the third party hosting company. Hosting has a lot of benefits (no hardware or software maintenance, no backups, etc.), but they are chiefly operational, which translates to financial; doing a total cost of ownership (TCO) comparison between an on-premises deployment and a hosted deployment is generally pretty straightforward.

Software as a service, however, has several differences, both from a technical point of view and from a business point of view. Most often, you'll hear "software as a service" (SaaS) defined as a multi-tenant system, which means that a third party owns the hardware and software, and runs one copy of the software on a big infrastructure, and multiple companies use this system - with varying technologies used to guarantee privacy and security between these companies. However, people most often miss the business side of this delivery mode. Generally speaking, SaaS is a subscription-based service, with fees usually (but not always) based on the number of users at a particular company. Software as a service should also be uniquely developed application; Microsoft Exchange Server is offered as a hosted solution by dozens of providers, but only one company (mine) offers Plexus Online (via the software as a service model). The benefits of the hosted model are carried forward via SaaS, and are extended to include other financial benefits: no upfront purchases of hardware or software, no license maintenance fees, etc.

I've been a strong believer in the hosted/SaaS model for some time; I started working with the delivery method in 1998 when I joined a web software company. However, when I joined my current company, Plexus Systems, earlier this year, I finally saw where the next stage in SaaS development is going. For lack of a better term, I'm going to call this the on-demand model - the term seems to be getting some pick-up in the industry press, so I thought I'd take a swing at defining it for you.

On-demand software utilizes the software-as-a-service delivery model, but goes further. On-demand applications are web-native software, using only a standard browser as the interface. More importantly, on-demand applications do away with the traditional "waterfall" development schedule (version 1.0, 1.1, 2.0, etc.) in favor of an agile development methodology, or "rapid application development" methodology. Using these new software development techniques has two important distinctions for the users: they are NEVER faced with an upgrade (i.e., they are always using most current version of the software); and they get direct access to the development team to ask for new features and customizations whenever they are need. (And these new features and customizations get automatically folded into the base application, so they are no longer "customizations".)

This combines the operational/financial advantages of SaaS with an entirely new set of advantages, most of them focused on the end users:

All users are on the same software, and it's always the most current version. And there is no desktop software to manage or keep up to date.
Since custom feature requests are folded into the base application, they are never obsoleted with the "next upgrade" - they always carry forward as standard features.
Because users are talking directly to the developers, it's easy to ask for new features or tweaks to interfaces.

If you think about this, your favorite websites are really on-demand applications. Google never released "Google 2.0", for example. And when ESPNzone.com makes changes to their interface, they trust that they are intuitive enough that you'll be able to figure it out - and that the new features offered are definitely worth the slight inconvenience of a slightly changed interface.

It's my belief that the on-demand model will be the future of most applications, as the advantages are just too great to match. Ask any CFO or VP of Finance if they are happy with spending a high portion of their budget keeping outdated software running, or with hiring IT people to babysit servers and applications, and they usually start fuming. They want an IT team that are business process consultants, and who focus on building value with technology, rather than simply babysitting technology. Or ask an IT guy how many of his applications are updated to the current version, and he'll likely laugh at you.

This, I believe, is going to change everything in the next few years.

Bring it Full Circle - Motivation, Software Marketing, & Lean Principles

2007-08-16T08:48:00.000-04:00

My last 3 posts have been about motivation within sales and marketing, obvious conflicts of interest, and how those issues impact the new sales and marketing model. (Note that I cleverly avoided the use of the overused phrase "new paradigm" in that sentence.) Today I want to try and bring that full circle, to talk about how this topic should influence software marketing plans and tactics, how it is a requirement in the on-demand, software-as-a-service world, and how lean principles are interwoven.

As I mentioned in one previous post, I heard a great presentation from Stephen M.R. Covey about his newest book, The Speed of Trust. To summarize this hour-long presentation in one sentence: Trust has a bottom-line impact on results, and when trust goes up, speed goes up while costs come down. Trust is the inverse of motivation. Without the correct motivation on the part of a vendor's personnel, their sales prospects will not trust them, which means the speed of the sales process goes DOWN and costs go UP.

For software companies, earning the trust of companies is a difficult challenge. In fact, most of the old-fashioned purchasing process (RFI, RFP, short list, demo, due diligence, pricing negotiations, contract) has come about specifically because vendors have proven again and again that they should NOT be trusted. Purchasers no longer believe it when a company says, "Yes, we have that feature." And they demand to be SHOWN that feature in a demonstration. My company, Plexus Systems, often gets dragged into multi-day demonstrations of the software, where each department that may use the software has their own checklist of features that must be demonstrated to their satisfaction. It's not a discussion about how to add value, how to implement the software in a way that maps to their business operations, etc.; it's a checklist of features that they run through to be sure that the vendor isn't lying to them (or, as it's more often described, to make sure that the vendor is not misrepresenting the capabilities of their software).

To earn trust, software companies must show that they are more interested in solving the problems of a potential customer than they are in selling them a huge software license package and maintenance contract. But the old-fashioned business model of software companies encourages exactly the opposite behavior. In fact, most companies sell software, then someone else implements it and maintains it, and the selling company doesn't come back to the table until it's time to sell an upgrade or to renew a maintenance contract.

In the software as a service model, however, this relationship is fundamentally changed. The software company is engaged with the customer on a daily basis, and their revenue stream is based on having customers stay on the service for a long time - and that requires happy customers. This is why I believe that long-term, the software-as-a-service delivery model will win out over the traditional on-premise delivery model in a very high percentage of cases.

Mark Benioff, the CEO of Salesforce.com, compares the old model to a "one-night stand" and the software-as-a-service model to a marriage. Although this is a bit crude, it does describe the differences pretty well.

So, if you're selling or marketing software-as-a-service, you're not selling a set of features that a customer can use; you are selling a relationship with your company. That fundamental difference means that your marketing messages must be multi-pronged: you must market the capabilities of your software, but you must also "sell" your company, and your loyal and happy customer base.

For my company, when we realized this a few months ago, it meant a big change in the way we sold our services. Previously, our goal was to get the client to do a demo of the software as quickly as possible - to let the features and capabilities of the software sell themselves. Now, however, we will NOT demo the software until we've gone through a good discovery process with the sales prospect, making sure we understand their business model, their operational requirements, and their goals for the software. In a few cases, getting this understanding has meant that we've walked away from a deal, because their was such a large gap between our analysis and what we could deliver to the client. In most cases, though, it simply meant that we were able to shorten the sales process, do a shorter demo, and show the customer exactly what they need.

From a marketing point of view, these changes mean that we need to take a high road, offering educational pieces, free analyses, client success stories, etc., rather than simply touting how good our software is. And we now trust the prospect to educate themselves to a great extent BEFORE engaging with us. Although this means that clients are outside of the tracked sales pipeline (and thus outside of our "control") for a longer period before they engage with us, it also means that they enter a discussion with us with a higher degree of trust, and this speeds up the process and lowers our cost of sales and marketing - and lowers the customer's cost of acquisition. (When you do a back-of-the-envelope calculation on what large enterprises spend on the process of evaluation and purchasing software, the numbers are staggering!)

Does Motivation Matter in Software Sales & Marketing? cont'd (part 3)

2007-08-14T08:29:00.000-04:00

Continuing on the theme of my last few posts, I want to talk about some obvious conflicts of interest in traditional software marketing. As I mentioned in my previous post, conflicts of interest can be simply defined as someone having a hidden motivation, or two different motivations that conflict with each other.

Recently, as I've been talking to reporters and editors at various industry magazines, somewhere in the conversation the discussion turns to them selling me services (i.e., advertising) for their magazines. These are not isolated events - it has happened again and again in meetings over the past 6 months. Conversely, as I've been talking with advertising reps from different magazines, they have offered to help me reach the editors, or to get press releases covered. For those not familiar with the magazine industry, this type of crossover between editorial and advertising was unheard of even a few years ago. It reveals a conflict of interest on the part of editors and reporters: while they may have the best intentions of covering only important news stories, the truth is that they are heavily influenced by advertisers in their magazines, and thus their coverage is biased towards those companies spending a lot on advertising. (This is why Consumer Reports accepts no advertising.) It wasn't always so - or at least they weren't so blatant about it. For years, editors would tell you that they didn't even talk to their advertising reps, and that they had no influence on their reporting. I tend to see the more blatant examples in the smaller magazines that share editorial staff with other magazines in the same publisher, and those who are suffering in terms of falling advertising pages.

The more infuriating example of this is the industry analysts: Gartner Group, Forrester Research, IDC, AMR Research, and the like. These companies provide analysis and recommendations on technology purchasing, including networking, software, hardware, etc., under the guise of being an unbiased third party. They sell their reports to companies trying to make decisions on technologies, generally to the Fortune 500 or the Global 2000. At the same time, they sell "access to their analysts" to the companies providing the technology! That is, a company like mine may pay $50k or more per year just to be able to talk to the analysts writing the reports - and their handlers are very careful about guarding their contact information, so they can't be bothered by companies that can't or won't pay for their time. So, you have supposedly "unbiased" analysts getting paid for their reports about companies that are also paying them.

In both of these instances, because the conflict exists, the consumer must assume that their motivation is suspect, which calls into question the value of the reports and recommendations they issue. However, they are so ingrained in the industry now that companies MUST pay to play their game, or they risk losing out on many large deals.

As a side note to this, note that both examples favor companies that are spending a lot of money; i.e., large, well-established companies with large marketing budgets. That reinforces the status quo and makes it more difficult for new companies and new technologies to gain a foothold in the market.

Next couple of posts, I'll tackle the issues of what "the motivation factor" means for marketing. And, as always, suggestions or comments are welcome!

Does Motivation Matter in Software Sales & Marketing? cont'd

2007-08-13T08:51:00.000-04:00

Continuing on the theme of my last post, I've been thinking more about why I do what I do. I hadn't intended to get into software when I studied English Lit at the University of Michigan - I kind of fell into it, first as a technical writer, then as a marketing writer, and then coming up through the ranks over the last 20 years. That's one of the things I love about a good software company: it is a total meritocracy, where the hard-working and talented get rewarded, regardless of your background.

At the same time, I'm not totally in love with technology; I understand it, I like it, I use it, but I'm not the guy who must have the latest and greatest mobile phone/PDA, or the coolest laptop. In fact, I'm against buying what's new, and instead try to get technology that is in the "sweet spot" of cost/functionality (usually about a year after it has come to market). For example, I haven't purchased an iPod yet, though all of my music is now digitized.

Instead, it's what I can do with technology that fascinates me. Digital printing, online publishing, video-conferencing with my young daughter when I'm traveling, reconnecting with college friends and co-workers from 20 years ago via a social networking site - those are the things that really excite me about technology. And that's a good part of why I choose to work in software.

However, I don't choose to work at IBM or HP or Microsoft - I've spent my entire career at start-ups and small companies that are seeking to change the status quo. And that leads me to two thoughts about why I like this industry: 1) I'm an iconoclast by nature, always tearing down the old and looking for a new way of doing things; and 2) I like puzzles, and working at a start-up or small company is the ultimate puzzle. If you gave me a marketing budget of millions of dollars and a team of dozens of people in an industry that is well-established, I'd probably be bored to tears. Giving me a shoestring budget in a brand new industry - now THAT'S a challenge that I find interesting!

So, circling back to whether or not motivation matters in technology sales and marketing: of course it does! I'm not saying that everyone's motives must be pure as snow; however, most of us can spot a "sleazy sales rep" from a dozen miles away - someone who only wants to sell us something, rather than help us solve a problem. The whole "solution selling" thing has gotten out of hand the last several years - some things are just a commodity and should be sold as such - but a good sales person for the right product/service can help immensely. I'm looking for someone with expertise in the product, and who has seen my situation (or something similar to it) a few times. If the situation is totally new, tell me that, and work with me to figure out the best thing to try.

But how does this translate to marketing? What key messages can we focus on that helps get this across? Obviously we can't just talk about "partnering" with our customers, as everybody lies about that all the time. We can certainly demonstrate it in the sales process, but that doesn't get us INTO the sales process as often as we'd like.

I'm open to suggestions (feel free to post comments!) but I'll be exploring this in several upcoming posts.

Does Motivation Matter in Software Sales & Marketing?

2007-08-09T10:39:00.000-04:00

A few years back, in the early days of the dot-com boom-and-bust cycle, I was golfing with a couple of friends, and I was bitching about how the software industry had become flooded with newly-minted MBA's who saw Internet companies as a get-rich-quick scheme - they were ignoring Wall Street and going to Silicon Valley, Boston, and in my case, "Silicon Alley" in NYC. One of my fellow golfers (who happened to be a VP at the Federal Reserve Bank), chided me gently, saying, "I didn't know you were such a moralist. If you're not doing it to make money, then why are you doing it? "

Why indeed? I didn't have a good answer to that question.

This conversation has stuck with me over the past 6 years. I was genuinely angry with the people that I perceived as contributing to the problem, even more so as the dot-com collapse threatened the survival of my then-current company, which was NOT a dot-com, but which nonetheless was suffering from the collapse in the capital markets. Part of it, I'm sure, was simply the human need to blame someone when something goes wrong - but my feelings had predated the dot-com collapse, so I've spent a lot of time thinking about this.

Recently, I was following a conversation thread on IT Toolbox, where IT people and consultants were talking about why ERP projects fail. There were a few astounding comments, two of which were: 1) "If sales reps sell a bill of goods to a customer and it doesn't meet the customer's needs, then shame on the customer and good for the sales rep!" and 2) "If I accomplish the written objectives of the project and the software is up and running, then I consider it a success, whether or not the software is actually used or whether or not it actually does what it's supposed to do to help the business."

Both of these comments, especially the first one, shocked me. Shortsighted, cynical, and mean-spirited is how I would characterize these.

All of these things together got me to thinking about motivation - why I work where I work, why my company does what it does - and about conflicts of interest, which is essentially people doing things for the wrong motivation, or people hiding their true motivation.

Sales seems, on it's face, to be motivated by money - getting a deal, any deal, done. However, the best sales reps that I've known in my career are those who walk away from some deals, saying, "No, our technology isn't right for you." Those are few and far between, but finding those reps makes for a much more successful company in the long wrong - assuming that happier customers equal greater success.

I'm going to spend a few more posts on this over the next few days, because I think that agile development methodologies and the software-as-a-service delivery model require inherent changes in motivation. And that the right motivation contributes to lean marketing.

Random Thoughts on CAR's MBS

2007-08-09T09:49:00.001-04:00

As I've mentioned in my last few posts, I spent the first part of this week at the Center for Automotive Research's Management Briefing Seminars at the Grand Traverse Resort in Traverse City, Michigan. I returned last night, and I thought I'd put down some random impressions of the event, as they might help me think of a coherent summary.

It's a funny event: it's a conference focused on the automotive industry, with the first two days organized around suppliers, and the last three days focused on the really big players. People are encouraged to bring their families, and there were many spouses (i.e., wives - see below) at the social events. It's considered a major event in the automotive world, and yesterday I saw Alan Mulally, the newish CEO of Ford, speak, which was interesting.

So:

- The first few days seemed to be filled with a lot of sales reps and consultants talking to each other. The actual executives from the suppliers were few and far between, and very much sought after - our sales reps were lucky enough to track them down and spend time with several. All of the sales people I talked with think those first few days were great.

- The conference overall seems to be >90% older (50+) white males who have spent their entire lives in the industry. The executives who were there have spent most of their careers at a single company (two max), while the sales reps have bounced around from company to company within the industry. There were very few minority participants. The few women that were in attendance could be separated into the tall blondes (sales reps) and the industry insiders (consultants and analysts). I didn't meet a single woman executive from any of the companies, though I know there were one or two in attendance. The primary MC for the event made repeated jokes about his wife spending all of his money, his in-laws, etc. All in all, it was like a trip back in time - to the 1950s.

- Due to the profile of attendees (see above), the revolution in personal technology and the Internet seems to have passed a lot of these people. Cell phones and Blackberries seemed to be common, but when a Toyota executive made an excellent point about how their younger clients (the Scion buyers) liked to communicate with the company (mainly via text chat, with email a distant second, followed by phone, etc.) people seemed to be shocked - both by the fact that consumers wanted to talk to the company, and by how they chose to talk with the company.

- The Toyota speaker (Jim Lentz, Executive Vice President, Toyota Motor Sales U.S.A.) seemed to be from a different planet, by the way. While Alan Mullaly's talk was excellent, I was more impressed with Lentz. That company simply has a different way of thinking about products and the people who buy them - they are more like a consumer products company, and less like a manufacturing company.

- We sent 5 people to the event, and none of us were registered for the entire week (nor is anybody staying at the hotel for the entire week). One of the five was a speaker at the event, so he didn't have to pay for his acommodations or event registration. We also sent one PR person from our agency, who stayed at a less expensive hotel and didn't have to register for the seminar. Total expenditure for the event: >$10,000, with no sponsorships, no exhibits, etc. Amazing.

- One of the daily pubs at the show wrote an article about how the dress code is swinging away from casual and back towards suits and ties, as people try to signal how "serious" they are about the event. (Apparently it had become something of a boondoggle where the only important work was being done on the golf course, but no more.) This cracked me up - as if they way someone is dressed has ANY bearing on how serious they are, how intelligent they are, or their ability to do their jobs!

All in all, it was a very strange event from an outsider's perspective. But overall it was enjoyable from a social point of view, it was educational (some of the speakers were great), and it was a successful marketing event for us, as we had a customer (Metaldyne) give a presentation highlighting their use of our software, and our CEO spoke on Lean Manufacturing.

And finally, my threesome came in tied for second in the golf scramble event; we shot a combined score of 12 under par to tie with three other groups that shot 60s. The winning team shot a combined 15 under, a remarkable score! Personally, I had the longest drive early in the contest (at about 290 yards) but it was surpassed by someone from Microsoft. Oh, so close!

Can a Tradeshow/Conference be Lean?

2007-08-06T16:24:00.001-04:00

For the next few days, I am at the Management Briefing Seminars at the Grand Traverse Resort, in Traverse City, Michigan. The conference is organized by the Center for Automotive Research, and is focused around the macro problems facing the automotive industry. Not surprisingly, a big part of the conference is focused on lean principles in automobile manufacturing.

This is a conference, not a tradeshow - the daily activities are centered around lectures and presentations given in a ballroom, along with networking activities. There is, however, a small exhibit area for "sponsors" of the conference, as well as many other sponsored activities - the badge lanyards are sponsored by one company, the wireless network by another, etc. So although this is technically a "conference" there are plenty of marketing opportunities for companies that want to get in front of these attendees. And lots of companies have spent lots of money (tens of thousands each) to exhibit and/or sponsor this event.

Personally, I hate tradeshows. From a pure marketing perspective, tradeshows are awful. Even if the attendees are the perfect potential buyers for my company's software, the "leads" garnered at the events are virtually useless, the cost of the floor space, booth transportation and construction, travel, and time out of the office are all enormous. When I've questioned a commitment to do a tradeshow in the past, all I hear is "It's one of those shows where we have to be there." Or, "All of our competitors will be there, so if we're not there, it will look bad." That first answer makes my blood pressure rise - "we have to be there" is not a reason to spends tens of thousands of dollars with no visible results - and the second answer makes me think of my mom, scolding me as a child and saying, "If all of your friends jumped off a bridge, would you do it too?"

What I've come to realize is that there is SOME value, however miniscule, in well-targeted events: brand recognition. If it's our perfect target audience, and the event is constructed such that we actually get a chance to spend time with them (in contrast to the event I'm at now), it might make sense to attend - IF we can figure out a way to do it in accordance with lean principles (no waste!).

I'm trying something new in the coming months; rather than taking a 20x20 booth to 4 events per year, each one costing $50k+ when everything is factored in, I am creating a quick-hit event program. I'm identifying events where different members of our target audience will be there (e.g., financial people, quality people, plant floor managers, etc.), sorted by industry (e.g., automotive manufacturing, medical device manufacturing, etc.) and I'm doing things backwards. Since this is about brand recognition rather than lead generation, I'm focusing the expenditures on sponsoring something at the show - the badge lanyards are always a great one - and then I'm sending only a miniscule presence (10x10 booth, 10x20 max) with only a few people. This approach serves the purpose of getting our name in front of key audiences, does it more cheaply, and with little disruption to the regular sales and marketing calendar. In fact, I'm encouraging some of our regional sales people to do small, regional events (e.g., user group meetings, industry associations, etc.) with a tabletop, a running Powerpoint presentation, and minimal signage.

My goals are:

Reduce the overall costs associated with our events program
Increase the focus on brand recognition vs lead generation
Be everywhere, rather than in just a handful of places
Get intimate with the decision-makers; rather than being one of 500 exhibitors, be one of just a handful

My gut feeling is that most tradeshows and conferences are dying; I've seen several that have been combined into a single event, just to create the impression that there is more floor traffic. There will always be a few that survive, but these large events (e.g., Comdex, Cebit, etc.) are dinosaurs that won't be around much longer. So rather than trying to ride them into the ground, I'm looking at their more nimble, fast-moving replacements.

Next Week in Traverse City

2007-08-03T10:28:00.000-04:00

Next week I will be in Traverse City, Michigan, attending the Management Briefing Seminars organized by the Center for Automotive Research (CAR). I'll be blogging from the conference, as I'll be in several workshops regarding lean management.

Look for my posts from the show itself. I don't think there is going to be much about marketing at the conference, but all the talk about Lean is bound to spark some new thoughts for me.

Getting to Failure Faster

2007-08-02T08:45:00.000-04:00

One of the concepts of agile development (and lean thinking in general) is "getting to failure faster." That is, planning is a good thing, but you have to realize that no matter how long you plan, you're not going to do better than getting it 50-70% right. The two biggest factors in success are the ability to adjust plans quickly as circumstances change or as it becomes apparent where the errors in the plan are, and speed. (In my earlier posts, I talked about how prolonged product development cycles have an inherent failure factor built in, due to changes to the requirements and market assumptions between the time the plan was first put in place and the launch of the product.)

So, rather than spending months building a marketing plan, lean marketing says "Be pragmatic. Try something you think is going to work, measure it's results, and quickly realize that you can either improve it, or you should abandon it." In other words, try something with the knowledge that it might not work, and finding out if it does or does not work is a much better use of your time than trying to create a great plan.

Dwight D. Eisenhower, our 34th president and a master field general, once said, "I have always found planning to be indespensable, but plans are all but useless." That is, there is value in doing some up-front planning work, but don't be tied to the plan, as it's likely to be wrong by the time you finish it. This inherent contradiction regarding planning is something that most people miss.

In fact, I saw a very good speaker recently Michael E. Raynor, who wrote "The Strategy Paradox: Why Committing to Success Leads to Failure [And What to Do About It]". I recommend this book, and

Immediate Gratification & the Empowered Customer

2007-07-31T15:27:00.000-04:00

I was reading an older post from a colleague's blog, Phil Wainewright, and it sparked a couple of thoughts in me. In his blog, Phil stated, "More than Web 2.0, more than open source, on-demand is the dominant ethos of the modern age. The driving force of all three is the same insistence on real-time sharing of information and resources. People today insist on immediate, unrestricted access that’s under their own individual control. They expect online ordering, online banking, online customer service, online Web search and knowledge discovery — all instantly available. All of these facilities are on-demand services."

I think Phil hit a homerun with this statement - and it has a huge impact on marketing. As an aside, I believe this ties into our culture of immediate gratification. Nobody wants to wait 3 weeks for delivery on a product, so FedEx has made a killing. Nobody wants to wait until they've saved enough money to buy that plasma TV, so they buy it on credit. And in our industry, nobody really wants to wait 6-12 months before they start using a new software product - they want it now, because this is the moment of dissatisfaction with their current system.

In essence, this is lean; something is available when I need it, and there are no unnecessary delays in either getting the additional information I need, or in placing an order and taking delivery.

So for marketing, how do you provide instant gratification when selling an enterprise-class system? People probably aren't going to order the system online when there is going to be an implementation project associated with it, but the first thing they're going to do is go to the web and search for something. The first rule of the new marketing is to know what your sales prospects call your product; you may be trying to establish a new category of software, e.g., "manufacturing operations management," but that's NOT the term that people type into Google or Yahoo. They probably start with something generic, such as "manufacturing software", and then start to narrow it down from there: "discrete manufacturing software", "manufacturing ERP", "multi-site manufacturing software", "quality management software". And you BETTER appear in the results when they're doing the specific searches, or chances are you're not going to be included in their evaluation.

This requires a fundamental shift in thought for most marketing people: "I am not telling the market what my software is; instead, THEY are telling ME what it is!"

I remember an old poster, from McGraw-Hill (see above) where an intimidating older gentleman is leaning forward in a chair, saying something like, "I don't know who you are. I don't know your company. I don't know your company's product. So what is it you wanted to sell me?" It's a classic in the advertising industry, as it's supposed to make the point that companies MUST advertise or their sales efforts are for naught.

I think that someone should re-do that poster, with a 20-something IT guy with three flat panels on his desk, leaning back and saying, "I've been to your website, and all of your competitors' websites. I read a couple of horror stories on industry forums about this technology, and I've already made contact with a couple of companies that are using your software. So what is it you want to tell me that I don't already know?"

It's the empowered customer!

At the same time, I read a quote from David Coursey last year, talking about software as a service: "Software-as-a-service places customers' and vendors' interest squarely together and gives back to the customer the power usually granted to those with the power to write checks and withhold payments. The SaaS model makes satisfying customers—existing customers—the vendor's most important priority. A customer is important every day, not just when they are about to cut the occasional, very large check.”

So he's saying that the power has gone over to the customer for the long haul - not just in the sales process, but in the entire relationship between vendor and customer. And I couldn't agree more.

Lean Marketing Communications - No Fluff

2007-07-31T10:13:00.000-04:00

As I said in my previous posts, marketing communications used to be about getting the right sales tools in the hands of your sales people, as they were the ones who "extracted" deals from sales prospects. Since they are now disintermediated, the role of marketing communications has radically changed; creating nice looking brochures (or even a nice-looking website) is no longer enough.

So what has mar/com changed to? (And how does it fit with the "lean" concepts of this blog?) The role of mar/com is now to inform the sales prospect directly, and to shape the evaluation of technology to make sure your solution appears in the best possible light.

That used to be something that was done primarily by the sales reps during the sales process; they would set traps for competitors, they would try to preempt their best points by pointing out some weaknesses in the software, etc. However, most of these sales tactics were focused on direct competitors. The deals were "hand-to-hand combat", as it were. Scaling this type of sales effort to very large numbers of sales reps and sales deals was very, very difficult, and the largest companies usually won deals simply because of who they were: people bought from IBM because it was a "trusted" brand (the old saying was, "Nobody gets fired for buying IBM"), or more recently they bought from Microsoft simply because there are not many viable alternatives for desktops.

In my career, the single most effective marketing communications tactic that I ever employed was the creation of a piece of literature, available for free download from my previous employer, called "22 Critical Questions to Ask a Hosted Microsoft Exchange Provider," (still available on their website). Technology evaluators are always looking for help in deciding what the important issues should be (although they look at this material with a jaundiced eye), and this document gave even non-technical evaluators a simple, easy-to-understand scorecard for comparing different providers. But most importantly, it explained WHY each criterion was important, and what the end results were for the purchasing company. The "why" moved the piece beyond simple sales literature and gave the content value on its own.

This is a good example of what I mean by informing the discussion. The best companies in the software industry have always shaped the evaluation criteria for technology in their own markets, but again this was usually in the sales process, rather than in the marketing process. That is, because most enterprise software has been sold by consultants, the big enterprise software firms would build a network of consultants that resold their software (creating an instant bias - so when a company chose a consultant to help them evaluate solutions, they were pre-determining the outcome of the selection process), and the software companies would train these consultants on how to write an RFI/RFP that was biased towards their own solution. The outcome of the evaluation was a virtual lock before any words were ever put on paper.

I both admire and abhor this tactic. I admire it because it's been so successful, and I abhor it because it's dishonest on its face. Additionally, the inherent conflict of interest that exists in most consultants has created a barrier to entry for small companies with exciting new technology. (The conflict of interest among the big "research' firms like Gartner, AMR, Forrester, etc. is an entirely different topic, and one that I'll get around to eventually.)

At my current company, Plexus Systems, we face these tactics from SAP, Oracle, and others on a daily basis. Rather than trying to compete with them with this same sales strategy, my marketing strategy (based on my previous post that describes the contemporary sales process) is to pre-empt this tactic by shaping the evaluation in the marketing process, rather than waiting until the sales process. Embracing openness, providing online downloads and demos without requiring that prospects register on your website, and trusting them to make the right decision and to raise their hands when they're ready to talk to you - that's the new, lean marketing that I'm talking about. I'll get into some more tactics in my next few posts. (Note: if you look at our website right now, you won't see a lot of this yet - but it's coming down the road quickly as we launch a new site.)

How The Internet Dis-Empowers Sales Organizations

2007-07-26T14:16:00.000-04:00

When I started working in high tech, 20 years ago this fall, the sales guys were kings. The top sales guys at my company made a lot more money than the CEO, and all of them had been through lots of different sales training courses, from "How to Win Friends & Influence People" to who knows what. They were slick, they wore expensive suits, they drove expensive cars, and they swaggered when they walked: they were the conduit to the customer, and the fortunes of the company rose and fell according to their ability to "extract" an order from a sales prospect.

Does ANYBODY buy technology this way anymore?! Way back in the dark ages, the sales reps (and the systems engineers who accompanied them everywhere they went, to make sure they didn't say things that were too terribly wrong) were the only means for sales prospects to learn details about a product. Prospective buyers would see an ad or read an article, maybe talk to a friend or two, and then would call the company for more information. Once that phone call was made, the sales rep became the sole source of information about the product, including technical details, deployment methodologies, references, etc. He was the presenter of slides and the bringer of brochures, white papers, and demos, and it was marketing's job to make sure he had enough copies of nicely designed, well-written documents to impress the hell out of the prospect he was talking to. In fact, marketing would agonize over decisions like 4 color vs 6 color printing, or quality of paper stock used (which supposedly implied something about the financial status of your company).

Contrast that with today: according to several sources, over 90% of new technology projects start with a search on the web. When IT people are first thinking about buying something, they don't want to talk to a sales person - they want information, and based on the information they find, they'll decide what the next steps are. The Internet has empowered buyers with this information - and it's not just the information that your company publishes. Just today I was involved in a discussion thread on IT Toolbox, trying to correct some misrepresentations that others had made about my company, Plexus Systems, in a discussion about ERP systems. Your potential buyers are reading blogs, chatting on discussion threads, reading articles, and going through your website with a fine-tooth comb.

In the end, the buyer can find out just about all they need to know without ever talking to a sales rep! And if they CANNOT find out what they want, they get frustrated, and often dismiss the company from the evaluation project. (Think about the last time you bought a car: did you just go to the dealership and ask the sales rep for information about the car? Or did you spend time researching cars on Consumer Reports and other online sites, and walk into the showroom already knowing what you wanted to buy?)

That is revolutionary, but there are so many young people in technology nowadays that they don't realize that many of the marketing tactics they use are based on driving new sales leads to the sales rep, rather than providing useful information to companies that are looking for products like yours. In fact, our CEO and EVP of sales were both surprised recently when a small handful of companies contacted us and said, essentially, "We've already decided that you are probably the right solution for us. We need to confirm a few things, and then we need a detailed proposal, including pricing." Those deals went from initial contact to signed contract in 6-8 weeks.

Contrast that with the "classic" technology evaluation model, where a Request for Information (RFI) is created and distributed (4-8 weeks), the responses collected (4-8 weeks), evaluated (2-4 weeks), then a Request for Proposal (RFP) is created and issue to a short list of vendors (4-8 weeks), the responses are collected (4-8 weeks), evaluated (2-4 weeks), the finalists schedule demos (4-8 weeks) and a committee makes a decision (2-4 weeks) pending board approval (4+ weeks). In the end, this process often takes 6-12 months, not due to any action on the part of the vendors, but simply because internal wheels are spinning so slowly! This process is almost the perfect definition of muda - lots of action providing little (if any) actual value. In fact, my own opinion is that a lot of this process is just CYA - IT people and financial people covering their asses in case something goes wrong. "I wasn't the decision-maker - there was a whole team of people, and we spent 6 months deciding on the right software!" Yikes - it's no wonder that enterprise software has grown so bloated and muda-laden, because it's being driven by a bloated and muda-laden sales process.

So, if you are going to embrace lean concepts in your marketing, there is a degree of trust that must be taken: trusting your prospects to make the right decision, if they can get all of the information they require to make the decision. (This is an enormous leap of faith for most companies to make, that's for sure.) I saw an excellent presentation by Steven M.R. Covey, author of "The Speed of Trust." (His father is Steven R. Covey, author of best-selling book "The 7 Habits of Highly Effective People," and "Everyday Greatness," among other books.) The main thrust of the book is that trust has a bottom-line impact on results and that when trust goes up, speed goes up while costs come down. This is lean thinking. So I argue that trusting buyers to make the right decision is GOOD for your company.

Of course, informing and influencing that decision is where marketing communications comes in. And again, that realization changes everything. That's where I'm going next.

To conclude here today, however, look around you at the sales people in your organization. If some of them seem lost, and surprised by what happens in the sales process, it may be because they used to be the swaggering, multi-million dollar earning types I wrote about earlier, and they have lost the upper hand when talking to clients - they have become disintermediated. And unless somebody shows them how things work today, they're going to end up as byproducts of a lost age.

Marketing Communications in a Lean Environment

2007-07-25T15:18:00.000-04:00

Building on what I've talked about in previous posts, let me know talk about marketing communications in a lean environment. But first, let me get on my soapbox.

Marketing communications is perhaps the least-respected organization in almost every company that has hired me. (It also tends to have the most concentrated population of female employees in high tech organizations, which may have something to do with the respect factor, but I'm going to let better-qualified people discuss that branch of the subject.) The output of a marketing communications department is often referred to as "fluff" by both the engineering team AND the sales team! The fact of the matter is, most software companies get by without any mar/com department in their early years, and when they hire their first mar/com person, it's often a junior person with page layout and/or web skills who can create some brochures for the sales team, and a web site (which is usually just an extension of the brochures). If you ask the developers, THEY are the ones doing the heavy lifting, building products that would sell by themselves, with no help from sales or marketing. And if you ask sales, THEY are the ones with the hardest job: convincing the customer to buy our product instead of other companies' products, when to the customer they all look exactly alike and do the same basic job. (NOTE: this is in direct opposition to how NetSuite and a few other companies do things, as noted in my previous post about their marketing expenditures vs. R&D.)

I, of course, think all of these arguments are so much horseshit. And yet, these tend to be self-fulfilling prophecies: an organization that does not respect the marketing team is not likely to hire strategic marketers (certainly not the very best guys out there), and the best guys are not likely to join a team that does not value marketing. It takes a special kind of masochist to look at a technology organization where marketing is considered a joke, and say, "You know, that looks like fun - I bet I can get them to change their minds, because I'm such a smart, thick-skinned guy that I can put up with their lack of respect until I convince them with great results." Sadly, I am exactly that kind of masochist; I've often found myself as the first marketing guy in the door, or the first strategic marketing person at a company (as opposed to the junior, get-a-brochure-done kind of person). Also somewhat unfortunately, when an organization like this hires a strategic marketing person, they expect them to deliver magic - a single idea that will REVOLUTIONIZE the market and will make leads start pouring in. That tends to put some pressure on idiots like me who take those jobs. (Not that my new employer, Plexus Systems, puts that kind of pressure on me!)

As we all know, there is no such thing as marketing magic; even worse, the things I did at my last company probably have only a slight applicability in what should be done at my new company. So, where does one start - especially in a lean organization?

My best friend is a heart surgeon, and I remember when he graduated from med school and had to take the Hippocratic Oath, which starts: "First, do no harm..." And this is where I generally start when I take on a new job. I try to do NOTHING for the first couple of months, for several reasons:

1) I don't know what has worked and what hasn't worked for this particular company and in this particular market;
2) I don't know the customers of the company, so I could piss them off or scare them by saying the wrong things loudly;
3) In general, I could make the situation worse instead of better!

Instead, I focus on initiatives that are already in place, such as sales literature and the web site. Generally, these items are a double-edged sword: the company needs them, but if they're not done right, they scare away as many prospects as they entice. So I spend the first few months revising this material, paring it down and getting rid of some of it, and generally updating it. Sales people love this, and it services the dual function of providing an improved toolkit while teaching me a great deal about the product, the market, etc. As this content is also the fundamental building block of other mar/com initiatives, it pays to get this done right early on.

Second, I get out on customer visits and sales calls as often as possible. Meeting the clients directly gives me insights into their personalities, and in how they gather and disseminate information. Are they email addicts? Do they prefer face-to-face meetings, or are they so swamped that they have a hard time carving out some time for me? Are their pressures financial, operational, or something else? NOTE: I know that this goes somewhat against the grain of what I was saying in my posts on product management, but ALL MARKETING PEOPLE MUST GET TO KNOW THEIR CLIENTS. There is a difference between having your decisions colored by your knowledge of your customers, and basing your decisions entirely on what your customers have told you. The former is good, the latter is bad.

Okay, next post I will get into a primer on the new sales process, and how it drives the new marketing communications process.

Can You Define the "Right" Customer for Your Company?

2007-07-23T09:58:00.000-04:00

Back on-topic. As I've said, I began to think about the role of marketing in a lean development organization after joining my current company, Plexus Systems, early in 2007. (See my earlier posts leading up to this one.)

My biggest problem was that I didn't have direct input into the development of new features and functions within our software - in our RAD environment, customers were defining these directly with our development staff. However, as I came to deal with this, I realized that since customers were directly defining the future of our product, choosing the RIGHT customer was incredibly important to the future of the product. In fact, we've had some very interesting discussions internally (with very strong opinions expressed) about whether or not there is any such thing as the "right" customer for an organization such as ours.

The two sides of the argument go like this:

1) Any customer who wants to buy our online service and use it to run their company should be able to. Who are we to tell them that they're wrong? Are we in such a strong position that we can turn away revenue? If we're telling them, "No, you're not our target customer," are we then missing out on an entirely new segment of customers that could be very lucrative?

2) If we let anybody use our software, we'll end up with a scattered feature-set (i.e., we'll be building lots of new features and functions that will only be utilized by a single customer) and we'll suffer performance issues because we won't be able to fine-tune the database lookups for a particular type of command or data structure. We will lose a large part of the inherent value of being a customer-driven development organization, because customers will be driving us in several different directions at once. We'll lose our efficiency, and our product will lose it's attractiveness.

Taken to extremes, the first argument says that even a non-manufacturing company (e.g., healthcare or finance) could use the software, if they so desired, and the second argument says that we should stick with only automotive suppliers doing precision metal-forming (because that's where we started back in 1995, and our original feature-set was optimized for these companies.)

In fact, the correct answer lies somewhere in between - and the correct answer implies a completely new role for product management/product marketing.

Traditionally, software companies have defined their target customers by broad industry (e.g., manufacturing, finance, hospitality, etc.), by sub-industry (4 digit SIC codes), by geography, by size (small and mid-sized, large enterprises, global 2000, etc.), and a range of other factors. In fact, if you start searching for a list of contacts to whom you want to market your service, you'll find that these are typically the characteristics that you can select for within the database. In other words, marketing communications methodologies are usually mapped to this pre-existing set of assumptions.

The answer that we came up with defines our market slightly differently. Rather than saying: our target market is manufacturing companies between $50 million and $500 million in revenues in North America with SIC codes 3411 to 3499, we defined our market broadly as manufacturing companies (that's about 1/3rd of the gross domestic product) with certain values in their operations. That is, companies that value quality ended up ranking more highly on our target list; companies that track their inventory in a certain way rank highly; companies that are in heavily regulated industries rank highly; companies with certain ownership structures rank highly; etc. We built a matrix of these different values and created a formula for how we calculate the "value" of sales prospects, based on their score in this formula. Those with higher scores get pursued more aggressively, and those with lower scores only get pursued with prior agreement of management.

This function of defining characteristics of the "right" customers - companies that are best suited for your product and which will help improve your offering by participating in your development process - is where I think product management is headed, and where someone with strategic marketing skills can add the most value in the marketing process in a lean development organization. In other words, product management has moved from defining PRODUCTS to defining CUSTOMERS. This is a huge shift in job description, but since customers are now defining the products directly, the impact of defining your customers is enormous as well.

Additionally, the continuous loop of the marketing process is now completely changed: the customers define new features, new features open up the possibility of new markets, and the product manager now has responsiblity for quantifying the size of those new potential markets and gauging their impact on feature-set and performance, in order to help the management team decide if they should go after those markets. New customers in new markets help further optimize the product for those markets, and eventually may lead development down a path that includes features optimized for another new market. (I'll try to come up with an image that more clearly defines this.)

There are a bunch of implications for this change, which I'll get into in a few posts. I think that my next post, however, will be about the downstream effects of this change on marketing communications.

As always, comments and suggestions are welcome.

Off-topic: Holy crap! Netsuite's Marketing Spend

2007-07-19T16:02:00.000-04:00

I've been following the stories about NetSuite's IPO filing recently, and there were three big items that came out during the due diligence process:

1) The company doesn't have a backup data center (which is probably true of most small on-demand companies);

2) Larry Ellison, CEO of Oracle (I'm not sure, but I think he's actually the devil) owns 74% of NetSuite common stock;

3) Until last year sales and marketing costs always exceeded revenue! Holy crap - they spent 4x as much on sales and marketing as they did on research and development!

You can discuss the first two items as much as you want, but I'm going to focus on number 3. The numbers are shocking to me: $27 million on sales and marketing in 2004, vs. $17.7 million in revenue; and $39.2 million on sales and marketing in 2005, vs. $36.4 million in revs; and $43.9 million on sales and marketing in 2006, which was 53% of revenues.

I would wager that the number of professional marketing people who have led teams in an environment where sales and marketing expenditures are higher than revenues (once the company has real revenues, anyway) is extremely low - fewer than 100 execs, perhaps? If you have any different ideas, I'd be very interested in hearing them - and please provide examples. According to Information Week, "That's not unusual. Salesforce.com's sales and marketing costs, for example, typically hover between 50% and 70% of revenue, according to past financial statements. That's huge compared to traditional software vendors, where sales and marketing costs typically run between 20% and 25% of revenue."

To me, this kind of excessive spending on sales and marketing bodes poorly for the future of the company; to spend $43.9 million on sales and marketing when you don't have a second data center surely tells you something about the priorities of the company - and they ain't uptime and disaster recovery, that's for sure! My company, Plexus Systems, is smaller than NetSuite, but we already have a second data center.

I'll have to dig and see how much their VP of Marketing makes for nearly driving the company into bankruptcy. It could be that I'm limiting my potential payroll by helping keep my company solvent with prudent marketing expenditures!

Rethinking Marketing in a Lean Development Organization

2007-07-18T11:51:00.000-04:00

After all of this, I'm finally getting to the meat of the thing - what I really want to talk about.

I've been working in web-based software/services for nearly 10 years, starting in 1998. However, it was only when I joined Plexus Systems earlier this year that I began working inside of a RAD/Agile/XP organization. (For the record, Plexus calls it RAD.) At Plexus, the developers and program managers talk directly to the customers, and they monitor how features are actually used within the system (it's an on-demand system - ERP and manufacturing execution - which enables real-time monitoring of features and pages). New features, customizations, improvements, etc., are all done at the specific request of a customer, and are then rolled into the primary product immediately. The beauty of the on-demand model is that you don't have to test the software on 5 operating systems and 5,000 platforms - there's a single architecture to test against, which greatly accelerates development and deployment. Plexus has built the entire platform in this way: 350 functional modules, with over 6 million lines of code. It is an extremely lean development process, and flies in the face of many assumptions about what's required to build great technology.

The first few months were spent doing the usual duties: learning about the product, learning about the market (manufacturers, which was new to me), cleaning up the mess from the previous guy, and meeting a few clients. It wasn't until I had been here a couple of months that something occurred to me: we had no product launches or features announcements set for the entire year. In fact, we have no product management department, and no "product roadmap" showing the market what we were going to build over the next few years. More importantly, because I wasn't acting as a traditional product manager, I had no standard role in the inbound portion of the traditional marketing process (described previously). Think about that for a moment: marketing has no role during the product definition process. When I realized THAT, I was really shaken up - if I'm not driving the product definition process, where am I adding value?! And how do I learn what our clients need and want?

Next, I realized that without any product launches or feature-set announcements scheduled for the year, the way I was used to organizing the marketing plan for the year was useless: key messages and important events on the calendar have always resulted from these launches, and without them, I had no clue where to start.

It was a frustrating time, to say the least. My role seemed to be reduced to coordinating the print ads that my predecessor had committed us to, and working with our PR agency to announce new customer wins, industry awards, etc. In my mind, this was NOT what I had been hired to do. My title and role was VP of marketing, and these things could easily be done by a "manager" level person making a lot less money than I made. So I thought long and hard: Had the company made a mistake in hiring someone of my level? Or was there a way to redefine the role of the head of marketing so that I really did bring value - a LOT of value - to the company in a completely new way?

When I was in college, I read a famous book, Zen and the Art of Motorcycle Maintenance, by Robert Pirsig. (It's maybe the worst title for a profoundly interesting book in the history of publishing.) In the book, the philosopher/author writes about getting "stuck" - that situation where you've gone down a certain path in thought and you've come to a dead-end, and you are absolutely stymied as to what to do next. That's exactly where I was.

However, in philosophy, getting stuck is a GOOD thing! It means that you're forced to think in new ways, and to reexamine your assumptions - and it forces you to realize that you don't know what you thought you knew. So, that's where I was - in a very good, albeit frustrating position. So I did what they teach you to do in philosophy class: I went back to the beginning, reexamining my assumptions and my goals.

Let me start with the goal: to help sell a lot of my company's services at the right price, to the right customers, in a manner that will help the company get bigger and more successful over time. Starting there was the right place, as it got me going down a completely different path - and one that happened to dovetail with a lot of recent trends in the industry. I'll take you down that path in the next few posts.

Cont'd: Why I Think Most Technology Marketing is a Waste of Time & Money

2007-07-17T16:00:00.000-04:00

I think I've dedicated enough time (5 long posts) to what I think is wrong with most technology marketing programs, and why most money spent on marketing efforts is money down the drain.

To sum it up: the underlying problem is that there is too much muda (waste) in the process. The product definition is tainted by muda, which means that the marketing of the product is almost 100% muda!

I know, I know - what is muda? If you haven't noticed, there is a definition of muda in the header of this blog, and understanding the concept is fundamental to understanding what I'm going to be writing about in the coming weeks. Muda is a concept brought to the US by the Japanese, initially in manufacturing, but now used more broadly across a wide range of business disciplines. The term muda was originally popularized with the implementation of lean principles in manufacturing, and more recently, in software development.

There are excellent organizations (e.g, the Lean Enteprise Institute) and books devoted to explaining what "lean" means in these contexts, so I'm not going to go in any depth here. The best short definition of lean that I've ever heard is as follows: lean is a philosophy to maximize the work effort of a company's number one resource, the people. Lean is therefore "a way of thinking" to adapt to change, eliminate waste, and continuously improve.

For the more spiritual minded among you, I found this quote:

"Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away."
Antoine-Marie-Roger de Saint-Exupery, pilot, poet (1900-1944).

That is a great definition of lean!

The way forward (to steal a phrase from Bill Ford Jr.) is to start thinking about product definition and marketing through the lens of lean. WHY are you doing what you're doing? Because it's what you were taught in school? Because it's the way things were done at the company when you started? Or because it's the most straightforward and efficient way to do market your product? What would happen if you stopped doing one of the things you do every day?

Lean principles have been adopted in software development in several new methodologies, variously called extreme programming, agile software development, and RAD (rapid application development). These models are in contrast to the older model (defined in earlier posts) which is often termed waterfall development.

I'm sure that the purists among software developers would take me to task for lumping all of these together, as there are differences - but to me, the differences are akin to the differences between the different factions of Christianity. They all believe in Jesus Christ, but the fine print is different, right? For these different programming methodologies, they all believe that waterfall development is bad, and that the way to fix it is to remove the calendar-based projects that lead to artificial groups of new features into "releases" such as V 2.0, 2.1, etc., and instead to have the programmers talk directly to customers and give them what they want in an accelerated timeframe - without versions, without release cycles, etc.

This has a huge, enormous, gigantic impact on marketing!! I can't stress that enough - as these new methodologies gain greater footholds among developers, marketing as we know it disappears, to be replaced by lean marketing. I'll talk about that in my next several posts.

Cont'd: Why I Think Most Technology Marketing is a Waste of Time & Money

2007-07-13T10:00:00.000-04:00

Continuing on the theme of my recent posts, let me talk about how the closed loop marketing process affects marketing communications and leads to spending a lot of money and effort ineffectually.

First and most obviously, if you've built the wrong product, ALL of your marketing communications money is going to be wasted. Spending money on product launch activities, including press releases, web site revisions, new photography, ads, video, etc., is like pouring money down the drain if the product is inherently un-sellable.

In most cases, of course, the product isn't 100% wrong - it has just enough right stuff that everyone is convinced that it's 100% right for the market. But that is never the case.

So let me talk about how the process screws up marketing communications, even in the BEST-case scenarios.

Because of the "project-oriented" nature of this process, marketing communications plans tend to be organized around events on the calendar - whether it's a product launch, a tradeshow or conference, or another discrete calendar date. Some of these are fixed and immovable (e.g., a tradeshow). Others, such as a product launch date, tend to change right up until the week before they happen - and the reasons they change are totally outside of the control of the marketing team. This makes for a difficult time for marketing communications people.

More importantly, however, this organization of the mar/com plan is based on the wrong foundation. It should be based on important dates and issues for the CUSTOMERS! For example, maybe they have a big contract they need to win, and some of the new features in the next revision of the software are needed in order for them to demonstrate their capabilities. If you slide back the availability of a product or service, how is this going to affect your clients? Or maybe they have an annual lock-down date for IT changes (e.g., many retailers will not make any changes to their systems between Nov 1 and January 15, as this is the period where they do the bulk of their sales during the year), and your announcement date isn't going to provide them with enough time to get the software deployed before their lockdown.

Additionally, given all of the filtering that has taken place before the mar/com team gets the detailed information needed for building their content and messages, what are the chances that the messages they create are going to resonate with their intended audience? Very, very slim, in my opinion. Most mar/com departments are so far removed from customers that the only time they meet them is at tradeshows - most mar/com people have never visited a customer site, or seen how the product is actually used at a customer site. (If you have, you are on the right track.) Remember, mar/com is at the END of the line in this game of "telephone" that is masquerading as a marketing process, so the information they hear has greatly changed since customers first spoke.

Given all of this, it's virtually impossible for mar/com groups to get it right, to spend money in high-impact ways, and to positively influence the direction of the company.

So, what's a marketing team supposed to do? The rise to power of the search engine has changed everything. I'm going to start with that in my next posting, and then work you through the thought process that got me to where I am now.

Cont'd: Why I Think Most Technology Marketing is a Waste of Time & Money

2007-07-11T10:15:00.000-04:00

So, continuing on the previous postings, what is wrong with this "continuous loop" marketing process? Let me count the ways...

1) Listening to customers is a good idea; however, customers often tell you what they think they should be saying. There is a level of interpretation and filtering that goes on between the real needs of the users and the person interviewed by the product manager. Nobody at an organization has a perfect view of all of the users, and everyone is biased by their background. Complicating that is ego; people interviewed by product managers feel like they must make some big, important point to show their own self worth. So this skews the MRD right from the beginning.

2) Product managers try to synthesize information from customers with information from other sources, including industry analsysts. I'll spend some time at a later point with a rant about what I think is wrong with industry analysts, but for now let me say that this suffers from the same issues as number 1, above, with a HUGE complication from ego (and an unresolvable conflict of interest).

3) Product managers must then filter this through what THEY believe is important, and must try to communicate that within the inadequacies of their writing skills. So this is a second level of filtering that goes on.

4) The negotiations between product management and development, which is supposed to be a discussion of what you want to get done vs. what CAN be done, is another layer of filtering that occurs.

5) The impact of changes made due to a single large deal during the development cycle is another filter.

6) The time frame between when the requirements are gathered and when the product is delivered is necessarily a long one, and the longer the time frame, the less likely those requirements are to still be valid. Business needs change rapidly, and 18 month old requirements are not very helpful.

In fact, when you look at the product management cycle through the lens of "lean" (more on that coming soon), these steps are almost ALL "muda", or waste. Ideally, you would want the usage of the product to be monitored directly by the developers, and requests for new features or enhancements to go directly from the users to the developers, with no filtering, little discussion, and almost no time lapse between the request and the delivery.

But we CAN'T have that, right? Software engineers can't talk directly to customers! They don't have people skills, they're not trained in recording these requirements, they should be focused on their core task of writing code, etc., etc. I've been hearing these arguments for years. And, in fact, there's a hilarious (and sad) scene in the movie Office Space where the two Bobs are trying to figure out what one guy does, as he describes his job as gathering requirements from clients and taking them to engineering. As it turns out, he does nothing of any value, but he falls back on the argument that, "I have people skills, damn it!" If you've never scene the movie, run out and rent it tonight.

Soon I'll talk about the marketing communications problems that come up, too. But don't worry, I'm nearly done talking about the problems, and I'm getting ready to talk about how to fix it.

Closed Loop Marketing Process

2007-07-10T17:01:00.001-04:00