Do it yourself (DIY) in the enterprise (continued)

Last year I wrote about the newfound productivity of the prosumer, the consumer who is bringing technologies into the workplace in a DIY (do it yourself) fashion.  If IT can’t or won’t get something done, users can simply check the Internet for the latest web-based service or software download to help them solve their problem.  In this month’s CIO Magazine which landed on my desk somehow, the cover article is titled "Users Who Know Too Much and the CIOs Who Fear Them."  The subtitle is "They’re smart, productive and using IT you didn’t provide.  How to manage the modern user."  I think we are at the very beginning stages now of IT’s recognition that the world is changing and like Jeff Nolan says the balance on the continuum of systems and people should move more towards a people-centric vision of technology.  What do the people want and how do we provide them the ability to get things done while at the same time balancing our need to keep a safe and secure environment?  Sometimes these issues are directly competing with one another.  It is still quite early in the CIO’s recognition of a user-centric IT world but the fact that CIO magazine is focusing on this means that it is becoming more critical to its readers.

Over the next couple of years, it will be interesting to watch how the battle between top-down, conservative IT and bottom-up DIY employees gets resolved.  IT wants control, security, and compliance while users just want to get things done.  As the article advocates, the smart CIOs will figure out how to balance the needs of their users and the role of IT.

This will require CIOs to reexamine the way they relate to users and to come to terms with the fact that their IT department will no longer be the exclusive provider of technology within an organization.  This, says Smith (Gartner analyst) is the only way to stay relevant and responsive.  CIOs who ignore the benefits of consumer IT, who wage war against the shadow IT department, will be viewed as obstructionist, not to mention out of touch.  And once that happens, they will be ignored and any semblance of control will fly out the window.

Whether or not CIOs get it, does not really concern me as the nature of sales for many of these DIY apps and services should be focused around the end user vs. centralized IT.  Given this, the sale should be much different, less costly, and with much less friction.  If a user wants to track his sales force productivity, they can go online and sign up for or create their own through a SugarCRM download.  There is no on-site installation as the web helps deliver the product efficiently.  From a sales perspective, as these companies grow over time, much of their sales can be done over the telephone or through a WebX or GoToMeeting session with only the large accounts reserved for an expensive direct sales rep.  Given this bottom-up, web-based model of selling and delivering software, it will be interesting to see how the incumbent vendors respond.  For example will users adopt a collaboarion platform from IBM that IT has pushed down on them or would it be better for CIOs to figure out what their workers are using and standardize on that?  Does this mean that the smarter incumbent software vendors look to buy startups that already have bottom-up traction versus building their technology from scratch?  As I was writing this post, I just noticed that IBM just signed a deal to pipe Google gadgets through its Websphere portal. 

"These sites are not just valuable to consumers. Businesses want the same content. Why would we keep these two universes separate?" said Larry Bowden, vice president of the IBM Lotus division for portals and Web services.

While Internet access, and thereby Google Gadgets, may be easily available to consumers, many businesses restrict access to the latest Web applications for security reasons, to make network management easier and to limit employee distractions.

By allowing Google Gadgets to work within its WebSphere Portal, IBM is making it easier for companies to give employees access to popular Web applications while keeping control over how they are used. Companies can decide which Google Gadgets they can see.

"The end user decides: We no longer need to go off and call a technician," Bowden said. "The power has been turned over to the people who know best. You know best."

It looks like IBM gets it and is trying to help its IT customers strike the delicate balance between control and giving users what they want.  All I can say is that the intersection of the enterprise and the web-based platform will be an interesting space to watch over the next few years and it is clearly heating up.

GOffice – what’s the big deal?

It is not a surprise that Google officially launched Google Apps Premier which is a bundled package of their hosted offerings for word processing, spreadsheets, email, calendaring, and instant messaging.  I wrote about this in the fall of 2004 when Adam Bosworth joined Google from Microsoft and wrote a lengthy blog post on the web-based platform.  Google has clearly been executing on this vision over the last two years, but I do not see this as a Microsoft killer.  While I am huge fan of web-based software and data in the cloud, there is one big problem – you always need to be connected.  For the last two weeks I have been living in a web-based world as I had to send my laptop back for service.  While I could do everything I needed to do, I must admit I was about 60% as productive as usual.  This lack of productivity partly came from clicking and waiting in my web-based Exchange offering and partly due to lots of travel which meant I could do absolutely nothing on the airplane.  What I see Google Apps doing is breaking the market into two segments – those who want to easily share and collaborate information with others in a lightweight manner and the power users who live, eat, and breathe in their productivity applications.  I certainly see myself using Google Spreadsheets to post some information on my blog but it will be a long time, before I even think about replacing my desktop productivity applications. In the meantime all of this is great for consumers as competition is forcing Microsoft to rethink their whole application strategy by incorporating a SAAS component into most of their offerings.  I can only assume that Microsoft will get better at this and make it easier for their users to work online and offline in a seamless manner.  In my web-based world, disconnected applications with an online component will rule.  Let’s see what the Adobe Apollo platform brings to the world later this year.

Nokia’s coopetition with carriers

I noticed today that Nokia released a free mapping program called Smart2Go which can easily be downloaded over the air to cell phones.  In and of itself, I did not find the news terribly interesting as Google Maps is a great app which is also free and there are countless others going after the space.  However what is interesting is that Nokia is offering this service through an acquisition they recently made.  In addition, for users with GPS chips in their phones, Nokia is offering a premium turn-by-turn service which will be paid for on a monthly basis.  In other words, from a business model perspective, Nokia is going directly after the end consumer and encroaching on precious data and subscription revenue of their carrier partners.  Take this thought further and ask yourself why Nokia is offering phones with dual-mode chips (wifi and cellular) and even offering VOIP services?  I wonder where this ends up in the long run but what is clear is that smart handset manufacturers understand that there may be potentially more revenue in the monthly subscription fee than one-time sale of hardware.  We should certainly keep an eye out for Nokia and every new app they launch in the future.  We also need to figure out if they are doing it with partners or doing it themselves either from an internally built application or through an acquisition.  For me, it is pretty clear where Nokia is trying to go.  By the way, combine this new map application with their purchase of Loudeye last summer and you can start to put the pieces in place.  As it says from the press release in August:

Loudeye operates 60 live services in over 20 countries and multiple languages across Europe and South Africa, Australia and New Zealand. Loudeye aggregates rights and content from all the major labels and hundreds of independents and currently offers licensed catalog and complete media for over 1.6 million tracks.

Why would Nokia need Loudeye if it wasn’t planning to offer its own music service direct to consumers.  Once again, for Nokia, recurring monthly revenue from every new cell phone buyer is a wonderful thing.  Everyone knows that margins on hardware are declining quickly, carriers are increasingly looking to Taiwan to private-label handsets to consumer to drive margins down even faster, and that ultimately cell phone manufacturers need to find alternative revenue streams.  The only question is when will this happen, not if.  So going after their wireless carrier partners’ data revenue may be controversial but in the end could be a must have for survival.

The fine line between dilution and delusion

It has been stated that there is a fine line between genius and insanity but who’s to tell where one ends and the other begins.  I can also say that there is a similarly fine line between dilution and delusion but this one is easier to draw.  Recently my partners and I were discussing the merits of a term sheet that came in for a portfolio company.  While the term sheet did not meet our expectations 100%, there were a number of strong points.  Unfortunately, the entrepreneur was not terribly pleased as he had a much higher expectation for round size and valuation in his head.  As we walked through the process for the current round of financing, my partners and I clearly understood that while we can guide the market with our pricing expectations, that ultimately the market decides.  So if faced with this situation, my only word of advice for entrepreneurs is that it is important to know that there is a fine line between dilution and delusion.  Talking to 1 or 2 investors does not ultimately give you a great idea of what you are worth and under that scenario I would encourage you to meet a number of folks to get an idea of what the market thinks about your business.  However, if you have already met a number of firms and they are giving you consistent feedback about how much money to raise and at what price, you may be delusional to keep pressing on in search of optimizing a valuation which no one is willing to pay.  In fact, to be clear, valuation isn’t everything and there are many situations where having too high a valuation for an early stage company can be detrimental as it can set unrealistic expectations for your team and your investors.  Being priced for perfection means that:

1. a company that is performing quite well may be still be viewed as a failure in the eyes of the existing investors and team. 

2. your company must really hit significant milestones to raise a next round of funding at a higher price.

3. it may take too long to raise funding to find the right investor who will pay the valuation you are looking for

4. a potentially great exit for your company may never happen because it doesn’t meet the bar for your last round of financing.

So if the market is giving you a strong signal, listen and remember there is more to a financing than price and you need to carefully balance a number of factors such as other terms in the deal, an investor’s ability to add value, and your ability to work with the lead partner and his firm.