Enterprise software is back in black (Fortune)

A generation of startups is harnessing momentum in cloud services, social networks and mobile computing to introduce fundamentally new ways for companies to do just about everything. That's brought sex appeal back to a sleepy sector.

Back in black, I hit the sack, I've been too long, I'm glad to be back.
— ACDC, "Back in Black"

April 12, 2012

By Christopher Lochhead, contributor, 

FORTUNE -- At the turn of the century, the enterprise software sector entered a nuclear winter innovation-wise.

Oracle (ORCL) CEO Larry Ellison declared it time for consolidation, and his company obliged by snapping up more than 80 smaller developers and technology vendors. Since 2003, IBM (IBM) Software Group has made more than 70 acquisitions, and SAP (SAP) has also done its part. From 2000 to 2010, I joked that the industry was idea-bankrupt. With the notable exceptions of companies such as Salesforce.com (CRM) and VMware (VMW), few enterprise software innovators made a name for themselves.

Of course, during the same decade, hoodie-wearing, 20-something entrepreneurial dudes in Silicon Valley fired up an amazing new crop of consumer web 2.0 businesses like Facebook and Twitter. Venture capitalists on Sandhill Road swooned for their attention like a gaggle of girls at a One Direction concert. In contrast, enterprise startups were treated like has-beens who couldn't get a first date with most Valley moneymen.

Now, enterprise software has gotten its mojo back.

MORE: Are tech CEOs being too conservative?

A new generation of startups is harnessing momentum in cloud services, social networks and mobile computing to introduce fundamentally new ways for enterprises to do just about everything. They offer digital channels for marketing and generating revenue. They provide platforms for engaging with customers. They support collaboration internally and across supply chains. They even overhaul basic functions such as billing, accounting and transactions.

These companies have a particular allure for the new breed of business tech consumers; aka "bizumers." These are workers who shun the recommendations of IT departments to find for themselves devices and applications that make their work lives more efficient. The freemium and subscription nature of cloud applications makes this process of circumvention easy, and bizumers are fueling astonishing adoption rates for some enterprise startups.

For example, in four years, enterprise social software company Yammer claims more than 4 million users, including 85% of the Fortune 500. It has attracted $142 million in venture capital along the way. Cloud file-sharing startup Box claims 8 million users at more than 100,000 businesses; VCs have made a $150 million bet on this company run by a young CEO. Even former enterprise software executives can't resist the allure. PeopleSoft founder Dave Duffield and Aneel Bhusri have formed a new cloud company focused on accounting and human resources applications called Workday. The company claims more than 250 enterprise customers and is rumored to be considering an IPO.

MORE: How consumer tech is transforming IT

These aren't unusual stories. Many enterprise innovators are reporting impressive user and sales growth rates. I recently attended the Wells Fargo Technology conference in San Francisco run by analyst-provocateur Jason Maynard. The number of compelling privately held enterprise startups was astonishing. Outfits like marketing automation developer Marketo; business intelligence platform Domo; community software vendor Lithium; enterprise social marketing player Hearsay Social; cloud subscription management software company Zuora and online advertising management platform Marin Software -- where, full disclosure, I am an advisor -- have compelling stories.

The investors I spoke with at the event seemed more interested in these startups than in many of the big-name public tech companies showing up at the podium. Wall Street money managers appear to be salivating to bite into a whole new breed of enterprise tech IPOs. And, large incumbents are hungry for a piece of these new enterprise technology innovators, with firms like SAP and Oracle making a series of forward-leaning cloud acquisitions to get in on the action. During a single week in April, Dell (DELL) disclosed three acquisitions focused on shoring up its position in the enterprise including the purchase of Clerity, a mainframe migration services company.

The new wave of enterprise innovation is signaling the biggest transformation in the way businesses use technology in a generation. If even a few of these companies succeed, the workplace of 2014 will be materially different than the workplace of 2012.

We could also see a re-drawing of the enterprise technology vendor landscape.

MORE: Are you ready for the upturn?

The industry might be dominated by new companies in new bizumer categories. Some Goliaths of today are at risk of becoming Wang or Digital Equipment Corp 2.0. With their subscription-based pricing models and the relatively high cost of buying traditional enterprise software licenses and then paying yearly maintenance fees, these startups offer compelling economics to customers. That's especially true when you consider recent data from Forrester Research(FORR) that suggests flexible licensing models will claim at least 43% of enterprise software budgets by the end of 2012.

Many of the new breed of enterprise software innovators also seem hell-bent on staying independent, following in the footsteps of Facebook's Mark Zuckerberg and Salesforce.com's Marc Benioff. Their tenacity, coupled with rapid user adoption and escalating valuations, could mean the incumbents may not be able to buy their way into the future, the way they have in the past. What is clear is that enterprise tech innovation is back. And businesses, bizumers, and investors are buying in.

Christopher Lochhead (@lochhead) is former technology executive, now strategy advisor & partner with Play Bigger Advisors.

How consumer tech is transforming IT: Meet The Bizumers

Originally Posted On Fortune.com
http://tech.fortune.cnn.com/2011/10/31/bizumer/

FORTUNE -- Today, business users are demanding a consumer-like experience at work. People are asking, "How come the technology in my person life is so great but, at work, it sucks so much?" Meet the new class of business technology consumers. You could call them "bizumers."

Where did they come from? Over the last five years, we've witnessed a consumer technology revolution led by Apple (AAPL), Facebook, Google (GOOG), Netflix (NFLX) and Flipboard -- among many others. As consumers, we are enjoying big breakthroughs in mobile devices, Web 2.0 services and, generally, simpler user experiences. Technology has never been more fun or effective.

Except at work. Enterprise technology seems bankrupt where simplicity and elegance are concerned. (There's no doubt the raw power and capability of enterprise technology -- from massive server farms to sophisticated algorithms -- is greater than at any other time.) The result has been the creation of a massive gulf between our personal and professional experience with technology.

Consider the typical knowledge worker's daily experience: a brick of a laptop, a lousy intranet, legacy ERP and CRP applications and ... Microsoft (MSFT) Office. Or, consider how bad old-line email is for collaboration relative to Facebook or Twitter's social experiences. (It's little surprise that the biggest innovation in e-mail in the last decade -- nested conversations -- came from a consumer application, Gmail, and only recently found its way into Office.) Even worse, at work it can be hard to get simple stuff done, like getting a travel request approved, an expense report paid, finding the right data, document, person, conference room, report or chart.

The average employee knows that consumer apps are user-friendly, easy to ramp up and do more to help them create -- all for less money than traditional enterprise IT. While CIOs have talked about the "consumerization" of IT, few have made inroads on this agenda. And yet, employees are demanding:

*Tablets
*Smartphones
*App stores filled with hundreds of small, lightweight, disposable, zero-training, mobile-style apps
*The ability to choose and use cloud-based "free-mium apps"
*Social collaboration

Forward-leaning IT organizations are re-structuring their architecture to reflect these desires by embracing new mobile platforms and cloud computing, while creating custom bizumer apps housed inside enterprise app stores. They are also letting people choose (or even bring in) their own smart phones, tablets and laptops. But to survive in the future, legacy enterprise vendors will have to atomize their monolithic modules into hundreds of smaller, more usable apps. Imagine a refashioned an accounting system like SAP (SAP) or Oracle (ORCL) as hundreds of enjoyable-to-use iPad-style apps.

These transformations are already happening. Services include:

*YouSendIt, which replaces the FTP site with a simple-to-use, web-based file-sharing service.
*Evernote, which stores docs, photos, pdfs and Web clippings on a mobile-accessible cloud.
*Egnyte (where I'm an advisor), a file-storage that is cloud-based an accessible across platforms.
*Chatter, a collaboration app from Salesforce.com, which uses a familiar social-media interface.

And there are many more. They more or less share important common characteristics:

*They are cloud-based, with a small footprint
*They are streamlined, with 3-5 major functions
*They require zero IT support
*They are the future

The bizumer revolution is on. With tech-savvy Millennials entering the workforce, resistance is futile. They are using a new style of consumer-like business apps to drive the biggest, button-up change in business computing in a decade. All inspired by how they use technology in their personal lives. It's not a matter of "if" it will happen, but "when."

Christopher Lochhead is former technology executive, now strategy advisor & partner with Play Bigger Advisors

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Strategies for the Downturn from BNET.com

Don't let the recession get you down. Lean times are a great opportunity to get more competitive and position your business for future growth.

Barack O' Blogger

Originally posted on CBSNews.com

Just like the Obama's date night shamed married men into taking their wives for a night out, the President is driving a surge in executive blogging. 
No surprise there as Obama is the first "iPresident" who used the Internet to beat his competitor John McCain, who admitted during the campaign to being a technology Luddite. 

Now the president is using social working and so-called Web 2.0 technologies to forward his agenda. He is an Internet marketing maven who has used YouTube, Facebook, Twitter and MySpace to market his message to the Muslim world and to sell his new health care plan. As master of its own message, the newadministration has basically turned into its own Internet marketing platform. 

All this e-marketing is working. According to Gallup Obama's approval rating is 61%. There are three reasons this is a powerful strategy for the president: 

1) Love him or hate him, Obama has engaging ideas and is a very effective communicator. 

2) Social Media is ubiquitous, easy to use, and loved by young people. 

3) The president has surrounded himself with a masterful team of technology and marketing experts who have figured out how to use the medium to maximum advantage. 

Obama has proven, beyond a shadow of a doubt, that the Internet is a seminal marketing device for the modern executive. But, according to SocialText company CEO's are lagging the president when it comes to this use of technology with only 12% of Fortune 500 companies blogging. 

Indeed, only, a few high-profile CEO's have been blogging for an extended period of time. Most notable among them, Mark Cuban,owner of the Dallas Mavericks and Jonathan Schwartz, the CEO of Sun Microsystems. 

But the ice is breaking. ABC TV talk show host George Stephanopoulos just conducted a "twitterview" with Senator John McCain while Governor Sarah Palin is now a regular tweeter And the legendary Jack Welch (former General Electric CEO) recently penned an article on the virtue of using Twitter. 

Obama's Web success will surely cause a jump in executive and company blogging. The question is will this be compelling content or just a load of corporate PR crap? Unfortunately, chances are it will turn out to be the latter. What makes me think that? Just read the average company Web site or press release. Most make you wonder how stupid CEOs are if they think anyone with a brain would actually want to read their babble. These communications are full of confusing indirect language, business jargon, and legalese. Other than that, they are awesome. 

Clearly most Fortune 500 CEOs and their marketing chiefs do not understand the new social Web world. Unlike Obama, most spend little time thinking about how to use the Internet to create a competitive advantage. Never mind, how to author compelling blog entries. So most companies treat blogging at best, like an electronic newsletter. When was the last time you read a company newsletter and thought, `That was great. Can't wait to read the next one.' I know. These things are often long-winded and self-indulgent. Making matters worse, most company communications today are over-controlled by legal and public relations committees. These groups tend to sanitize, restrict, and script every word that comes out of executive mouths. 

So what should you look for in a good executive blog? Short, clear, compelling, posts. One company getting it right is Google, whose official blog was was named one of Time Magazine's Top 25 Blogs "Top 25 Blogs." Another example: Whole Foods whose whole story blog shares recipes, and tries to educate readers about food in an engaging way. 

In many cases CEOs of private or smaller companies feel freer to share their true thoughts and insights with their readers, or at least more so than their colleagues at large public companies. One example: My buddy, Mike Damphousse, founder and CEO of Green Leads, a marketing company has built a strong following by sharing free advice on his blog, Smash Mouth Marketing. 

And so as the president continues to use Web 2.0 approaches to market his policies, he will no doubt inspire others to do the same. The unanswered question is whether these new executive blogs be just another way to disseminate propaganda or a compelling new source of content from provocative movers and shakers? 

By Christopher Lochhead
Special to CBSNews.com

AOL, Is There Life After Love?

Remember when Tom Hanks and Meg Ryan fell for each other in the film, “You’ve Got Mail”? Time Warner produced the 1998 date flick, which was basically an ad for AOL that coincidentally foreshadowed the love affair which consumed the two companies a couple of years later. 

In the 1990’s, AOL represented the Internet to tens of millions of people. Its dial-up service made the Web accessible and easy to use. The company did great marketing and by 2000 had built a huge following. Its stock price rocketed and then, in an act of Internet bad-boy hubris, AOL used its stratospheric valuation to woo and marry Time Warner. 

The new media mavens had officially taken over the old media stalwarts. The marriage costapproximately $160 billion, one of the largest acquisitions in history. But the honeymoon did not last long and by the end of 2000, the AOL-Time Warner romance was already on the rocks. 

Where do you want to start? Within months of the nuptials, the dot com economy blew up and took nearly ever company’s stock price with it. Executive egos at the merged entity got in the way as old media and new media cultures clashed. Over time, AOL also lost the battle for consumers on the Internet to Yahoo and Google, and more recently, Facebook and Twitter, among others. It seems that almost everything that could go wrong did. So it is that nowadays, the once mighty AOL is barely relevant. 

Now it's divorce time with AOL being spun-out of Time Warner to become a stand-alone, public company. The question is whether the newly-single AOL can make its own way as a solo act. 

Probably not. 

Most turnarounds fail. Regaining lost momentum is hard as time is a thief. And most turnaround management teams lack the Three C's - cojones, craniums, and cash - to make it work. What's more, Time Warner CEO Jeff Bewkes may be planning to saddle AOL with some of Time Warner’s debt and that might stall AOL’s much needed mid-life makeover. So it is that many predict the likely outcome for AOL is a continued slide into the Internet graveyard with the company taking its place alongside that of fallen highflyers like Webvan and Pets.com. 

But if fallen Canadian heavy metal band Anvil can stage a comeback with a bold move - they made a heart string tugging, spinal-tapian rock-umentary that is gaining them new fans rapidly - why not AOL also? 

OK, so how could AOL thrive as a divorcée? Successful turnarounds need fresh thinking, energy, and experience. Hiring a new CEO is a good first step. In March Tim Armstrong an ad sales exec from Google came over to AOL/>. 

Unfortunately, AOL has lost a lot of its best people. Armstrong must immediately fire the dead weight and start promoting the smart, aggressive, risk-taking people. He also needs to go hunting for new top talent to infuse the company with creative ideas, products, and services. Some of this new talent needs to be very young. Bill Gates, Steve Jobs, Michael Dell, and AOL founder Steve Case were all kids when they created their first big innovations. History is repeating itself nowadays with young leaders at the helm at social networking companies such as Facebook, Twitter, and Digg. 

Additionally, Armstrong should reach out to Steve Case and ask for advice. Case is a smart guy who did it once and he might be able to help AOL. Making Case an advisor, or potentially an AOL board member, is also an option. 

Once Armstrong figures out the internal organizational issues, he needs to push AOL to take big calculated risks. One of the reasons that startups generate so much innovation is because they act like they have nothing to lose. So they go for it. Bigger established companies can become protective, so they tend to play it safe. AOL needs to act like a horny young startup, not an old jilted lover. 

To kick-start the process AOL should sell its Internet access business. It may be a major contributor to AOL’s revenue, but it doesn't figure as part of the company's future. AOL lost its battle for the Internet access market a long time ago, when it was slow to adopt broadband services. Get over it. Sell the business. Generate some cash and move forward. 

Next AOL needs a major revamp of its services. Its Web sites generally look dated. CEO Armstrong said recently after Time Warner's annual meeting, "We are first and foremost concerned with the consumer experience for AOL." 

No wonder. AOL needs to come up with a dramatic breakthrough in design, one that creates a new, easy to use Web browsing experience. Apple killed the competition in the MP3 player market by creating a whole new paradigm for buying and listing to digital music with the iPod. YouTube did the same in Internet vidoe by using Abobe’s Flash to create a new way to publish and consume video on line. AOL needs to do the same for the way we experience Internet content. 

Next, AOL should become more than a portal or search engine. It needs to aggregate everything you and I use on the Web into one central place. The truth is that the Web is still too hard to use and it takes too long. If they were able to become a personalized, uber-portal that manages everything we do on the Web in one simple front-end, new users would flock to them. It appears that Google may be taking a stab at this with its new Wave communication offering. Creating a new user experience needs to be done in the context of the social computing revolution. AOL must find a way to combine social networking, user-generated content, email/messaging and traditional media content so that we are compelled to use their services. 

“AOL needs to act like a horny young startup, not an old jilted lover.”

- Christopher Lochhead

Additionally, it's time to go shopping for some cool new companies. Today in Silicon Valley - and beyond - there are hundreds of small startups that are trying to make the Web user experience better. AOL should buy several and accelerate its ability to create the next generation user experience. With the explosion of mobile devices like the Blackberry and iPhone AOL must figure out how to become one of the top 10 mobile services on smart phones. So buying some mobile companies would also be prudent. 

Additionally, AOL also needs to forge strong partnerships. They should attach their brand to Apple’s ASAP. Apple, not Microsoft or Sony is defining the future of user experience for technology consumers. It should also explore content distribution deals with some of Time Warner’s competitors. 

After all that, AOL lastly needs to launch an aggressive marketing campaign to gain new users. It must also make us care about AOL again. And try their new services. In the old days AOL bombarded the public with zillions of startup CDs to get people to try the service. The CDs were so ubiquitous people called them AOL coffee cup coasters. Now it's up to management to figure out how to blanket the world again and to get us to try AOL 2.0. 

As I noted earlier, fixing a broken company is one of the hardest tasks in business. But if AOL can pull this feat off, anything is possible. At that point, maybe there's a chance Tom Hanks and Meg Ryan might even do a sequel.

7 Signs Your Company Is About To Crash

It went horribly wrong the second my bike hit the tree. As I flew over the handle bars, it was clear that my misjudgment was about to cause a lot of pain. Thanks to my Giro helmet, buddy Troy, and the E.R. team at Dominican Hospital in Santa Cruz, CA., I made it through the crash with only a dislocated clavicle, bruised ribs, and torn ligaments. 

Today, a lot of companies are crashing and their employees are similarly winding up getting tossed into the dirt. In fact, recent jobless data show a record 6.5 million people are now on assistance in the U.S. Clearly, it's dangerous out there. But there is a way you stay ahead of the wrecking ball. Here are seven signs (learned the hard way) that your company is about to crash and how to avoid ending up in the “career E.R.” 

1) Great People Are Leaving & Dumb People Are Staying 

Great people build great companies. When you start to notice that more than a few great people are leaving, something is wrong. When a company’s best people start leaving, it sets off a chain reaction. Here’s what happens. 

Great people (let’s call then “A-players”) love to work with other super talented A-players. They create a winning culture, which creates a winning company. Just like Michael Jordan who famously pushed his teammates to be their best. 

Not so with B-players. They tend to hire, work with, and promote people who are less talented than them (“C-players”), in an effort make themselves look better and/or to feel superior. This behavior sets off a chain reaction of poor company performance. Which then rots the culture of a company. As the A's leave and the B's and C's take over, one day you wake up and are working with a bunch of morons. 

2) You Don’t Understand Your Company’s Strategy 

Great companies have a game plan for winning. A plan that is clear and simple to understand. They can show you their strategy on one piece of paper and can explain it in about thirty seconds. Poorly run companies either don’t have or can’t articulate their strategy. If you can’t explain what your company does, why you matter, and what makes you different in 30 seconds, it’s mostly likely because your company does not have a strategy or your executives can not communicate it. Either way, it is a sign that you may be going over the handle bars. 

3) Growing Slower Than Your Industry 

Successful companies grow faster than their market does. This means they are expanding sales while taking market-share from competitors. For example, Apple has been growing its market share for the last few years as Dell has been shrinking. Every day customers vote with their wallets. Losing sales is a sign you may be working for a loser. If your industry is growing at five percent and your company is growing at two percent you are losing market-share. Over time, this will catch up with you sending you flying into the unemployment line. 

4) Frequently Missed Targets 

Most companies, especially in tough economies miss their targets from time-to-time. But, when a company misses its quarterly Wall Street earnings (or internal budget targets if your are a smaller business or privately held) frequently in a short period of time, it is a sign of more than a bad economy. It signals bad planning, bad forecasting, bad sales management, bad expense controls, or a company being badly beaten by competitors. No matter what the cause, this is a sign of weak executive management. And weak executives can destroy a strong company quickly. So if this is happening at your company, make sure you are wearing a helmet. 

5) Repeated Layoffs 

Many companies have done layoffs in this economy, but if your company is doing it regularly it is another sign of poor management. Most executive teams underestimate how much trouble they are in when things start going sideways. So when it comes time to cut expenses and people, they have often don’t go deep enough. Then, three to six months later they are forced to do another layoff. If this turns into a vicious cycle, you have incompetent management and probably an out of touch board of directors. Their ineptitude will cause more and more jobs losses. This will continue until your board-of-directors wakes up and lays off the real source of the problem: the CEO. 

6) Running Out Of Cash 

Cash is the life blood of every company. The cash a company generates tells you a lot about its health. A company’s cash position is also one of the purest metrics to track. It’s not subject to interpretation the way revenue, expenses, and earnings are. So pay close attention to it. If there is more cash going out than coming in every quarter, the bike ride ends badly for employees. 

7) Poor or No Communication From Executives 

If your executives are not communicating effectively with you and your co-workers it’s a warning sign. In tough times incompetent executives go into hiding. If and when they do communicate they do it in dumb `bizno-babble' ways. To wit: "This quarter we experienced some negative earnings growth resulting from the current economic pressures and global mitigating circumstances. We expect to incur some challenges going-forward due to visibility issues and other macro-spending trends." Etc. etc. If you don’t understand what they are saying, it’s because the executives don’t know what they are doing. 

Most executive teams underestimate how much trouble they are in when things start going sideways.

So if your company is showing some of all of these seven signs it is time to get proactive. You could start looking for another job now (most experts think it is easier to get a new job, while you are currently employed), wait to get a laid-off (and hope for a solid severance package), or wait it out in hopes that you company will get healthy. No matter what it is smart to raise your profile in your profession by attending industry events, getting to know some recruiters, and making sure you have up-to-date profiles on social networking sites like Linkedin.com, Facebook.com and Spoke.com 

Whatever you choose to do, do not wait until your flying over the handle bars to make a plan. If it looks like your company is about to crash, be proactive about weighing your options, make a decision, then take action. 

Good luck and always wear a helmet! 

By Christopher Lochhead