Sunday, August 26, 2012

Start-Ups Emerge as Tech Vendors of Choice

Something we have seen over the years is that the big IT vendors have put the squeeze on customers and the customers don’t like it. If they can buy the same functional points from someone else more focused on customer service at a lower price point, then why would they buy from the big guy and be held to ransom? The cost of setting up the vendor in Accounts payable is so infinitesimal relative to the value created  and costs saved. Aivars Lode, Avantce

Start-Ups Emerge as Tech Vendors of Choice

Updated August 23, 2012, 8:19 p.m. ET


Businesses are getting more comfortable buying technology from start-ups and other small outfits, a shift that could usher in a period of slower growth for tech giants such asHewlett-Packard Co.  and Oracle Corp.

Spearheading the change are tech buyers such as Vanguard Health Systems Inc., VHS -0.92% a Nashville, Tenn., health-care company that has a $100 million-plus annual tech budget. In the past, Vanguard Health used to stick with just a few tech vendors such asMicrosoft Corp. MSFT +1.01% and Cisco Systems Inc. CSCO +0.39%

But more recently, Scott Blanchette, Vanguard's chief information officer, chose a three-year-old start-up instead of one of its incumbents for software to help spot trends in clinical data. The software from the start-up, Explorys Inc., costs less and could get up and running faster, he said.
"Take a large company like us and partner with a big company like [International Business Machines Corp. IBM +1.06% ] and the results will be predictably slow," said Mr. Blanchette. Vanguard Health currently spends about 25% of its tech budget with the small companies and Mr. Blanchette said he would like that to approach 50% in a few years.
Mr. Blanchette is one of many CIOs who are now shifting more of their spending to smaller tech providers. Many of these executives, who hold the purse strings to their company's tech budgets, said smaller companies are now quicker to embrace new computing models, have products that are easier to deploy and tend to respond better to customers than the giants.
To be sure, many CIOs said they won't stop buying products from the titans. Some said they turn to them first before looking elsewhere. "What I hear from CIOs is that they want to buy from a fewer number of larger vendors because they want one throat to choke," said H-P Chief Executive Meg Whitman.
But many buyers agree smaller companies move more quickly and make customers feel more important, threatening companies like H-P, which has struggled with year-over-year revenue declines in recent quarters.
Meanwhile, the benefits promised by some of the biggest tech vendors—such as fewer systems to tie together and one contact for all issues—haven't fully materialized. "There is frustration with the big vendors," said Christine Ferrusi Ross, an analyst at Forrester Research.
There is no precise data that shows the tech-buying shift. In a recent study by the CIO Executive Council, a peer group for IT executives, corporate tech buyers gave their top vendors a score of only 3.23 out of 10 across 20 categories, such as providing honest communication and demonstrating an ability to innovate.
Meanwhile, a 2012 survey of U.S. CIOs by recruiting firm Harvey Nash GroupHVN.LN -1.45% PLC found 73% said they needed to embrace new technology or risk losing market share.
The dollars at stake are huge. Gartner Inc. IT +0.21% projected in July that world-wide corporate IT spending is on pace to hit $3.6 trillion this year, up 3% from last year.
A new crop of business-focused tech companies such as Splunk Inc. SPLK -0.23% andPalo Alto Networks Inc. PANW +0.98% have recently made successful public-market debuts, fueled by strong revenue growth.
Old-line tech vendors have taken notice. Microsoft in July paid $1.2 billion for Yammer Inc., which makes social-networking tools for businesses. IBM, Oracle and SAP AGSAP.XE +0.60% have all spent billions for younger online software makers. And H-P executives talk about reinventing the company by expanding into three hot businesses that aren't among its main ones today.
"That is a challenge to big companies to show that we can innovate," said Sanjay Poonen, president of global solutions at SAP.
The German software maker is pushing new products—some developed internally and some acquired—that it is constantly updating.
"We have to act like a start-up," Mr. Poonen said.
Venture capitalists said they are emboldened to invest in more business-oriented tech start-ups now.
"Five years ago, it would've been tough to fund a company that was going right at the growth of one of the bigger companies," said Mike Goguen of venture firm Sequoia Capital.
Now, however, businesses are looking for something new "and they don't see the products from their incumbents."
Others are more blunt. "This shift is the entire reason why we can thrive and even exist today," said Aaron Levie, chief executive of Box Inc., a file-sharing start-up that countsProcter & Gamble Co. PG +0.51% among its customers and in July raised $125 million in funding.
Many CIOs spent years installing complex systems from big vendors that handle tasks like balancing the general ledger and tracking shipments. Those systems are largely in place now, leaving businesses free to invest in other areas, like collaboration tools or software that analyzes data for trends.
That is what happened at Trident Marketing, a direct sales company in Southern Pines, N.C. While CIO Brandon Brown still uses systems from big companies, he recently bought analytics software from Fuzzy Logix LLC and call-monitoring tools from Coordinated Systems Inc., among other small firms.
Mr. Brown declined to disclose his budget, but said he can't spend $500,000 upfront for a system from an established vendor using a traditional payment model, though he can afford $100,000 a year for five years in a subscription model favored by younger companies.
A big reason for the shift is the emergence of so-called cloud computing programs that can be accessed over the Internet and don't require new hardware. In the past, every time the business expanded, "you had to pay Cisco and H-P and Oracle 20% more," said Mr. Blanchette, the Vanguard CIO. That isn't the case with the new programs.
"There is a lot of dissatisfaction overall with a lot of our vendors, especially the big ones," said Ken Piddington, CIO of oil company Global Partners LP GLP +1.01% . "Too many times today, the bigger companies are just not as nimble."

Friday, August 17, 2012

Craigslist’s Challenger Could Be an App, or Several

Looks like the web 5.0 is coming specific solutions or sites relevant to a group of similar users rather than the ad driven business model of the past. Aivars Lode Avantce

Craigslist’s Challenger Could Be an App, or Several
A few days ago an incoming alert caught my eye. Someone had posted a public message through Highlight, an iPhone app that shows people who else is nearby whom they might want to meet.
The note simply read: “Selling 2 face value wilco tix for tonight – share pls. Thanks!”
It was enough to raise my eyebrows. Highlight is a type of application that tries to extend the social graph from the people you know to the people you might know. I’ve seen it used for networking and dating, and as a travel guide in new cities — but never as a targeted, location-based classified ad service.
Yardsale, a mobile application, lets people browse through items for sale based on how far away they are from the person who is selling them.Yardsale, a mobile application, lets people browse through items for sale based on how far away they are from the person who is selling them.
The notification might be part of the answer to a question raised by my colleague Nick Bilton a few weeks ago: Why has no upstart knocked Craigslist from its perch, despite its outdated design and failure to work nicely with others?
It might not be one site that rises up to claim the throne. It also might not be a site. It might show up in the form of a distributed network of sites and applications, one that connects buyers and sellers who are near each other, linking them through the location-aware, always-on, powerful machines in our pockets.
The Highlight example is one of many. There are several start-ups that are trying to tap into our mobile phones to build out that exact network of listings, but only for people nearby. Yardsale, for example, lets people browse through items for sale — everything from dining room chairs to gaming consoles — based on how far away they are from the person who is selling them.Bondsy is trying to build a marketplace layer over a user’s existing social network. Another service, called Ketup, shows a photo feed of nearby items that are for sale.
Ryan Mickle, one of the founders of Yardsale, said that while the company did not consider itself to be a direct competitor to Craigslist, he thought it could be a healthy alternative.
“We wanted to rebuild the experience of buying and selling,” Mr. Mickle said. “We could streamline it and make it so that if you had some salt-and-pepper shakers that you wanted to get rid of, you could take a picture, upload it, and 15 seconds later it would be available through the app.”
For now, this is tech that is still limited to the one-percenters. Craigslist appeals to people all around the country, and world, because of its simplicity and accessibility. You don’t need to have a fancy phone to sell your old sofa on Craigslist. But Craigslist’s foothold is still largely on the Web — meaning that as the world moves to mobile, companies that are not able to adapt could be left behind. For companies like Yardsale, whose app has been downloaded around 100,000 times, mobile is crucial.
“We can show you the items for sale on your block,” Mr. Mickle said. “The serendipity of what’s available from your neighbor could lead you to finding stuff you didn’t even know you want.”
Soon, one — or all — of these services could be giving Craigslist a run for its money.

The Key Missing Ingredient In Leadership Today

Change will continue and we are lucky to have seen the  future in many ways through our international  travels and business relationships. This article clearly identifies that leaders must enable change in order for business to survive and prosper. Aivars Lode Avantce

The Key Missing Ingredient In Leadership Today

We make a living by what we get; we make a life by what we give.
Winston Churchill
Most leadership writing today advises us on how to prosper within the system or perhaps even on flourishing despite of the system. What’s missing? Real leadership is about transforming the system.
Leadership is not merely about success. AbrahamLincoln and Martin Luther King were great leaders, not because they were successful within their different worlds, or even because they were successful despite the constraints of their worlds. They were great leaders because they transformed their worlds.

Leadership implies more than success

To see what I mean about the limited vision of leadership today, let’s look at a rightly celebrated example of leadership writing today. It’s entitled “Solitude and Leadership” by William Deresiewicz, the author of A Jane Austen Education. It began life as a lecture at West Point given in October 2009. Then it became an article in The American Scholar. Now it is a chapter in The Best American Nonrequired Reading 2011 edited by Dave Eggers.
The piece is literate, eloquent and often moving. It praises the lonely and courageous leadership of General David Petraeus, who went against the flow, thought things out for himself and got things done “despite the system”.
“Leadership,” Deresiewicz told his aspiring leaders at West Point, “is what you are here to learn—the qualities of character and mind that will make you fit to command a platoon, and beyond that, perhaps, a company, a battalion, or, if you leave the military, a corporation, a foundation, a department of government.

Leadership is more than being excellent sheep

But leadership, says Deresiewicz, is about more than being successful.
“Does being a leader… just mean being accomplished, being successful? Does getting straight As make you a leader? I didn’t think so… what I saw around me were great kids who had been trained to be world-class hoop jumpers. Any goal you set them, they could achieve. Any test you gave them, they could pass with flying colors. They were, as one of them put it herself, ‘excellent sheep.’ I had no doubt that they would continue to jump through hoops and ace tests and go on to Harvard Business School, or Michigan Law School, or Johns Hopkins Medical School, or Goldman Sachs, or McKinsey consulting, or whatever. And this approach would indeed take them far in life… People who make it to the top. People who can climb the greasy pole of whatever hierarchy they decide to attach themselves to.”
Thus Deresiewicz’s piece is already a considerable advance on the kind of writing that is common in leadership journals, with articles like “Six Steps to Asking Effective Questions” or “Seven New Presentation Techniques” or “Four Rules For Making Yourself Indispensable”. All these little tips and tricks are no doubt helpful in a limited way to keep running smoothly. But they don’t shed light on leadership.

Are these activities worth doing?

By contrast, Deresiewicz pushes his listeners to think for themselves and examine why they are doing what they are doing.
“…for too long we have been training leaders who only know how to keep the routine going. Who can answer questions, but don’t know how to ask them. Who can fulfill goals, but don’t know how to set them. Who think about how to get things done, but not whether they’re worth doing in the first place.”
“What we don’t have, in other words, are thinkers. People who can think for themselves. People who can formulate a new direction: for the country, for a corporation or a college, for the Army—a new way of doing things, a new way of looking at things. People, in other words, with vision.

The enemy is hierarchical bureaucracy

Deresiewicz is well aware of what these aspiring leaders will be up against. Leaders will be entering hierarchical bureaucracies, whether it’s the military like West Point, Harvard Business School, or Michigan Law School, or Johns Hopkins Medical School, or Goldman Sachs, or McKinsey consulting:
“You need to know that when you get your commission, you’ll be joining a bureaucracy, and however long you stay … you’ll be operating within a bureaucracy… And so you need to know how bureaucracies operate, what kind of behavior—what kind of character—they reward, and what kind they punish.”
“That’s really the great mystery about bureaucracies. Why is it so often that the best people are stuck in the middle and the people who are running things—the leaders—are the mediocrities? Because excellence isn’t usually what gets you up the greasy pole. What gets you up is a talent for maneuvering, pleasing your superiors, picking a powerful mentor and riding his coattails until it’s time to stab him in the back. Jumping through hoops. Getting along by going along. Being whatever other people want you to be, so that it finally comes to seem that.. you have nothing inside you at all. Not taking stupid risks like trying to change how things are done or question why they’re done. Just keeping the routine going.
The problem is pervasive in institutions today:
“This is a national problem. We have a crisis of leadership in this country, in every institution. Not just in government. Look at what happened to American corporations in recent decades, as all the old dinosaurs like General Motors or TWA or U.S. Steel fell apart. Look at what happened to Wall Street in just the last couple of years.”

An example of leadership: David Petraeus

Deresiewicz’s model of fine leadership is David Petraeus:
“Look at the most successful, most acclaimed, and perhaps the finest soldier of his generation, General David Petraeus. He’s one of those rare people who rises through a bureaucracy for the right reasons. He is a thinker. …he is able to think things through for himself. And because he can, he has the confidence, the courage, to argue for his ideas even when they aren’t popular. Even when they don’t please his superiors. Courage: there is physical courage, which you all possess in abundance, and then there is another kind of courage, moral courage, the courage to stand up for what you believe.”
Deresiewicz notes that success wasn’t easy for Petraeus.
“His path to where he is now was not a straight one. When he was running Mosul in 2003 …he pissed a lot of people off. He was way ahead of the leadership in Baghdad and Washington, and bureaucracies don’t like that sort of thing… But he stuck to his guns, and ultimately he was vindicated. Ironically, one of the central elements of his counterinsurgency strategy is precisely the idea that officers need to think flexibly, creatively, and independently.”
At the end of the day, Petraeus had great accomplishments. He was successful despite the military bureaucracy. He bucked the system. He challenged the top brass. He dealt with setbacks. He developed a theory of counter-insurgency and successfully implemented it. We should salute his accomplishments.

Great leadership transforms the system

What Petraeus didn’t do was to permanently change the system of the US military. Despite his successes, the military bureaucracy remains intact. It continues to grind forward with the best people stuck in the middle while the people who are running things—the leaders—are still focused on greasing the wheels of the bureaucracy, not on transforming it.
We can forgive Petraeus for not transforming the military bureaucracy. He was caught in the middle of a war. He had enough on his hands trying to rescue the disaster that was Iraq. That he was able to accomplish that in such circumstances is remarkable. But at the end of the day, the system of which he was a part remains intact, impregnable, mechanistic, inhuman, nurturing to those who preserve it and hostile to those who try to transform it.
Yet we have to ask more of leadership writers like Deresiewicz. He writes:
“You need to know that when you get your commission, you’ll be joining a bureaucracy, and however long you stay … you’ll be operating within a bureaucracy,.”
These are words of despair, not leadership. It’s not acceptable that all great institutions will always remain bureaucracies run by mediocrities. Real leadership is about creating the best that the human race can accomplish and bureaucracy isn’t it.
Leadership writers need to raise their sights and ask: why most “great” organizations still grinding along as hierarchical bureaucracies when we know how to do things differently?

Thinking in terms of systems not just individuals

Leadership needs to take the next and necessary step and ask: what would be involved in transforming these hierarchical bureaucracies into agile organizations in which excellence is celebrated and where the people at the top are the most creative and the most imaginative?
To do so, we need to get beyond thinking about leadership as merely making better individuals. That’s because systems are stronger than individuals. Having better individual leaders won’t do much for the crisis in leadership that Deresiewicz correctly identifies.

System change: too little too late

It’s not that we don’t have people thinking systemically. The problem is that the thinking often comes too late to have any impact.
Thus it’s nice to have Jack Welch, the patron saint of maximizing shareholder value, declare in 2009 that maximizing shareholder value is “the dumbest idea in the world.” But where was Jack Welch when he was running GE from 1981 to 2001 oriented precisely to this idea?
Similarly it’s great to have Sandy Weill, legendary banker and creator or the Citigroup [C] in an interview on CNBC’s SquawkBox call this week for splitting up the commercial banks from the investment banks and establish an exchange to establish transparency for derivatives. But where was Weill with this thinking while he running Citigroup?
These cases are not isolated. In 2009, John Reed, who helped Weill create Citigroup, apologized for creating a lumbering giant that needed multibillion-dollar bailouts from the government. Philip Purcell, the former CEO of Morgan Stanley and David. Komansky, the onetime leader of Merrill Lynch, have since voiced similar concerns about deregulation. The question is: where were they when the system needed them?

A different way of running organizations

Leadership thinking needs to raise its game. Leaders need to be showing the way towards a different way of running organizations. It’s not enough to get things done within the system or despite the system. We need to transform the system. We need in effect to reinvent the private sector, reinvent government, reinvent education and reinvent health.
Reinventing the Fortune 500: The Fortune 500 are becoming increasingly unproductive because they are run as hierarchical bureaucracies.  These firms are looking from the inside-out, producing their products and services to make money for shareholders, doggedly tweaking their value chain, parsing and manufacturing customer demand, trying to find ways to lower costs, looking for economies of scale. They are “pushing” their products and services at customers. They are living in the world of financial capitalism with a goal of making money for their shareholders. They are filled with disgruntled employees: only one in five is fully engaged in his or her work. Their life expectancy is limited. These are 20th Century organizations.
The Fortune 500 must become organizations of the future, focused on looking from the outside-in, understanding the people with whom they might do business, comprehending their hopes and dreams and problems and goals, and trying to find ways to delight them. Rather than “pushing” products and services at customers, they are deploying the power of “pull”. They must recognize that we are living in the age of customer capitalism. The value of firms that do this is growing exponentially. These are the organizations of the future. The Fortune 500 must be run in a radically different fashion. The irony is: we know how to do this. So why don’t we get on and do it?
Reinventing government: Reinventing government is much more than cutting back budgets or using better technology. It is as Tim O’Reilly has argued, a government stripped down to its core, rediscovered and reimagined as if for the first time and focused on adding value to its primary stakeholders. It means shifting the idea of government from shaking the vending machine to get more or better services out of it, and over to the idea of government building frameworks that enable people to build new services of their own. Again, we know how to do this. So why don’t we do it?
Reinventing education: Graduating more students and raising grades are important but it’s not nearly enough to respond to the challenge of the Creative Economy of the 21st Century where the future depends on innovation. The current education system is a test-driven bureaucracy that is not fitting our students for the turbulent unpredictable world that lies ahead. Even the reforms to education strengthen these bureaucratic tendencies. Real education reform means a system that is not run for the convenience of the administrators and the teachers, but rather a system that genuinely puts “students first”, and instills a love of learning that lasts a lifetime. Here too, we know how to do this.
Reinventing health: Similarly the health system is infected with bureaucracy. Real reform in health means transforming a system that is run for the convenience of the administrators, the insurance companies and the health professionals and turning it into a system that is truly focused on “patients first”, with genuine patient-driven care.  Here again, we know how to do this.
Real leadership requires transforming the Fortune 500, government and the education and health sectors. We know how to do all those things. What we need is real leadership to take on the challenge.

Dalton Caldwell Punches Facebook In The Nose

Is facebook open? After admitting in their SEC filings that there are tens of millions of dummy accounts, this would not bode well for them. Aivars Lode Avantce

Dalton Caldwell Punches Facebook In The Nose
Dalton Caldwell is a noted developer and entrepreneur in Silicon Valley. He has startups imeem and picplz under his belt. He used to have big hopes and dreams for a Web 2.0 that had widely available services on top of which lots of startups can build things of value. He had these hopes and dreams when he started a company in early 2010 called that helps app publishers promote and monitor  their apps on social media and via dedicated Web sites. One of the places he built that service to work on is Facebook. That’s a logical move: 950 million users is a big country.
It’s just that Caldwell never really believed he would be allowed to succeed. Caldwell for the last two or three weeks has been blogging about what he sees as a Big Chill underway on the supposedly “open” social Web. His fears were confirmed in mid-June. In an open letter to Mark Zuckerberg posted today, Caldwell recounts a meeting he had on June 13 with a bunch of senior Facebook execs to look at his app and service that was built on the Facebook Platform. He says the meeting “took an odd turn” when the Facebook execs told him his product was competitive with Facebook’s own App Center product, and they would hate to have to compete with his service. Dalton, he says they said, was “a nice guy with a good reputation,” and how about if he just agrees to let them buy his company so he could help them build App Center? Caldwell wasn’t interested in becoming another Facebook acqui-hire, seeing his product shut down or melded into the Facebook colossus. “I’d rather reboot my company than go down that route,” he writes.

The awkward moment Caldwell recounts is, he says, not an isolated incident. He’s heard of other examples of startups getting the message from Facebook’s M&A team that it’s better to fold up and join us than try to build a big business on Facebook’s platform. Caldwell is one of a growing chorus of developers becoming leery of “platform risk,” or betting a business model on the good graces of a service like Twitter or Facebook that can change its priorities and steamroll a developer or two here and there in the chase for elusive ad dollars. Microsoft left carcasses all over the playing field in the 1990s and 2000s doing this very same tactic.
Caldwell isnt saying Facebook is evil. It’s just a misalignment of interests all around. From his post:

Mark, I don’t believe that the humans working at Facebook or Twitter want to do the wrong thing. The problem is, employees at Facebook and Twitter are watching your stock price fall, and that is causing them to freak out. Your company, and Twitter, have demonstrably proven that they are willing to screw with users and 3rd-party developer ecosystems, all in the name of ad-revenue. Once you start down the slippery-slope of messing with developers and users, I don’t have any confidence you will stop.
…. …. …. ….
I don’t think you or your employees are bad people. I just think you constructed a business that has financial motivations that are not in-line with users & developers. Even if my project isn’t the mechanism that instigates this change, the change will happen.
Mark, based on everything I know about you, I think you get all of this. It’s why you launched FB platform to begin with. Do remember how you used to always refer to Facebook as a “social utility”? That is an interesting term to use. I haven’t heard you use that terminology in a while. I can guess why.
Seeking Facebook comment now.
The “project” Caldwell refers to is his “new” version of, which is a free social service with an API available to all at a reasonable price. It won’t be free nor will it be ad-supported. But it will be open. It’s a long shot to get way off the ground, but at least it’s an insurance policy against the future Caldwell dreads, in which Facebook and Twitter’s ad-driven interests continue to clash with those of its developers. Caldwell put the project on Kickstarter here It’s already raised $118,000.