Thursday, December 19, 2013

A Glimpse Into the Future: What Sales Will Look Like 5 Years From Now

A great article on the evolving world of sales. Aivars Lode avantce.

A Glimpse Into the Future: What Sales Will Look Like 5 Years From Now

By Tom Searcy

What will the future bring for sales professionals?

Sales expert Tom Searcy looks into his crystal ball to share his predictions for what trends will dominate the market in 2018.

One of the responsibilities of leaders is to help their teams not only plan for the future, but anticipate it. I spend a great deal of my time helping business leaders see that future in the larger market context beyond just their own industry. Here's a small glimpse into what I believe the next five years will look like in the world of selling:

1. There will be fewer traditional sales people

The market forces of digitization, mobilization, and purchasing governance are going to dramatically change the ways in which buying and selling occur. This will transform the role of the traditional sales person and diminish the need for that position. That does not mean that there will be fewer jobs per se in the world of revenue generation, but those jobs will be different than that from what we now call "sales." Here's why:

- Less prospecting--Traditional direct prospecting methods will have lower yields to the point that sales people performing direct prospecting will become cost prohibitive.

- Fewer client meetings--Prospects and clients will have less time and interest in considering new vendors and going through the traditional face-to-face presentation cycle for considering providers.

- More structured purchases--The procurement process, purchasing department, and online auctions will continue and expand in use to include smaller size contracts.

- Disintermediation--Buyers will seek additional ways to go direct to providers and manufacturers, diminishing the need for and use of manufacturer reps, dealers, and distributors.

- Leveling the playing field--Buyers will turn more items that have been considered value add into minimum requirements thereby decreasing the need for involved explanations and comparative analysis.

The net of these trends will be fewer sales people on the road calling on clients directly.

2. The focus of buyers will finally shift from price to integrated outcomes

This may sound like good news at first, but, the reasons that this will occur need consideration.

- Competitive pricing exercises will have squeezed out what is available in margin discounting. This means that other than spot quoting, more products and services will be treated as commodities and will thus be included in structured purchase processes.

- Commodities that have standardized COGS will be "traded" not bought and sold. This means that the activity of quoting will replace the more traditional roles of sales people who provide needs assessment, solution matching, and price justification.

3. The roles in the revenue generation chain will become more specialized.

These roles will include, but not be limited to:

Traders

--Although not titled as such, this will be the role of many of the people with sales titles. Their real role will be to facilitate quoting of commodities and near commodities in the roles titled "Account Management," "Inside Sales" or "Customer Service."

Designers

--Solution architects will continue to be in high-demand for opportunities in which the prospect has been qualified for a diagnostic session. Customization and tailoring of pre-packaged and modular solutions will be the choice for companies who want to limit the risk and cost of completely built-from-scratch approaches.

Project Management

--This function of collaborative coordination between customers and providers including all of the supply chain management, enterprise resource planning, and logistics will grow in importance for the larger contracts in the market.

Lead generation

--This area will continue to evolve as the technologies adapt to the filters and barriers organizations put between buyers and your revenue generators. Social media, outsourced meeting makers, earned media, and other mechanisms are entering and developing in the market for the single purpose of getting higher up the food chain in the buying organization as a way to bypass the structured purchase.

Urgency or perceived urgency will trump process. When clients have real problems in a hurry, they will eschew all formality to solve a problem now. Companies that are positioned effectively for rapid response in the marketplace will be able to capitalize on opportunities.

Evaluation of prospects will continue to drive fast-growth company decisions. Smart companies do what they do best, and avoid doing things that will stretch them beyond their capabilities. An effective Target Filter will be crucial to continue to sort through the dearth of leads and glean only the high-value opportunities.

Guarantees and proven speed to results will still earn a higher price than similar commitments over longer time periods. Companies in the market continue to move closer to Just-in-Time mentalities around need satisfaction, and JIT has moved closer to "NOW" than ever before.

Communication skills at all levels will be valued as companies align their business development organization with the prospect's purchasing organization.

Effective and efficient written and verbal communication is a greater requirement when other differentiators have been commoditized.

Trust will still be more important than bona fides. At the end of the day, buyers have to trust the company that they are going to work with because it is the buying group's collective careers that are on the line if they get it wrong.

4. Compensation for sales people will change significantly

As the partitioning of the sales process and subsequent specialization of roles occurs, the commission-based compensation for selling will also change. This will mean a move to less commission-only and high-commission compensation models and more of a salary and bonus model with compensation more broadly shared by all of the participants.

5. What will not change

In the world of sales, much of the above is heresy. However, when I look at the companies who are growing in the top 10 percent of their industries, many of the changes described have been embraced and implemented. This picture of the future is incomplete, of course. It is also not absolute. There will continue to be direct prospecting efforts, just less. There will continue to be traditional sales people and approaches, just fewer.

Big Data’s Biggest Challenge? Convincing People NOT to Trust Their Judgment

Will big data make decisions for you? Aivars Lode avantce

Big Data’s Biggest Challenge? Convincing People NOT to Trust Their Judgment

by Andrew McAfee | 8:00 AM December 9, 2013

The previous statement reads like heresy, doesn’t it? Management education today is largely abouteducating for judgment—developing future leaders’ pattern-matching abilities, usually via exposure to a lot of case studies and other examples, so that they’ll be able to confidently navigate the business landscape. And whether or not we’re in b-school, we’re told to trust our guts and instincts, and that (especially after we gain experience) we can make accurate assessments in a blink.

This is the most harmful misconception in the business world today (maybe in the world full stop). As I’ve written here before, human intuition is real, but it’s also really faulty. Human parole boardsdo much worse than simple formulas at determining which prisoners should be let back on the streets. Highly trained pathologists don’t do as good a job as image analysis software at diagnosing breast cancer. Purchasing professionals do worse than a straightforward algorithm predicting which suppliers will perform well. America’s top legal scholars were outperformed by a data-driven decision rule at predicting a year’s worth of Supreme Court case votes.

I could go on and on, but I’ll leave the final word here to psychologist Paul Meehl, who started the research on human “experts” versus algorithms almost 60 years ago. At the end of his career, he summarized, “There is no controversy in social science which shows such a large body of qualitatively diverse studies coming out so uniformly in the same direction as this one. When you are pushing over 100 investigations, predicting everything from the outcome of football games to the diagnosis of liver disease, and when you can hardly come up with a half dozen studies showing even a weak tendency in favor of the clinician, it is time to draw a practical conclusion.”

The practical conclusion is that we should turn many of our decisions, predictions, diagnoses, and judgments—both the trivial and the consequential—over to the algorithms. There’s just no controversy any more about whether doing so will give us better results.

When presented with this evidence, a contemporary expert’s typical response is something like “I know how important data and analysis are. That’s why I take them into account when I’m making my decisions.” This sounds right, but it’s actually just about 180 degrees wrong. Here again, the research is clear: When experts apply their judgment to the output of a data-driven algorithm or mathematical model (in other words, when they second-guess it), they generally do worse than the algorithm alone would. As sociologist Chris Snijders puts it, “What you usually see is [that] the judgment of the aided experts is somewhere in between the model and the unaided expert. So the experts get better if you give them the model. But still the model by itself performs better.”

Things get a lot better when we flip this sequence around and have the expert provide input to the model, instead of vice versa. When experts’ subjective opinions are quantified and added to an algorithm, its quality usually goes up. So pathologists’ estimates of how advanced a cancer is could be included as an input to the image-analysis software, the forecasts of legal scholars about how the Supremes will vote on an upcoming case will improve the model’s predictive ability, and so on. As Ian Ayres puts it in his great book Supercrunchers, “Instead of having the statistics as a servant to expert choice, the expert becomes a servant of the statistical machine.”

Of course, this is not going to be an easy switch to make in most organizations. Most of the people making decisions today believe they’re pretty good at it, certainly better than a soulless and stripped-down algorithm, and they also believe that taking away much of their decision-making authority will reduce their power and their value. The first of these two perceptions is clearly wrong; the second one a lot less so.

So how, if at all, will this great inversion of experts and algorithms come about? How will our organizations, economies, and societies get better results by being more truly data-driven? It’s going to take transparency, time, and consequences: transparency to make clear how much worse “expert” judgment is, time to let this news diffuse and sink in, and consequences so that we care enough about bad decisions to go through the wrenching change needed to make better ones.

We’ve had all three of these in the case of parole boards. As Ayres puts it, “In the last twenty-five years, eighteen states have replaced their parole systems with sentencing guidelines. And those states that retain parole have shifted their systems to rely increasingly on [algorithmic] risk assessments of recidivism.”

The consequences of bad parole decisions are hugely consequential to voters, so parole boards where human judgment rules are thankfully on their way out. In the business world it will be competition, especially from truly data-driven rivals, that brings the consequences to inferior decision-makers. I don’t know how quickly it’ll happen, but I’m very confident that data-dominated firms are going to take market share, customers, and profits away from those who are still relying too heavily on their human experts.

Europe needs data protection, not data protectionism

95% of the planets data has been created in the last 2 years. Aivars Lode avantce.

Europe needs data protection, not data protectionism

By: Neelie Kroes

Dec 4th 2013

A strong and trusted cloud, with clear rules – the cloud isn’t going away, so we better make it safe

A culture of open data and open access to scientific results – we can produce so much more value from data when we give the original data away

A shared commitment to cybersecurity – we need better capabilities, a culture that shares responsibility for this problem, and more cooperation between countries and companies

The digital revolution is now driven by data. The Economist and others have called “big data” the next industrial revolution, and for good reason.

The next generation of innovation in manufacturing, healthcare, academic research or public services will be possible because we find new ways to harness and learn from data. Just as machines started to augment or replace our muscle power 200 years ago, machine analysis can now also supplement our thinking.

With that opportunity to do more, make more and avoid more mistakes, why is so much of the world lurching into a fear-driven debate about personal data and online surveillance?

The answer is obvious. Big data is a challenge to our comfort zone. Today we produce more data every two days than all humans did up until 2000. The scale of online surveillance is greater than many people ever realized. And it is a surprise to learn that even allies spy on each other. In this respect, I understand people’s fears.

But let’s also be mature about data.

We should not sit like rabbits in the headlights in the face of scandals, or allow trust in the Internet to collapse. You don’t fight unacceptable surveillance by shouting or through a European Surveillance Agency (I explain why in this interview with France 24 – fast forward to 13 minutes). You fight it by funding research into secure systems (as the EU is doing with itsHorizon 2020 programme), supporting new standards and transparent contracts for data services, teaching people that in the online world you either pay with data or cash for a service, and putting in place legal requirements for companies and governments to take cyber risks seriously.

That said, proper and clever use of data requires a lot more than data protection laws. If your home or office has been burgled, you don’t just call a lawyer: you get a better lock.

Many great data innovations don’t rely on personal data at all. Translation technology likeSysTran and Google Translate are good examples, and they remind us that data shouldn’t stop at borders. I support data protection not data protectionism.

Let’s acknowledge that people won’t use what they don’t trust. And from that starting point of high security, let’s see data as an opportunity. It is an opportunity to make our lives easier and grow our economies.

Europe and the world need:

I want Europe to be connected, competitive, open and secure. That won’t happen if we run away from data

Software Deals Likely, MKM Says; Lists Potential Buyers, Targets

Software Deals Likely. Aivars Lode avantce

Software Deals Likely, MKM Says; Lists Potential Buyers, Targets

2013-11-18 16:29:13.791 GMT

By Beth Mellor Nov. 18 (Bloomberg) -- Software may see more deals as conditions are ripe for a new round of consolidation, MKM analyst Israel Hernandez says. * Consolidation driven by weak organic growth facing cash- rich, large tech cos., need to address shifts to cloud computing, SaaS, big data, software-defined networking * Expects most deals to fall in $1b-$5b market cap range, though cannot rule out larger deals * Potential buyers in sector include IBM, Cisco, Oracle, SAP, Hewlett-Packard, Dell, Intel, Microsoft, Juniper * Potential targets include Citrix, Red Hat, Informatica, Tibco, Qlik Technologies, Teradata, Check Point Software, F5 Networks, Fortinet * Also sees recent security IPOs as potential targets, including Imperva, Palo Alto Networks, Proofpoint, Qualys, FireEye, Barracuda Networks * NOTE: In July, FBR said security stocks likely to see more consolidation after Cisco’s acquisition of Sourcefire

Germany: SAP's software licensee conditions are INVALID

SAP licenses are invalid in a court Germany found. Aivars Lode avantce

By | OUT-LAW.COM 5th December 2013 08:31

Germany: SAP's software licensee conditions are INVALID

Court rules they're 'contrary to EU principles' after complaint from reseller

A court in Germany has ruled that terms that software giant SAP stipulated in its software licensing contracts were invalid after finding that they ran contrary to EU copyright principles.

The regional court of Hamburg upheld complaints made about SAP's licensing terms by German software reseller Susensoftware GmbH. Susensoftware had claimed that SAP had engaged in unfair business practices by deploying licensing terms that unfairly restricted the reselling of SAP software.

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Munich-based intellectual property law expert Igor Barabash of Pinsent Masons, the law firm behind Out-Law.com, said that the Hamburg court had referred to a decision by the Court of Justice of the European Union (CJEU) in a dispute between rival software providers Oracle and UsedSoft before determining that SAP's licensing terms were unduly discriminatory.

In a statement sent to Out-Law.com, SAP said that the resale of used software would still be subject to conditions. The company did not comment on whether it plans to appeal against the ruling.

Businesses wishing to use original SAP products are required to agree to licensing terms set by the software developer. The licensing terms at dispute in the ruling gave SAP the right to prevent the transfer of a software licence between an initial licensee and a third party in certain circumstances.

Under the terms, initial licensees of SAP software needed SAP's consent before they could transfer its licensing rights to a third party. The third parties had to provide a written declaration that they would use SAP's software in line with the licensing terms SAP had set out. SAP reserved a right to refuse the transfer of software from the initial licensee to a third party if it deemed the use of its software by the new user to be contrary to its legitimate interest.

However, the regional court in Hamburg invalidated the clause (ruling in German) after ruling that it was not compatible with EU copyright principles. Under the so called principle of exhaustion software owners generally lose the right to control the distribution of their copyrighted computer programs following the 'first sale' of that material within the trading bloc, "with the exception of the right to control further rental of the program or a copy thereof".

SAP said that press reports in Germany following the ruling had wrongly given the impression that SAP customers could transfer its software without any restrictions. It said initial licensees would still be prohibited from transferring only some of the licenses they bought from SAP to third parties. Uniform splitting of volume based licenses purchased is banned, in line with the CJEU's ruling in the Oracle and UsedSoft case, it said.

A second clause contained in SAP's licensing agreement required users of the software to inform SAP if they were using its software in a way which exceeded what was provided for under that agreement. Under the terms, businesses were obliged to purchase additional licenses from SAP to cover this additional use.

The regional court in Hamburg invalidated that clause too on the basis that it required buyers of SAP software to acquire additional licenses exclusively from SAP and not from third party resellers such as Susensoftware. The clause was unduly discriminatory towards buyers of SAP software, it ruled.

However, SAP said that, in practice, the company had only ever applied the clause to initial licensees and not to third party acquirers of the software.

"The Regional Court of Hamburg clearly refers to the CJEU case in its reasoning and says that the two clauses in the terms and conditions are unduly discriminating against SAP customers and are not in line with the decision in the Oracle and UsedSoft case," Barabash said.

In July 2012, the CJEU ruled that software owners exhaust their rights to control the resale of their copyrighted products after they have sold them within the EU, regardless of whether the sale concerns a physical product or one downloaded from the internet. It said that, as a result, the original purchaser of the software can sell on 'used' copies of the software to others but that they must delete any copy they have made for their own use when they make that sale.

However, the Court said that the original purchaser cannot divide up the number of licenses for the software they buy from the copyright owner and then sell on the right to use those licences that they do not need.

"The interesting thing about the new decision from Hamburg is that it is not a software developer that was initiating legal action to protect its software market through eliminating used license resellers, as was the case in the Oracle and UsedSoft case," Barabash said. "The positions of the attacker and the defendant are switched. It was a used software reseller claiming that a software developer was violating general copyright principles and putting resellers at a great disadvantage through the use of invalid and restricting terms and conditions."

Barabash said that the German Act Against Unfair Business Practices allows businesses to bring claims against other companies even where there is no direct legal relationship between the parties.

The expert predicted that SAP would file an appeal to the court's ruling in the hope that, even if the original ruling is upheld, the higher court will provide more detailed guidance on the admissibility and inadmissibility of restrictions in licensing agreements.

"It has been unclear until now, in light of the CJEU's ruling in the Oracle and UsedSoft case, whether there were loopholes software developers could use to avoid their licensing terms being affected by the judgment in that case," Barabash said. "It seems, however, that German courts will look to implement that judgment in a very strict way in a manner that will benefit resellers."

50% of angels regret investments made this year

Just because there is a big market does not mean you will get it. Angels regret their investments! Aivars Lode avantce

50% of angels regret investments made this year

November 21, 2013 2:39 PM

Rebecca Grant

Dec. 4 - 5, 2013
Redwood City, CA

Tickets on Sale Now

Angel investors invest approximately $20 billion into 60,000 companies a year, but a recent survey shows that 46% regretted making an investment in 2013.

The data comes from Worthworm, a company that uses analytics to “take the guess work” out of ”premoney” startup valuations. It designed its tools for entrepreneurs and angel investors to smooth the pitching and negotiation process.

Worthworm’s survey examined the attitudes and outlooks of American angel investors in an attempt to find out what they like and dislike.

“While we often hear about pitching angel investors, we don’t often get insight into their top reasons for investing and what turns them off,” Worthworm cofounder Alan Lobock said. “What entrepreneurs really need to hear is what will end a meeting with a potential investor before it even starts. Our research clearly shows that angels believe the majority of entrepreneurs do not do their homework before stepping through the door.”

A sample of 100 angel investors was asked why the invest, how many investments they regret, the top reason for that regret, the most important factors in a funding proposal, and more.

The No. 1 reason (by far) that angels regretted investments was due to a financial projection that as overly optimistic.

Startup valuations have soared to the highest levels in a decade.Pitchbook found in its recent report on venture capital trends that valuations for seed-stage companies have increased by 63% since 2008. Inflated valuations are frustrating for angel investors, who essentially get less bang for their buck.

One of the challenges here is that early stage valuations are hard to peg.

Startups like to pretend their companies are worth $12 million just because they went through Y Combinator or because the “total addressable market” is a gazillion dollars. The reality is that in the early days, before major traction or revenue, valuations are a lot of smoke, mirrors, and wishful thinking.

Worthworm’s survey found that high premoney valuations, bad fit between investor and startup management, and flawed strategies were the main sources of regret.

Forty-nine percent of respondents cited sustainable competitive advantage as the most important factor in a funding proposal, followed closely by relevant experience of the cofounders. Their biggest frustrations with proposals were overly optimistic financial projections, and unrealistic premoney valuations.

Angel investments are on the rise, but they are still highly risky.The odds of a positive return are less than 50 percent, and angels are often motivated by factors other than money.

Investors would basically prefer if entrepreneurs didn’t blow a lot of hot air. Considering that angel-funded startups are significantly more likely to survive at least four years and raise additional financing, its in entrepreneurs’ best interest to be honest and back their claims up with real information.

Amazon, Facebook, Google give Cisco's switches the COLD shoulder

Even Cisco is being disrupted by amazon google and facebook. Aivars Lode avantce

By | Jack Clark 18th November 2013 13:43

Amazon, Facebook, Google give Cisco's switches the COLD shoulder

Microsoft and cloudy pals go DIY as networking giant's stock plummets

Analysis

Networking giant Cisco lost around $10bn in market value last week as investors sold out in response to weak earnings and poor growth projections. Worse yet, some of its biggest customers – from Amazon and Google to social network giant Facebook – are implementing technologies that will allow them to reduce their dependence on the networking giant.

This spells some serious trouble ahead for the company with a shift in how some of its biggest customers buy networking equipment.

Nooo, ANYTHING but BT! Cisco gives 'stay of execution' to Phoenix ITArista wants Cisco Catalyst 6500 scalp. Price on head? $35bnGoogle coughs up $17m to end Safari STALKER COOKIE brouhahaBIG trouble in BIG China: Cisco shares fall off a cliff as CEO warns of slumpFacebook hitches skirt, flashes 'Cisco-slaying' open network blade

Meanwhile, spending on mobile devices is rising at the expense of traditional PC purchases, which in turn encourages the use of apps operated by or hosted on platforms owned by these companies – and they don't like Cisco.

Switching up

Amazon Web Services, for instance, is building its own networking switches so it doesn't have to rely on the "black box" technology produced by companies such as Cisco, Amazon's chief technology officer Werner Vogels confirmed to The Register.

"It is clear that networking has for a very long time been a black box. They don't even come with APIs," he explains. "This is the history that forced us to really look at way networks are laid out and build [devices] and do [it] ourselves. Also the cost – everything else in our data centre [is] more efficient."

Google is thought to have been operating its own custom networking gear as well for several years, and has recently loaded its own custom software-defined networking technology onto its wide-area networks. In September, 2012, a mysterious "Pluto" switch meant for Google turned up at a branch office in Iowa due to a shipping error.

Social web giant Facebook is also fleeing the company by working with a cross-industry group to develop a specification for an "open" switch that will be made by a low-cost original device manufacturer like Quanta or Wiwynn.

What unites these customers is that they are part of a new wave of companies that have grown sufficiently large that they have a motivation to control everything in their supply chain: and control is something that Cisco always tries to keep for itself so it can extract lucrative service fees from punters.

Cisco, and contemporaries Juniper and Brocade, have built closed switches and routers for decades to help companies shuttle around data center traffic. They have closely guarded the inner features of their technology, and every release with it brings a wealth of new features for their platforms that requires a legion of people armed with certifications and arcane experience to manage.

Economies of scale...

Now, some of the world's biggest data centre operators are running away from the traditional companies, and going to Asian device manufacturers for low-cost gear designed by their own teams.

Whenever we've asked Cisco about this looming threat, the company typically argues that these people have reached a scale that they no longer form the majority of Cisco's target market.

There are two critical problems with this market: these companies, especially Amazon Web Services and Google via Compute Engine, are cannibalising on-premise IT spend as companies move to their compute clouds, and by pioneering these new approaches the fleeing firms will create an ecosystem of accessible, low-cost Cisco-beating kit.

In Cisco-land, all businesses need pricey networks to deal with a deluge of devices and "the internet of things". All of these businesses operate their own networks, and will need glossy equipment for complex tasks.

In reality, many businesses IT departments are being hollowed out by cost-cutting and cloud shifts, and small businesses may not operate any hardware at all. Large enterprises, meanwhile, are growing to the point that they can now command the economies of scale that let them do their own hardware – Goldman Sachs, for instance, is a member of Facebook's open hardware scheme.

Privacy

There's also the recent issue of revelations around NSA spying, which may severely impact Cisco's ability to sell to governments that feel the US may want to compromise them. By example, Cisco's sales to China have been plummeting.

In fact, the only cloud market we can see growing as a consequence of all of these shifts are those operated by telcos. Cisco will continue making wads and wads of cash here, but will it be enough to replace the hollowing out of the market as a consequence of a major shift to mobile devices and clouds? Doubtful.

Cisco may also say there are some markets that will never use the cloud due to security concerns, and will have a need for the types of serviceable kit operated by Chambers & Co. That may very well be true, but the awarding of a $600m private cloud contract for the CIA to Amazon indicates that even the most secure workloads may shift to these new IT suppliers.

All these factors seem to favor the custom networking schemes of the larger providers, and where large providers go the rest of the world tends to follow, as we have seen in the widespread adoption of Linux, lower-cost storage hardware, scale-out systems like 'NoSQL' databases and the Hadoop analytics stack, and others.

'Networking is so ridiculously expensive' – Amazon exec

Clearly, Cisco will be around for a long time, but resentment has built up against the company and its contemporaries like Juniper and Brocade for maintaining high prices and high service fees at a time when the cost of storage and servers has plummeted.

Now, people working at places like Amazon are lighting the blue touch paper that could blow up core elements of Cisco's business.

"Networking is so ridiculously expensive... Look at the ratio of all servers, networking and everything - server cost is going down very rapidly and networking cost is frozen in time," says Amazon Web Services distinguished engineer James Hamilton. "What that means is ratio of costs for networking are skyrocketing."

For this reason, Amazon is building its own networking gear and software. Since then, "the price has phenomenally changed. We're now on the right glide path – it's now on a Moore's law path," he said.

Both Amazon and Facebook have also been frustrated by the slow turnaround time for getting requested features put into products. This, and undocumented features playing havoc in its facilities, motivated Facebook to start an Open Compute Project scheme to design new switches.

"Nothing in the data center stack should be immune from [the] impact of open source," says Facebook's hardware and supply chief Frank Frankovsky. "There was already a lot of pent-up demand for something like this."

Microsoft, also, has lifted its networking control features within Azure up and away from its underlying switches. Though we don't know whether Redmond is building its own hardware, we do know that it's trying to reduce its software dependency (and licensing cost) on Cisco.

Cisco's response to all of this has been the creation of "Application Centric Infrastructure" which will closely couple hardware and software together in a proprietary, obscured manner. One Cisco employee said you could possibly term the tech "hardware-defined networking".

Since some of the industry's most advanced customers – ones who deal with problems that appear at scale years before the rest of the world – are going in the opposite direction, seeking freedom where Cisco seeks control, we suspect Cisco's strategy may be borne of the necessity to support shareholders rather than punters. ®

How Munich rejected Steve Ballmer and kicked Microsoft out of the city

Open source the begining is here. Aivars Lode avantce

How Munich rejected Steve Ballmer and kicked Microsoft out of the city

By Nick Heath

"Our main goal was to become independent." Peter Hofmann, project lead

Peter Hofmann speaks about Munich's open source migration at the Linux Tag conference in Berlin.
Image: Stefan Krempl
"If you're staying with Microsoft you're getting more and more overwhelmed to update and change your whole IT infrastructure." Peter HofmannMaking sense of the IT zoo

Microsoft CEO Steve Ballmer came to Munich and made the case for sticking with Microsoft software.
Image: James Martin/CNET
"We planned a slow migration, carrying out the migration and the development of our LiMux client in parallel." Peter Hofmann

Munich focused on The IT Evolution as the logo for its custom Linux platform.
Retooling for Linux

This screenshot of LiMux shows the major customization that Munich has done to Ubuntu.
"We thought from the start we would have other organisations follow us but it's really not easy." Peter HofmannCost

Freedom to work

Victory Gate is a symbol of the City of Munich. Its Linux migration declared victory in October 2013.
Image: iStockphoto/tzeiler
"We are using the community way of support." Peter HofmannWhat does the future hold?

Picturesque Munich is regularly ranked as one of the world's most liveable cities.
Image: iStockphoto/Björn Kindler

Breaking up with Microsoft is hard to do. Just ask Peter Hofmann, the man leading the City of Munich's project to ditch Windows and Office in favour of open source alternatives.

The project took close to a decade to complete, has seen the city wrestle with legal uncertainties and earned Munich a visit from Microsoft CEO Steve Ballmer, whose pleas to the mayor of Germany's third largest city not to switch fell on deaf ears.

Munich says the move to open source has saved it more than €10m, a claim contested by Microsoft, yet Hofmann says the point of making the switch was never about money, but about freedom.

"If you are only doing a migration because you think it saves you money there's always somebody who tells you afterwards that you didn't calculate it properly," he said.

"That was the experience of a lot of open source-based projects that have failed," Hofmann noted. They were only cost-driven and when the organisation got more money or somebody else said 'The costs are wrong' then the main reason for doing it had broken away. That was never the main goal within the City of Munich. Our main goal was to become independent."

Munich is used to forging its own path. The city runs its own schools and is one of the few socialist, rather than conservative governments, in Bavaria.

Becoming independent meant Munich freeing itself from closed, proprietary software, more specifically the Microsoft Windows NT operating system and the Microsoft Office suite, and a host of other locked-down technologies the city relied on in 2002.

The decision to ditch Microsoft was also born of necessity. In 2002 the council knew official support for Windows NT, the OS used on 14,000 staff machines at the council, would soon run out. The council ordered a study of the merits of switching to XP and Office versus a GNU/Linux OS, OpenOffice and other free software.

As well as being tied to Windows upgrades, Munich faced becoming more tightly locked into the Microsoft ecosystem with each passing year, Hofmann said.

"Windows has developed from a pure PC-centred operating system, like Windows 3.11 was, to a whole infrastructure. If you're staying with Microsoft you're getting more and more overwhelmed to update and change your whole IT infrastructure [to fit with Microsoft]," according to Hofmann, whether that be introducing a Microsoft Active Directory system or running a key management server.

Free software was ruled the better choice by Munich's ruling body, principally because it would free the council from dependence on any one vendor and future-proof the council's technology stack via open protocols, interfaces and data formats.

The prospect of such a high profile loss, and other organisations following Munich's lead, spurred Microsoft to mount a last ditch campaign to win the authority back. A senior sales executive at the time told general managers in EMEA "under NO circumstances lose against Linux." Steve Ballmer himself took time out of a skiing holiday to make a revised offer in March 2003, followed two months later by Microsoft knocking millions of Euros off the price of sticking with Windows and Office.

The lobbying failed to change Munich's mind, and in June 2004 the council gave the go-ahead to begin the migration from NT and Office 97/2000 to a Linux-based OS, a custom-version of OpenOffice, as well as a variety of free software, such as the Mozilla Firefox browser, Mozilla Thunderbird e-mail client and the Gimp photo editing software. It became known as the LiMux project, after the name for the custom Linux OS the council was rolling out.

Nine years is a long time for a desktop migration by anyone's standards, but the LiMux project was always going to be more than a simple transition.

Originally planned as a soft roll out that would be complete by 2011, the project was extended when it became clear that the migration to free software would be more challenging than first thought.

The complexity came down to the way IT was managed at Munich: twenty two different units handling IT for different parts of the council and each with differences in the Windows clients and other software they used, varying patch levels and no common directory, user, system or hardware management.

"[The council] had 22 different units with their own IT, with totally different kinds of systems for the networking, operating and user directories. It was all a big zoo,” said Hofmann, adding there was no detailed overview of the hardware each user relied upon or the software they needed to do their job.

Without a clear picture of its IT estate, Munich found it was taking too long to deal with unexpected problems thrown up when rolling out LiMux.

"If you set up an old PC with the new system you'd start recognising 'Whoops, that isn't there or there's hardware that needs to be reconfigured' and at that stage that's clearly too late. You have to know what's going on before you roll it out."

Munich chose to standardise processes for capturing each department's infrastructure and requirements and for testing and release management, at the cost of adding several years to the project's completion date.

"That took a large amount of time to get over these heterogeneous systems," said Hofmann.

A single unit was put in charge of maintaining and supporting the LiMux client, as well as implementing and providing common tools for user and system management.

The nature of the project had changed, from a desktop migration to cleaning up much of Munich's IT infrastructure and the way it was managed – a move in keeping with the council's motto for the project: "Quality over time".

In spite of the delay in completing the project, Hofmann said the authority had always planned to take its time.

"We never planned to carry out a big bang migration. From the start we planned a slow migration, carrying out the migration and the development of our LiMux client in parallel."

The time taken to complete the project is one of many reasons that Microsoft has attacked Munich's move to LiMux. A report criticising the project, produced by HP for Microsoft, claimed the Redmond software giant could migrate 50 to 500 desktop PCs per day if upgrading to a Microsoft OS and office, suite compared to the eight per day it said was being achieved under the LiMux project.

However, by Hofmann's reckoning, that slow and steady migration is one of the reasons the project has largely managed to stay within its budget with minimal disruption. The project finished within budget in October 2013, with more than 14,800 staff migrated to using Limux and more than 15,000 to OpenOffice.

A myriad technical challenges emerged as Munich tried to reconfigure an infrastructure littered with proprietary formats and protocols to play nicely with LiMux and free software.

Large chunks of the software used by the council were built using Microsoft technologies. For example, a sizeable proportion of Microsoft Office macros were written in Microsoft's programming language Visual Basic, while other departments were tied to Internet Explorer by a dependence on ActiveX. This preponderance of lock-in interfaces was described as "awful" in 2010 by then deputy head of the LiMux project Florian Schiessl.

As would be expected, the council has had to shell out a chunk of change on getting applications to work on LiMux – a custom-build of the Ubuntu flavor of Linux – some €774,000 as of last year.

At the time the migration started, the council used about 300 common office software programs, such as web browsers and e-mail clients, and 170 specialised apps tailored to different roles performed by the council. These specialised apps ranged from large-scale IT systems down to macros and templates linked to Microsoft Office.

Understandably, migrating these apps to run on the LiMux OS is one of the areas where choosing LiMux over Windows cost Munich, with the work on migrating apps to LiMux costing €200,000 more than porting them to a newer version of Windows.

Offsetting that is the estimated €6.8 million savings the council says it had made as of last year from not having to licence a new Microsoft OS and office suite.

The lion's share of Munich's applications, about 90 per cent, are accessible via LiMux. Most have been ported, while others are running as web apps, inside virtualised containers or via terminal servers.

A small number of apps have proven impossible to port, make accessible or switch away from – particularly software whose use is mandated by the German government – and have to be run directly on Windows machines.

While the council has weaned itself off the majority of Microsoft technologies, Munich still experiences friction where it rubs against proprietary software in widespread use elsewhere.

One of the main complaints from Munich staff using LiMux and OpenOffice is about incompatibilities with Microsoft Office. Documents, spreadsheets and other files display some fonts, pictures and layouts differently in OpenOffice than in Microsoft Office, and changes to some documents are not properly logged.

Munich hopes to ease some of these problems by moving all its OpenOffice users to LibreOffice, a process which will get underway at the end of this year. Munich has worked with other users of LibreOffice, including authorities in the German city of Freiburg and the Austrian capital Vienna, to pay for updates to LibreOffice that should improve interoperability with Microsoft's office suite.

The complexity of moving from proprietary software after years of being a Microsoft shop might explain why more organisations haven't followed in Munich's footsteps, and why some, like the German municipality of Freiburg, have given up on their own shift to open source. Last year Freiburg scrapped plans to move to OpenOffice claiming it would have cost up to €250 per seat to resolve interoperability issues.

"We thought from the start we would have other organisations follow us but it's really not easy," said Hofmann.

Hofmann's warning against justifying the jump to free software on cost alone seems well-grounded given how hotly Microsoft has contested costings for the programme.

Microsoft claims that, by its estimation, the LiMux project would have cost considerably more than Munich has said. The HP report for Microsoft put the project's price at €60.6m, far more than the €17m Microsoft claimed it would have cost to shift to Windows XP and a newer version of Microsoft Office.

Munich stands by its assertion that it has cost the council less to drop Microsoft than it would have to have stuck with it, and says Microsoft's figures are based on bogus assumptions.

The final cost will be released at the end of 2013, but in August 2013 Munich said it had cost €23m to shift to LiMux and OpenOffice. Munich says this is far less than the estimated €34m it said it would have cost to upgrade to Windows 7 and newer versions of Microsoft Office.

Where does the truth lie? Well Munich makes a good case for why much of the work carried out during the LiMux project would have been necessary if the council had decided to opt for a newer version of Windows, and how it has saved money on top.

By choosing to swap to LiMux and OpenOffice Munich was able to keep using its old PCs for longer, something that Hofmann said would not have been possible if it had chosen some of the recent versions of Microsoft Office and Windows 7.

Extending the lifespan of its PCs in this way had saved the council some €4.6m as of last year, according to its official figures.

And by Munich's reckoning, the same standardisation of the council's tech infrastructure and administration would have eventually been necessary whatever the OS and office suite chosen, said Hofmann.

Training thousands of the council's staff to use a new OS and software is another area where Munich believes the council would have faced equivalent costs for both Microsoft and LiMux – claiming it would have set them back €1.69m regardless of the system.

"If we would have switched to Microsoft Office, the costs for the e-learning platform would have been the same, and the new GUI for MS Office would have required the same amount of training," said Hofmann.

"[In fact] the GUI in OpenOffice is much more like MS Office 2000 than the new MS Office GUI."

Similarly the €6.1m bill for personnel to oversee the migration process would have remained the same regardless of whether the council moved to LiMux or a future Windows OS, in Munich's estimation. Currently up to 18 people work at any one time work on development and maintenance tasks relating to the operating system and office software for LiMux and Windows.

While many businesses might balk at the thought of not having a support contract to pick up the pieces when their OS and office software goes wrong, Munich feels far from adrift, said Hofmann.

A team of just 25 people at Munich develop, roll out and provide final support for the Ubuntu-based LiMux client. A larger number of people look after the everyday administration of the city's PCs but far fewer than the 1,000 people cited in the Microsoft/HP report as implementing the LiMux project.

The authority doesn't have a support deal for the LiMux client, but instead handles support itself with the help of various free software communities, such as those supporting Ubuntu, KDE, LibreOffice and OpenOffice.

"We are using the community way of support," said Hofmann. "We are finding it to be effective, mostly."

The model is allowing the council to help develop the software it uses in order that it better suit its needs.

"If you're only a customer with a support contract, it doesn't give you the ability to change how things are put into Ubuntu or LibreOffice," said Hofmann.

"That becomes more possible when you work with the community."

The same staff who develop LiMux are also responsible for the last level of support, Hofmann said, adding the authority prizes the freedom it has to work out how to resolve problems on its own.

"We had an issue with OpenOffice in the past and a support contract wouldn't have helped us because nobody else has this sort of problem, so we would have had the choice to live with it or forget about it," said Hofmann.

Instead Munich paid a company to resolve the issue for them, and put the patch upstream.

"The only downside is there's no-one to blame when things do go wrong, but what's the advantage of that?" Hofmann said.

Now that the migration to LiMux is complete, Munich plans to continue developing LiMux (the next version is due out in summer 2014) and continue to incorporate changes made to the Ubuntu LTS release it's based upon. The authority will also continue to identify opportunities to migrate other apps to run on the LiMux client so it can further reduce its Microsoft footprint.

Now that Munich is on a path to freeing itself from proprietary ties, Hofmann says he sees no compelling reason for the authority to ever go back.

"We saw from the start that if you're only relying on one contributor to supply your operating system, your office system and your infrastructure, you're stuck with it. You have to do what your contributor tells you to. If they say 'There's no longer support for your office version', you have to buy and implement a new one. You're no longer able to make those kinds of decisions by yourself."

He is hopeful that Munich will show other large organisations that it is possible to make the jump to free software and, while it is a difficult and time-consuming process, making it happen doesn't mean shutting down your IT.

"It's the best thing you can do. I've been asked 'How come you say you're up and running when Microsoft says you're already dead'," he said.

Hofmann's response: "It is possible to do an open source migration and still have the citizens not left alone. We're far from being dead."