Amazon’s Web Services success and old tech

Below is a good article on the current state-of-affairs regarding ‘The Cloud’ and how Amazon’s success with their Web Services (AWS) business is getting the ‘old school’ technology providers attention.  We have summarized some of the highlights below:

  • Since Amazon (AMZN) started disclosing the results of its cloud service business back in April, the stock is up 68%, representing a $124 billion increase in stock market value
  • …the industrial giant [GE] could slash the cost of running an important oil and gas application over 90% by shifting to the cloud
    • Application updates that once took 20 days can now be implemented in two minutes
  • [Coca-Cola’s CTO] said “Our data centers have always had lots of servers, lots of cost, using a lot of energy, and this is not going to get us to the future,”
  • Amazon’s web services unit has already reported revenue of $5.4 billion for the first three quarters of the year, an increase of 70% over the same period a year ago.
    • Sales should exceed $10 billion next year and $16 billion in 2017
  • Cloud Winners, so far as of 2015, according to this article are AMZN, GOOGL and MSFT:

aws_111115

  • And the not-so-winners, so far as of 2015, according to this article are IBM, HPQ and EMC:

aws2_111115

Of course times are rapidly changing fast in ‘The Cloud’ marketplace and today’s winners certainly might be tomorrow’s losers but one thing is for certain and that is talk is cheap and actions are more important than ever in this Fad called “The Cloud”.

http://finance.yahoo.com/news/amazon-s-cloud-success-stokes-fears-of-old-tech-failures-163810909.html

Amazon’s cloud success stokes fears of old tech failures

 

 

Salesforce Q2’14 Financial Results – No Respect

When a bold, trend-setting company such as Salesforce earns the respect of the Wall Street financial community then maybe we truly have reached the point that “The Cloud” is recognized as a legitimate business model and not just a ‘fad’.  Nowadays, Salesforce is treated just as another company when analyzing their quarterly financial results.

rodney-dangerfield-quotes2

Salesforce is still not a profitable company; yet.  However, with consistently improving business, which is more sustainable than selling traditional on-premise software by-the-way, the future is bright.  They are focused on ‘growth’ versus ‘profit’ now.  If this trend continues from $-0.16 Earnings Per Share (EPS) last quarter to $-0.10 EPS this quarter it shouldn’t be too long before they are profitable.

At that inflection point it will be absolutely interesting to see how explosive the Company might grow considering the solid foundation they would have built and the unbelievable scalability of this type of Software-as-a-Service (SaaS) business model.

Below is a link to a Forbes article the summarizes Salesforce’s Q2’14 Finanical Results:

http://www.forbes.com/sites/alexkonrad/2014/08/21/salesforce-narrowly-beats-expectations-in-q2/

By almost every metric the company improved the flow of cash coming into the company by somewhere between 30% and 40%. Cash was up 34% to $246 million; deferred revenue up 31% to $2.35 billion. Unbilled and deferred revenue that the company has under contract but won’t appear on the books yet stands at $5 billion, up 32%, while Salesforce is now projecting full-year growth of between 31% and 32%, with its guidance inched up $30 million to $5.34 billion to $5.37 billion.

#CloudIsAFad and #SaaSIsAFad.com

cropped-saasisafad_header

SYNNEX diversity paying off in 2014

Computer Products distribution dark days

Many years ago my professional career was primarily working for several computer product distribution companies.  We offered products such as hard disk drives, computer memory, video cards and computer monitors.  They were all specialty items at the time but quickly became commotized where the buyers simply needed availability of a particular part number and the current price (of a hard disk drive, for example).  Fortunately, my particular business unit at each of these companies was focused on a slower sales cycle, yet highly profitable products such as document scanners, document imaging software and optical storage solutions. Law Cypress, International Computer Graphics and Bell Micro were the companies and the business was typically low-margin, high-volume and lazy (quite frankly).  At the time, in the 90’s, there was one company that was a little bit annoying but never amounted to much because they rarely earned the business.  This company was SYNNEX who was known as the low-price, no value-add, awful product knowledge, limited line card distributor.  They were the epitome of distribution scum among many scummy contenders.  In fact the current SYNNEX corporate profile at Yahoo Finance (http://finance.yahoo.com/q/pr?s=SNX+Profile), as of 4/5/14, still reads like their traditional business:

Business Summary

 

SYNNEX Corporation provides distribution and business process outsourcing (BPO) services to resellers, retailers, and original equipment manufacturers (OEMs) primarily in North America. It operates in two segments, Distribution Services and Global Business Services (GBS). The Distribution Services segment distributes information technology (IT) products, such as IT systems, peripherals, system components, software, networking equipment, consumer electronics, and complementary products to value-added resellers, system integrators, and retailers. This segment also offers data center server and storage solutions; and contract assembly services, including systems design, build-to-order, configure-to-order, and assembly capabilities, as well as value added services comprising kitting, reconfiguration, asset tagging, and hard drive imaging. The GBS segment provides BPO services, including customer management, renewals management, back office processing, and IT outsourcing through voice, chat, Web, email, and digital print. The company also provides logistics services consisting of outsourced fulfillment, virtual distribution, and direct ship to end-users; financing services comprising net terms, third party leasing, floor plan financing, letters of credit backed financing, and arrangements; marketing services, such as direct mail, external media advertising, reseller product training, targeted telemarketing campaigns, trade shows, trade groups, database analysis, print on demand services, and Web-based marketing; and online and technical support services. It also has operations in China, India, Japan, the Philippines, Costa Rica, Hungary, Mexico, Nicaragua, and the United Kingdom. The company was formerly known as SYNNEX Information Technologies, Inc. and changed its name to SYNNEX Corporation in October 2003. SYNNEX Corporation was founded in 1980 and is headquartered in Fremont, California.

 

That was then, this is now (perception is everything)

Each company I mentioned above has since seceded to exist as a business or has been acquired for next-to-nothing of its once great market valuation.  Why and why does SYNNEX’s business continue?

Because selling a tangible hardware product such as hard disk drives, computer memory or video display components becomes such a commodity over time that the only thing that matters is ‘price’ and ‘availability’.  Hence, there is no value-add and, therefore, little profit margin.

Since those long-ago days I had not paid any attention to the Company SYNNEX because I just assumed they would eventually become irrelevant and meet the same fate of many of the other computer products distributors.  However, I watch CNBC for several hours every morning to catch up on the daily business news and recently SYNNEX (NYSE: SNX) was in the news so that immediately peeked my interest.  The stock was up something like 15% in the early morning trading and I wanted to know why so I investigated this Company that I once had little regard for.  For the record, SNX’s stock price ended up over 23% for the day of 4/4/14.  But why?

stock price

Changing the corporate DNA dynamics

First and foremost, the obvious reason is that SNX had great financial results in the previous quarter and had solid guidance for the upcoming quarter.  These are the facts, but what drove these great financial results and such optimistic forecasts?  With nothing more than browsing the SYNNEX website for the answers, it’s my personal opinion that they have gone to great lengths to change the corporate DNA from a low-margin distributor persona into a true value-added solutions provider and ‘cloud’ seems to be a key component of this strategy.  A quick look at the SYNNEX corporate website is quite telling of the transformation for the Company.  No longer is a ‘great price on this particular disk drive’ prominently featured on their website.  Rather this language is replaced with language more relevant and value to business consumers such as ‘process services company’ and ‘technology solutions’ (instead of ‘distribution products’).  While it’s clear that SYNNEX still runs their traditional distribution business these corporate DNA changes are significant and ‘cloud’ plays a big part into this.

main page

SYNNEX to the Cloud?

While this might be a bit of a stretch since I don’t know anything other than what’s available on their website about their cloud business, I bet that ‘cloud’ is a significant part of the overall SYNNEX strategy.

technology solutions

For example, only one-click deeper on their website displays a well-organized list of who’s-who in the IT space such as Microsoft, Symantec, Adobe and many others as technology partners for SYNNEX CLOUDSolv Solutions.

cloudsolv

What do you think?  In your opinion is this enough of a good strategy to help SYNNEX be successful in the long run?

Cloud Computing Forecasts Update, 2013

This is simply one of the best articles about Cloud Computing that I have ever read.

http://www.forbes.com/sites/louiscolumbus/2013/11/16/roundup-of-cloud-computing-forecasts-update-2013/#!

Let me give some historical perspective.  A few years back we started CloudIsAFad.com based on the fact that ‘cloud’ was deemed by many people as “A Fad”, or “all hype” and “no revenue”. Well to the nay-sayers of ‘cloud’, I simply would like to ask you now, ‘do you think Cloud Is A Fad?’.  I defiantly ask you “do you think that ‘the cloud’ is just the internet re-branded?

I started to summarize-the-summaries of this article below but after a few bullet-points I reconsidered and thought I just ought to redirect you to the article itself as it clearly articulates trends, forecasts with many great references and charts.

  • Public IT cloud services will grow at over 7X the rest of the comparable market
  • Gartner predicts that the bulk of new IT spending by 2016 will be for cloud computing platforms and applications
  • McKinsey & Company projects that the total economic impact of cloud technology could be $1.7 trillion to $6.2 trillion annually in 2025.
  • IDC predicts public IT cloud services will reach $47.4B in 2013 and is expected to be more than $107B in 2017. Over the 2013–2017 forecast period, public IT cloud services will have a compound annual growth rate (CAGR) of 23.5%, five times that of the IT industry as a whole. The growing focus on cloud services as a business innovation platform will help to drive spending on public IT cloud services to new levels throughout the forecast period. By 2017, IDC expects public IT cloud services will drive 17% of IT product spending and nearly half of all growth across five technology categories: applications, system infrastructure software, platform as a service (PaaS), servers, and basic storage. Software as a service (SaaS) will remain the largest public IT cloud services category throughout the forecast, capturing 59.7% of revenues in 2017. The fastest growing categories will be PaaS and Infrastructure as a service (IaaS), with CAGRs of 29.7% and 27.2%, respectively.

Enjoy!

#CloudIsAFad

Congratulating LinkedIn on fantastic quarterly financial results is like a broken record

This is becoming a rather re-occurring theme where we give a brief commentary immediately after LinkedIn reports their quarterly financial numbers (which consistently impress!).  So, in true broken-record fashion, let’s say it again:  “Congratulations to LinkedIn on another fabulous quarter.”

Before we get into some of the numbers I would just like to make one general comment about this Company and their CEO, Jeff Weiner, specifically.  While LinkedIn has been experiencing terrific growth over the past few years and the stock market ‘experts’ continue to apply pressure to Jeff to provide more aggressive guidance into future revenues, he continues to temper what are probably unrealistic expectations and keeps everything in perspective.  It’s a typical under-promise and over-deliver.  While some may feel that this is ‘sand-bagging’, I disagree.  We have seen it time-after-time before where Companies tend to let Wall Street dictate potential future revenue expectations with each of their individual opinions of “Price Targets” based on a good or bad earnings report.  Jeff is having none of it and continues to guide this Company with a solid growth strategy.

Reading this full article and the comments from the analysts shows some of the frustration among the Wall Street pundits at Jeff’s ‘low-balling’:  LinkedIn Surges: What Wall Street’s Saying (http://www.thestreet.com/story/11997644/1/linkedin-surges-what-wall-streets-saying.html?puc=yahoo&cm_ven=YAHOO)

So, let’s dig into some of the numbers:

  • $363.7 million in revenue, a 59% increase on the same period a year ago.
    • Thomson Reuters were expecting … revenue of $353.8 million.
  • LinkedIn expects revenue between $367 million and $373 million,
    • …below the $383.3 million expected by a Bloomberg survey.
  • For the full year, the professional networking site raised its revenue guidance to a range between $1.46 billion and $1.48 billion, up from a prior range of $1.43 billion to $1.46 billion.
  • CEO Jeff Weiner pointed out that LinkedIn has 238 million users worldwide

Finally, just to put some icing on this cake where Wall Street has to provide one more little digg, here you go.  A direct quote from the article:

Though the company raised full-year revenue guidance, the next quarter’s guidance, as has become customary, was lower than expected.”

IT investing in cloud

It’s amazing to me that to this day I continue to often have spirited debates/conversations about the viability of ‘cloud’ for business use.  Just when I thought I had heard it all such as ‘the cloud is just the internet re-branded’, ‘no one will EVER trust their data in the cloud’ or ‘cloud is a fad’;  I get hit with yet another naysayer trying to argue the fact that there is serious financial investment taking place in ‘cloud’.

There was a short summary of a research piece from Compuware, alongside Research in Action, which provided some interesting data points.  A link to an article about the research can be found here:  Cloud still number one IT investment priority, says report and I would like to summarize some of the data as follows:

  • 16.5% of companies cite cloud as the most important area of their IT portfolio to strengthen, ahead of mobile IT (13.5%), business analytics, big data and in-memory (11.3%)
    1. Cloud infrastructure (12.5%) is the top area of investment for IT in 2013
    2. Renegotiation of outsourcing contracts (9.6%)
    3. Investing in big data and analytics (9.2%) rounded off the top three
  • Key areas of investment:
    1. Investing in cloud for test and backup purposes is the top priority this year according to 24.1% of respondents
    2. Private cloud implementation (17.1%)
    3. Public/hybrid investment (15%) trailing behind
  • Most popular services used today:
    1. eCommerce platforms (78%) were the most widely used according to survey respondents
    2. Public cloud SaaS (50%)
    3. Social media (50%)
  • Looking two years ahead:
    1. 47% of those polled intend to use hybrid cloud services, with 34% saying they will use public cloud IaaS.

 

LinkedIn Q4’12 financial results: Cloud/SaaS are fads.

Congratulations to LinkedIn, once again, on delivering great fourth-quarter financial results.  These outstanding results continue to demonstrate the fact that the ever-growing disparate nature between “business cloud” and “consumer cloud” which we wrote about here previously.

While “Facebook fatigue” starts to set in for many users, LinkedIn’s membership continues to swell at an incredible pace.

Facebook Fatigue:  “About 27 percent of Facebook users – and 38 percent of those ages 18-29 – said they plan to spend less time on the social network this year, and 61 percent have at one time or another taken a “Facebook vacation” lasting several weeks or more.

Of course Facebook’s overall user base of over 1 billion and revenue in the $5 billion territory dwarf’s LinkedIn’s numbers in the same categories but the viability of each companies business model is what separates these two cloud ‘social’ companies.

linkedin logo

LinkedIn Q4 2012 financial results:

  • Revenue jumped 81 percent to $303.6 million
  • User base rose 8 percent to 202 million

Almost all of Facebook’s revenue is based on advertising, while LinkedIn is a nice blend of advertising and subscriptions.  Advertising only is not a viable long-term business strategy.  It’s just too simple for advertisers to switch from one marketing medium to another and they do it all the time.  Whatever is the ‘hot’ advertising deliver platform at a particular time is where the money will surely flow.

As LinkedIn continues to establish itself as the most popular site for job seekers, the company is selling more subscriptions to help recruiters find the right people. Revenue from talent solutions, Web-based software that recruiters and employers use to fill jobs, climbed 90 percent to $161 million, accounting for 53 percent of total sales.

Bait-and-switch?

I personally am a big fan of LinkedIn and absolutely love their services however it’s also best to be cautious not to rely on just one such service.  Why?  Because we’ve seen it thousands of times previously where a once great service starts to let pure greed take over the corporate culture from what it once was.  When a company starts to focus on pure profit and forgets about delivering a quality product or service then they are doomed. In the case of LinkedIn it might be starting with this:

Starting in the second quarter, the company will raise subscription prices for products targeting recruiters and promoting job openings.

Of course LinkedIn has every right in the world to charge whatever they wish for their services but they should be careful to avoid the ‘How Netflix Lost 800,000 Members, and Good Will‘ effect.  What Netflix did was a classic bait-and-switch.  They on-boarded millions of loyal, and mostly satisfied, users and then arrogantly raised prices on their services.

Subscribers revolted and many dropped the service. The plan further tarnished a once widely respected Internet service that had already been wounded by an unpopular price increase in the summer.

Netflix temporarily lost yours-truly as a customer.  On a side-note, I admire Netflix mostly for their outstanding corporate culture.  View this slideshow if you want to learn more about the Netflix Corporate Culture.

I’m certainly not saying that LinkedIn is in danger of losing users due to this price increase but it’s always wise not to bite the hand that feeds you.

Fads

Just for fun I took the 2 year stock chart from Yahoo Finance and added today’s projected closing price of nearly $150 per share to the far-right portion of the chart.  As you can clearly see LNKD investors are certainly pleased with that they didn’t listen to all the ‘Cloud Is A Fad’ nay-sayers.

linked stock price 02 08 13

In summary, and in the true #CloudIsAFad spirit, I guess I will close by sarcastically pointing out that LKND on pace for over $1 billion annual revenue (~$16B valuation), CRM on pace for over $3 billion annual revenue (~$24B valuation) and even FB with over $5 billion annual revenue (~$69B valuation) are all just Fads.  #SaaSIsAfad.

You can read the entire article on ‘LinkedIn Profit, Sales Beat Estimates After Membership Swells’ here:  http://www.bloomberg.com/news/2013-02-07/linkedin-xxx.html?cmpid=yhoo

 

Governance Gone! Wild!

While to some the acronym, ‘GGW’ might conjure up beautiful visions of fancy tour buses traveling the country capturing everything in sight on video for the whole world to see (as long as you pay the $9.99 per DVD, or opt for the $19.99 for full-DVD collection, or get their online subscription for $9.95 per month — or whatever it costs), I have just witnessed a different version of ‘GGW’ that is anything but beautiful.  In fact, ‘Governance Gone! Wild!’ is down-right scary!

I just attended several days of the Dreamforce 2012 conference in San Francisco and, as always, I was impressed with the innovation, which is clearly evident at these events.  I was impressed with the creativity of all the Software as a Service (SaaS) applications available built upon the Force.comheroku and/or other Salesforce platform services.  There were apps for this, and apps for that, and apps that work with other apps, and integrated apps.  In fact I’m on “app-overload” right now and tonight, instead of sweet sugar plums dancing through my head, I will most likely have a nightmare about all the possible lack of governance issues that are not being addressed in this quickly-evolving ‘cloud’ environment.  It’s truly like the Wild West!

This is not to say that these SaaS application vendors have overlooked governance issues completely.  In fact I suspect many of them take these items seriously and have built their respective solutions accordingly.  However, I can tell you what is an obvious generalization is the main pitch-points in these solutions is (1) easy user experience with a simple, familiar web-interface and (2) ability for organizations to self-manage or re-configure solutions without the need for costly professional services or software development.  These are not bad pitch-points in the least but what I must say is that conversations seem to rarely dig too much deeper than the surface of some point-and-click functionality and a demonstration or two.  I admire these vendors for their passion to solve very specific needs for enterprise customers and I’m invigorated with their energy to quickly have their Killer SaaS app deployed and being utilized by their customers to improve operational efficiencies.

Yet, as I put myself in the shoes of the SaaS vendor the last thing I would want to do is possibly slow down the sales cycle by bringing up governance and organizational readiness topics such as policies, processes or people that wasn’t directly related to my particular technology.  These topics are somewhat related to the technology but it’s more about the organizational readiness by the customers themselves.  We must remember that these applications are promoting their solutions to enterprise organizations, not consumer.  Therefore, I would like to give one specific example of what caused my “Governance Gone!” nightmare.

 

Wild! 

As seen below in the photo below (not to the left), Salesforce.com introduced their new “marketing cloud”.  At the Dreamforce conference they setup an example of the ‘Dreamforce Social Media Command Center’.  They had a full-time agent at each of several work stations.  Each of these work stations was monitoring a different social media feed.  One each for Facebook, Chatter, Twitter, LinkedIn, YouTube and maybe even a few other social networks to provide an example of a Social Media Command Center and how this could be a reality within your particular organization.  As I saw this incredible activity of feeds, tweets, #hashtags, likes, posts and other real-time social interaction – this is where it really struck me about Governance (or lack thereof in this scenario).  It was Wild!

These are the types of things I was thinking to myself, not from a technology perspective itself, but rather ‘are these people considering the following types of items’ before going buck-wild to immediately implement this type of Command Center within their own organizations:

  • People:
    • Since these are mostly real-time conversations and, naturally, the business wants to represent themselves professionally, what type of special training will be required for this new type of social media command center operator?
  • Policy:
    • As we all know, social networks are filled with people that sometimes spew nasty, disgusting or plain hateful messages because they think they are completely anonymous to the world.  In these cases what is the organizations policy about any responses, deletion of messages or any other action?
  • Process:
    • With this gluttony of electronic information overload from such a wide ranging variety of sources, in different formats and with such a diverse contextually meaning, what is the process to accurately analyze the data?  After all, I would imagine that video-’gamers’ are quite active on these types of social networks and “rad”, “bad” or “bitchin’” don’t quite translate into the true meaning if you just consider the official dictionary definition of a word or phrase.

In summary, in our zeal to innovate and offer powerful, useful, as well as, truly remarkable technology, which is going to revolutionize the way we do business, we should not be in such a rush to not consider and overlook an organizations preparedness from a governance standpoint.  Great technology is not always good enough.  If your organization decides to not consider well-thought out governance plans then the “Governance Gone!  Wild!” bus may be paying you a visit sooner than expected!