Microsoft - Convergence at Last?
I'm kicking off this year's coverage with an apology.
Last year I did Microsoft a disservice and didn't get around to covering Convergence 2011 even though they had been gracious enough to pay my expenses to the conference and treated me (as well as other analysts/influencers/media) very nicely. My excuse, which I still hold to, is that we launched CRM Idol at the same time and that was so time consuming that I was unable to get to it - which I apologize for.
Once again, they have paid for my expenses (disclaimer subtly included here for the good ol' FCC, or SEC, or whoever its for), and this year I'm making sure (obviously) that I'm going to provide them with a complete analysis of Convergence and what it means to the present and near future of Microsoft. They are far too significant a company to do another mulligan with - and CRM Idol still is well over a month away.
So here goes.
The Caveats
Okay, look, some of what goes on at Convergence is that Microsoft looks at its company wide business applications products from the back end (accounting especially) to the front end (CRM, or sales, marketing, customer service) from the SMB market to the largest companies. My emphasis is going to be on the customer facing products and the company on its largest scale, but without any real focus on the accounting products other than peripherally. I'd be lying if I said I knew them well or cared about them (at least at this point) beyond the impact they have on CRM (via integration) and on the company product portfolio as a whole.Backdrop: The Conference Setup
From the analyst relations/public relations side of the event itself, Convergence is driven by a truly remarkable staff, built around the folks from the Microsoft PR firm, Waggoner Edstrom. That group, for those of you who don't have the privilege of knowing them are Lisa Perazzoli, Heather Packer, Meg Manazir, Umran Hasan and Lourdes Rios Salazar. There are many others who I am leaving out, and I'm sorry for that, but know at least this. All of them each and as a team are seriously awesome as both professionals who know their job and as warm, good human beings who are a privilege to know. Eminently huggable people who approach the conference with the zeal and the care that is necessary and that they feel.Aside from my personal regard for each of them, don't underestimate the value of their contribution. Conferences like this set the vision and the tone for the next year or so for the company holding them. Attendees, who are typically a mix of influencers, customers/prospects, partners and employees are left with a memory that carries forward in the form of an emotional framework that is established by the conference. This drives the tone of the participant's experience and can drive the quality of their thinking over the ensuing future. Thus, these conferences are not the tradeshows of old where wares were simply shown by vendors and their partners were there primarily for lead generation. Though those things still are part of it. But the contemporary software industry (at least) single company trade show or user conference if you want to call it that, has a far greater impact than it ever did. In the 90s. there was no tweetstream impacting the outside view of the company as it unveiled its vision and plans. These conferences can dramatically impact what someone of importance to the company - a stockholder, financial analyst, customer or prospect, industry analyst or influencer or employee or competitors - might do to and/or with that company from the day the conference starts and beyond.
That means that what the teams like the brilliant Waggoner-Edstrom team do potentially affects the fortunes of the company over the coming year. A great impression means good will from people who can possibly help or hurt the business. No small thing.
Does Size Matter?
The size of the conference seems to be another consideration when it comes to impact. "My conference is bigger than yours" is a marketing ploy that allows one company or another to make a statement that seems to project growth, dynamism, and whatever else things like that project. For example, Marc Benioff, CEO of salesforce.com and someone that I think is the world's greatest marketer, bar none (all companies in the world included), made the point that Dreamforce 2011, according to him at least was the best attended software conference ever (though Oracle disputed that at OpenWorld 2011 a few months later).That question - the size of the conference - made me wonder why Microsoft didn't combine their two conferences - Convergence and their other Worldwide Partner Conference to drive the bigger number. I asked a person at Microsoft who I completely trust because of his decency and candor over the years that I know him, Bill Patterson, (running the social strategy initiative for CRM). He said to me, that this discussion had gone on internally, "the numbers v. the intimacy" and intimacy triumphed. I thought about the decision for awhile, and realized, damn, they were right.
Just to show you what I mean, let me tell you about a little thing that Microsoft for all of the almost 11,000 attendees. They provided a conference long code for free internet connectivity for every attendee at their hotel. That's 11,000 free connections. Think about it if they had 30-40,000 people. The expense would, I would guess, be too great to support that nice gesture. I'm guessing that wasn't provided by any other vendors in general to more than a handful.
Let's briefly take that issue of intimacy trumping size a little further. As far as the 47 analysts/influencers and press go, they couldn't have handled what they did for us any better. I'm not going to dwell on the details but I will say this. The schedules for each of us was just enough of everything including group meetings with senior execs, one on ones with senior execs, networking time, time to set up your own one on ones. No back-to-back-to-back-to-back meetings (major overload) as one of the vendors did to most of us last year. That's not a small deal. They took care to handle each person individually and we found all those we dealt with totally well briefed not just on what we were, but who we were. While that seems to be a literary distinction, it honestly isn't. For me, for example, it is the make or break about my relationship to ANY company, large or small, well acquainted or trying to get acquainted.
Plus, the other thing, when in Houston go to T'afia. All I'll say it is arguably one of the best restaurants in both food and drink I've ever been to.
Why am I dwelling so much on this? Because I want to make it clear that Microsoft's approach is the right one for them and any competitor who tries to "nyah nyah" them for that, will hear about it from me. This was the best run, best managed conference I've attended in a long time and the openness of the staff and executives, the information shared, the knowledge of me individually, makes me want to know what they are doing and, because I'm a human being, inclines me favorably or at least positively. Not enough to influence my thinking ultimately, but enough to think more positively when it could go either way. In other words, I don't respond in a clinical fashion. Plus, there are some conference best practices here that other vendors might want to consider in their own planning. Impact from memories matters and has since humanity began. Always will.
The Keynotes
The keynotes are always the speeches that are responsible for setting the stage for not just the conference, but the company's future. They provide the vision (if they are done right), surface the present and expose the road map to the future. Done well, they inspire but they don't pump up by providing a cohesive view view of what is and what will be. They are able to project a tone that defines the "feel" of the company. They are also the place where the company differentiates itself from their competitors, hopefully without the silly competitive bashing that technology companies in particular seem prone to - a pimple-faced approach to differentiation that we could do without. I'd like to think the senior management of software companies had outgrown those things.It also exposes the possible weaknesses in the strategies and programs, the discrepancies in the product portfolio, given those strategies and market demands, and the potential missteps. These aren't exposed on purpose or even in the interests of candor or "authenticity" (sidenote: if you hear someone say on a stage "in all candor" odds are good it isn't. Scripted candor isn't candor).
I think that Dennis Howlett in his initial post on Convergence and Microsoft put it really well, "Microsoft kicked off Convergence with a confident tone." What underlay his confident tone was that Microsoft finally seems to have gotten off the dime. They've made both a technological transition to the use of their own business applications such as Microsoft Dynamics CRM (rather than Siebel to which they had been wedded for years) and a cultural transition for the company which manifested itself (a little strangely) in an all out commitment to the cloud. The implications of that cultural transition are extensive, impacting their business model as a company, how they internally operate and interact and the strategies they design to reach out to their customers and prospects - and how they execute and communicate all of that.
What's also interesting about this apparent cultural shift is that they could arguably support it with an infrastructure that enables it. I'm, of course, speaking of the Azure cloud platform and infrastructure, which they have spent countless billions on for R&D (okay, you can actually count it - number I keep hearing - $9 billion). One little known fact (yeah, right) that is a foundation for organizational change is that there has to be structural support for it to take hold - meaning, like anything else, not just the emotional support, but infrastructure and programs that can sustain it. You make a cultural transformation built around the idea of a cloud based company, you'd better be able to back that up with....the cloud.
Whether or not you believe that they have undergone a complete cultural transformation or not (I believe they are well along a progressive path to one though its not as finished a product as they say it is), one thing was clear to me and to many of the analysts there - Microsoft has turned a corner and is poised to become the formidable player and possible leader in the business applications world. Perhaps it won't be on the scale of ubiquity they had with operating systems and productivity for so many years, but among the leaders in the business space at all customer sizes.
So what stood out? Here's the catalog:
1. Microsoft made an utterly complete commitment to the cloud. However, like their brethren at SAP and Oracle, they are not stupid and are not going to jettison the customers who have had Microsoft on premise applications for years and would be hard pressed to replace their legacy systems with a private or public cloud system. So they are doing what SAP and Oracle have also done which is focus their efforts around a so-called hybrid cloud strategy. This is a smart strategy for more than pragmatic purposes, because, as eminent thought leader, Josh Greenbaum said in his post on Convergence, that this leaves the choice of the when and how they move to the cloud to the customer.
But I did find a couple of oddities, more in the messaging than in the likely execution. First, they seemed to imply that the historic albatross around the neck of cloud and SaaS deployments, perceived issues (not real ones) of data location and security are still a problem and that their hybrid model solves that problem. Reality is that since last year and salesforce's announcement of the Data Residency Option (DRO), this is actually no longer a problem.
The other thing is something that has puzzled me for more than a year now. Even when they speak of the cloud, Azure is more of an undercurrent than it is a centerpiece of their offering. I'm still not sure why this is. Perhaps they think it's more "appropriately" mentioned at the partner conference? They have it referenced on slides, it is mentioned here and there, but the low key nature of their approach to it is a real underestimation of the value of what they have. (more on that in a particular context later)
2. They have nailed UX (a.k.a user experience). Nailed it. Their combination of the extremely well done Metro interface and their work on natural user interfaces involving voice and touch is the new gold standard - and I'm someone who loves Apple products. (please, Mac fanboys, spare my life.)
I first saw the forerunner of what became Metro as the interface for Windows Mobile's OS for 7.0 and then the later, far better Mobile 7.5 (Mango). Their use of the same interface for Windows 8 (check out the Consumer Preview) and now its application to the business applications (See Figure 1 right below) allows them to do what they said it could do - be a consistent (not boringly the same, if done right) UX across any device.
Figure 1: Microsoft Metro Interface for Dynamics Apps
But it's much more than that. They have extended it well beyond that to a natural use of both voice and touch - which I'll talk about later on in this. For now, suffice to say that the creation of the Kinect for Business unit at Microsoft designed to take the Xbox Kinect sensory paradigm to the corporate world is a huge step in the evolution of Microsoft's thinking.
3. Their commitment to mobile is both deep and intelligent. It reflects a dramatic transformation of their thinking, which was reflected in their demo of a mobile sales force automation (SFA) application on an iPad. They are no longer wedded to the Microsoft only universe that they were with Windows and Office and even SharePoint for so long. They've concluded that a "hybrid" OS strategy - meaning different operating systems on multiple devices is a good thing not a threat. In fact, they announced that their first iteration of this mobile SFA product will not only be on Windows Mobile 7.5, but IOS, Android and Blackberry's OS. This is the way that they've defined their intelligent acquiescence to the "consumerization of IT" (in Kirill T's definition). While it's actually a very narrow slice of what that means (and probably a bit self-serving), I won't discuss that here. Suffice to say, its allowed them to do some very smart, very useful though not all that innovative things with mobile, that are more praiseworthy than not.
4. They are moving slowly into verticals, but they are moving. This one is a table stakes move to play at the enterprise level. While I certainly liked what I saw, a retail app that is scaled to large retail establishments and covers all from the customer facing side (via iPads) to the back end (the supply chain/inventory management), I didn't hear enough about their approach to make me comfortable. What I heard was a somewhat abstract commitment to verticals and some lip service to manufacturing and a look at retail. Not much more. That doesn't really put them anywhere close to the league of Oracle or SAP or even from the standpoint of messaging reflect the apparent intensity (apparent since I haven't seen any verticals yet out of salesforce.com) of the commitment that salesforce is making to unleash vertical applications. There is almost no choice in this. They are making some headway but they are in the rarified air of SAP especially. Dislodging them is going to be very difficult. But try they must. This is fertile ground for Microsoft Dynamics.
There were several other themes and commitments that emerged but I want to get around to CRM and Social CRM now so I'm going to forgo the others in the interest of length.
CRM...Anywhere and Social?
What is apparent, year after year, is that the Microsoft Dynamics CRM offering is a solid and accessible offering for as they tagline it, "dynamic business." Their sales force automation and customer service components are very sound and stable with the traditional core functionality that it should have. On that level it competes with anything. To add to this solid caché, their CRM Online and soon to be CRM Anywhere services will deliver what they sound like - a "we can provide it anywhere anyway" vehicle for customers to choose from.They've also done themselves a real service by bringing Dennis Michalis in to take Brad Wilson's place as bossman of the CRM practice. Initial thoughts: Dennis has pretty much impressed all the influencers that I've chatted with his thinking/vision; his willingness to listen and learn (which take my word for it, is HUGE with influencers. We are an egocentric lot. Time and, of course, results will ultimately tell the story, but this is a very good start.
Additionally, as I pointed out earlier, their mobile offering (see Figure 2) is very, very good, providing all the traditional CRM functionality for sales folks that they would need on the road in combination with some very smartly innovative small things. For example, dial a call on your Android phone, you are asked by "the system" if you want to put this phone call into your CRM system. If you say "yes" the call and the actions associated with it are entered into your system of record. It's your call (pun totally intended). There even are some analytics on the back end, via SQL Server 2012, that are provided for the hungry salesperson. This may not be beautiful, but it is a clean looking, easily navigable solid mobile SFA app - one that I can say with some certainly can more than compete with anything like it on the market.
Microsoft claims that they, unlike their (unnamed) competition, they are providing fully integrated dashboards, CRM and social components on their mobile applications. I'm not sure what exactly they mean here. I think they are claiming that salesforce.com which provides Chatter (a.k.a. in Microsoft's terminology "social") as a separate layer can't do that. Okay. So what? Either they explain the value of doing their way or don't claim it as a differentiator. Also, where is the dashboard coming from? I thought, though I'm open to being corrected here, that the analytics shown for the sales dashboard were "provided by" SQLServer 2012 - not integrated into the mobile application. Yes? No?
Figure 2: Mobile SFA Dashboard and Functions, Microsoft Dynamics CRM 2012
Even with that unsubstantiated claim, this mobile strategy and the products have unarguable strengths. This is a very satisfying step forward for this giant company.
CRM Competing at the Enterprise Level?
But keep in mind, Microsoft announced a year ago that they are going to be competing at the enterprise level with their CRM and ERP products so they are squarely in the wheelhouses of SAP and Oracle and are in market alignment with salesforce.com.Can they compete at the enterprise? We'll get to that.
Before we do, though I need to address concerns I do have with their CRM offerings and what I think either needs to be done or is being done about them.
First, Social....
Despite their commitment to social, I have yet to see what I consider even table stakes when it comes to social functionality incorporated into CRM.They've got Facebook integration. Check. They've got LinkedIn integration. Check. They've got a very nice Twitter analysis tool - or maybe very fun is the right word. Check. Activity streams are coming. Check. Most importantly for now, they have embedded InsideView natively into their core Dynamics CRM product. Check. Check. Check. All great steps forward.
But social is clearly not part of their DNA yet. If they want to compete with salesforce.com or go to the enterprise level, then they have to make it part of their skin cells.
There is clearly some discomfort with the concept of social and how to incorporate it into their portfolios even though the company is fully aware of their need to involved in it. Luckily, they have Bill Patterson on the social initiative for the Dynamics CRM line and that, my friends, is a wise, wise choice. He truly gets it.
But, at present, I noticed this discomfort expressed with a comment that Kirill T. made in his keynote, which was to the effect that "systems of record should be replaced by systems of engagement."
NO!!!!
Like Social CRM is an evolution and extension of CRM; like Customer Referral Value (CRV) is an extension of customer lifetime value (CLV); thus systems of record are complimented by systems of engagement; not replaced by them. Systems of record are always going to be necessary for one simple reason -they are records (duh) of transactions and, when comingled with systems of engagement, interactions and social profiles that are critical to getting insight into customers. Systems of engagement sit on top of that (in a manner of speaking) and are how a customer or employee interacts with the company. The interactional (is this even a word?) data is captured and stored in the system of record - a.k.a. the traditional storehouse for CRM.
They also announced that they are going to release their social customer care with the Q4 release, which while laudable, is late in the game as most of the other companies that they are competing with - salesforce.com, etc. and including those specifically focused around enterprise level customer care (e.g. Sword-Ciboodle, Pegasystems, KANA) have already released some enterprise-grade social capabilities. Late in 2012 doesn't really cut it, though better to release it than not.
Second...The Marketing...Pillar
More than a year ago I noted that Microsoft still didn't have the marketing automation capabilities that were beginning to appear in their competitors offering and were the technology foundation of a very hot market with indie specialists like Marketo, Eloqua, Pardot, Infusionsoft and newcomers like Crowd Factory on the rise.They still don't. But what I found particularly fascinating this year was that their partners were stepping up and filling the gap that Microsoft left - a validation of the brilliant partner ecosystem that Microsoft continues to maintain and service - best in the industry, bar none.
Three things stood out.
1. One of the industry-leading marketing technology companies, Marketo, announced a very tight integration with Microsoft Dynamics CRM. It is as tight or even tighter than the one that they have with salesforce.com, which was (and is) a masterpiece of integrated goodness. That's saying a lot and I think should be telling salesforce.com something.
2. Silverpop, long a leader in the email marketing space, bought CoreMotives, a smaller Microsoft Dynamics focused marketing technology company to be able to offer a more complete core suite of marketing capabilities that integrate with Microsoft Dynamics CRM.
3. The rise of ClickDimensions, a native Microsoft Dynamics CRM social marketing capability that exhibited some truly impressive chops on the Convergence show floor (more on them another time). If I were Microsoft, I'd be buying this company now. While they are still small enough to afford.
Keep in mind what's going on here. Microsoft partners are stepping into the gap in the portfolio ecosystem and this is truly something that you don't see that often. With the Marketo integration, possibly the Silverpop acquisition of CoreMotives and for social marketing, ClickDimensions, there is a genuinely strong marketing component.
Does this substitute for a native capability? No it doesn't. But it's a helluva start. It makes me more comfortable, as long as Microsoft makes the effort to support these well placed partners, to recommend them in a suite-like configuration to the appropriate candidates.
Third...Analytics?
Ah, now we have a problem (and, to highlight that statement in a Hollywood fashion, the conference in Houston. Get it?)If Microsoft is to compete at the enterprise level to the degree that they really want to, analytics from BI to customer analytics to insight solutions are a critical requirement.
To their credit, they showed and spoke of in-memory analytics from the SQLServer 2012 side, a free Twitter lightweight analytics tool/toy and even showed some Silverlight-based sales analytics that were slick, but this is still nowhere near what they are going to need to compete with SAP Business Objects (still my gold standard) and HANA, their well advanced in-memory computing platform; Oracle Hyperion, and IBM Cognos. The reality is that this is a rapidly growing and evolving market with companies like Clarabridge defining 11-point sentiment analysis or companies like SAS coming up with social media analytics packages with a serious amount of enterprise power. Microsoft has to compete here. And from what I've seen so far, they have a long way to go.
Situating the Big Picture
Microsoft is literally the only company in the world (including Apple and any enterprise software vendor too) that can make the claim that they can be the end to end enabler to help you run your life. Take a look at this visionary video done by Microsoft and Samsung on the future of you and business and you'll get an idea of what might be possible in five years time.Several years ago, in 2007 to be exact, In a post on Microsoft "Ecosystems and Environments" I suggested that Microsoft take this seriously and begin to develop the messaging and the portfolio and the culture to do that.
I'm pleased to say that I think they are beginning to see that and do that and the evidence is there from their consumer to their business products and services. Here are the indicators:
- COO Kevin Turner in his keynote used "enterprise ready, consumer friendly" as one of his themes.
- They are investing heavily in the Kinect for Business unit so that they can bring natural gestures to business applications.
- They have finally taken Microsoft Surface, their touch technology (which actually pre-dated Apple's touch technology) and eliminated it as a product (I was on the Surface Board of Advisors back in 2007. Let's say this was a very smart decision) and made it part of their UX platform.
- They showed a retailer's employee (actor) opening up a Microsoft Dynamics for Retail application with his voice.
- They are moving all of their applications into the cloud regardless of whether it is consumer side or business focused.
- They are unifying the UI across all applications business or consumer
- The visionary video. Meaning they are developing a vision that is based on a lifestyle not a task.
There is one other piece which they are not talking about that would enhance this "we support your life's choices ecosystem" message, and would be a market that they could dominate but seem to ignore for reasons that neither I nor leading influencer, Denis Pombriant can fathom.
That would be their unified communications offering. Think Skype, Lync, and Azure. Microsoft could own this market like they owned the operating system market and the productivity markets for so long. The infrastructure is there with Azure, the direct communications layers are there with Lync and Skype and the audience is there with the nearly 600 million who are registered members of Skype alone. This is the foundation for the "system of engagement" needed to handle the end-to-end technological underpinnings that Microsoft could theoretically provide to each human being that is impacted by their technologies throughout his/her day.
To do that, they need to vastly expand the ecosystem of providers and partners who can build the ancillary services that are key to tying together the whole. That means, for one thing, fixing the horrible Skype API, one of the reason there is such a paucity of third party developers for this otherwise dominant VOIP platform. It's a verb, for chrissakes.
Why Microsoft doesn't go after this as a market or use it to build their narrative around the "we can help you run your life" story they uniquely can tell I don't know. All I can say is, they should.
What am I Thinking?
So what does all this "stuff" mean for Microsoft now?Well, here's what I think.
What's become increasingly clear is that Microsoft due to pressure from the bottom (customer side) up and due to pressure that I think is generated internally is beginning to seriously open up their thinking and step up their efforts to compete in the market for business applications in a much bigger way than in the past. Some of their thinking and actions are incredibly smart, some just table stakes, but they also remain deficient in a few critical areas that they need to make them competitive at the enterprise level particularly.
On the widest level, at least, they seem to be finally thinking about being the ecosystem that supports people in how they run their lives. Kevin Turner comment "enterprise ready, consumer friendly," is a first take on this and all internal stuff I heard indicates that they are aware of that. This is a reflection of what they are calling a major change in the Microsoft culture and it well might be.
They are clearly understanding at least their version of the consumerization of IT - which is reflected in the brilliance of their UI and their thinking around the user experience. They've realized that people want to work the way that they do things at home and the combination of the Metro user interface and the work in touch, voice and motion sensing as part of the UX is an indicator that they are putting it into a real world framework. This also reflects the "we can help you run your life" technology ecosystem they are starting to embrace.
This overall perspective is also reflected in their acquisition of Skype in 2011. They understand the value of this vast social network tied by voice and video communication that has become increasingly ubiquitous.
But, since I am a CRM guy, I have to look at what that means for their CRM value proposition. Of course, as with all their Dynamics product line - front and back office - it is now part of this end-to-end thinking - even if there isn't a complete value chain showing it clearly defined.
Unto itself, there are definitive signs of progress, with the expansion of the social components, though I find them less than table stakes still, the partners filling the marketing technology void in a significant way, the excellent mobile capabilities that also reflect the new user interfaces and experience that are becoming the company wide totem.
Additionally, the hiring of Dennis Michalis can only be seen, now that we know him, as a positive.
However, I still have concerns with their lackluster public proof of their social CRM commitments (lip service, no demo for example during the keynote), their timetables on social (e.g. social customer care in the 4th quarter of 2012); their lack of analytics that are even close to competitive and their peculiar refusal to put Azure in the forefront even with a highly publicized "one hundred percent all in" move to the cloud. Trust me, these are significant concerns. But Bill Patterson doing the social strategy for CRM - a work-in-progress as of now - is something that gives me a good deal of comfort and mitigates that part of my concern.
Do I think they can play in the enterprise. Yeah, because they already are. But they lack some of the fundamentals that will put them in the league of SAP and Oracle in particular - the strength and wide scope of analytics; and even things I haven't even mentioned like knowledge management (NOT document management, Sharepoint users) ala Oracle's InQuira and Endeca.
But those are less important at least during this first half of the year, than the fact that Microsoft has clearly turned a corner and is getting ready to resume their role on the biggest stages as a major player. If you don't believe me, ask Josh Greenbaum or Dennis Howlett or some of the other influencers. 2012 has already been a critical test of Microsoft's capability and willingness to try to get back to the summit.
They passed. With a good grade. Now for the rest of the year - and beyond.