Brian Sommer's month in brief - November

Profile picture for user brianssommer By Brian Sommer December 12, 2018
Summary:
A look back at the highights from November in tech.

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November was a thematic month. Public cloud and M&A activities were very much in the news. Thankfully, there were other newsworthy items, too. Here are the highlights:

November was a CLOUDY Month

Will 2019 be a tougher year for tech? Recent tech stock sell-offs might warrant some attention. This article in Bloomberg BusinessWeek might give you cause for pause. The core of the story involves Micron Technology, a maker of memory chips. This paragraph paints an interesting picture:

“The Big Five tech companies – Apple, Amazon.com, Google parent Alphabet, Microsoft, and Facebook – spent $80 billion on big-ticket physical assets last year, double what they spent in 2015. Such massive investments can’t continue, analysts argue, nor can the knock-on effects for chipmakers.”

The cloud business will get vicious – In the same issue of BusinessWeek, we get “Google May Have to Get Used to Third Place in the Cloud”. It’s a fast primer on how competitive the public cloud space is. This tidbit is interesting:

“In the cloud business, there’s Amazon Web Services, and there’s everybody else. But the race for the silver medal is getting less competitive, too. In 2019, Microsoft Corp.’s Azure is expected to solidify its position enough that Google Cloud Platform will have a tough time catching up.”

And this follow-on quote is equally interesting:

““Not Amazon” is a strong position when pitching to retailers, grocers, and other cloud customers that would prefer to avoid lining Jeff Bezos’ pockets while he’s competing directly against them. For years, Google looked like the alternative.”

There’s even more in “Heres How Microsoft and Google are Trying to Catch Amazon in the Cloud also from BusinessWeek.

“It’s hard to think of a business Amazon.com Inc. dominates as convincingly as the market for cloud computing services. Andy Jassy, chief executive officer of the company’s cloud division, Amazon Web Services Inc., likes to brag that his outfit has several times as much business as the next 14 providers combined.”

And with all of that for a background, we learned this month that former Oracle senior executive Thomas Kurian’s is landing at Google. This Bloomberg opinion piece is a solid read and it suggests that Kurian will have his work cut out for him:

The problem is that if Greene, who co-founded the revolutionary tech company VMware and sits on the Alphabet board, couldn’t make Google a resounding cloud success against AWS and Microsoft, then perhaps no one can. Greene’s corner of the company was focused on selling software to businesses, and it has been an odd fit within a company that devotes nearly 100 percent of its attention to consumer technology: web searches, smartphone apps, mapping, digital assistants that can predict people’s needs, and web video.

And all of this, comes right on the heels of Oracle’s Open World event where CTO and Chairman Larry Ellison dedicated an entire keynote to comparing Oracle’s Cloud Platform to Amazon’s. Larry made two innovations (i.e., impenetrable barriers and autonomous robots) critical to Oracle’s differentiation.

Oracle’s got to climb past Google and Microsoft to catch Amazon and that won’t be easy. Moreover, Oracle will be up against one of its most senior and long-time executives, Kurian, who could further stymie Oracle’s plans.

To recap:

  • Cloud providers have built out tremendous data centers and capacity but that space, like real estate, may have too much inventory for now.
  • Google may have lost its second place standing to Microsoft. Microsoft has become the alternative to AWS of late.
  • Google is picking up Oracle’s Kurian in 2019 and that, Google hopes, will accelerate its cloud adoption by businesses.

Oracle may have entered the fray too late. 2019 should really be a year to watch as the leader board here will speak volumes about where CIOs want to spend their budgets going forward.

Lastly, one Wall Street analyst recently shared with me his astonishment with the rate that data centers are disappearing in corporations today. He said his firm had been tracking this rate and it had been moving along a few percentage points each quarter. Now the rate is double digits and climbing. He doesn’t expect many corporate data centers to be left in 3-5 years. At the current rate of load shifting to the cloud, he’s betting on the 3-year timeframe now.

Other big ideas

MIT Sloan Management Review had an article that every ERP executive should be required to read: “Tech Companies Don’t See Their Biggest Problems Coming”. Just one of the pearls in this piece describes the “assumption that management is easier than technical work”. Yeah, I see lots of mature ERP vendors try to manage sales, manage Wall Street, manage earnings, etc. What most do is a terrible job of managing the technical R&D spend and deliver market relevant solutions at the speed of innovation. When ERP vendors get big, they either tend to hire lots of average developers who develop apps at below average rates or they waste their technical talent re-plumbing acquired products.

Harvard Business Review – In “How to Sell New Products”, I saw a lot in that piece that ERP vendors should focus on such as:

Senior leaders have great confidence in their ability to develop innovations but not in their ability to commercialize them.”

Instead of training salespeople to understand and overcome the obstacles inherent in selling completely new products, most companies over rely on product demonstrations. Thus, sales teams struggle to close deals.

It’s a good and long read and worth the price of the issue.

SageSage made its CEO decision. A couple of months ago, Stephen Kelly stepped down as Sage Group’s CEO. Their interim CEO, previously the CFO and COO, Steve Hare is now in the big chair. The company is now looking for a new CFO. For more, see this Reuters piece.

PlexPlex had its annual manufacturing roundtable meeting in Troy, Michigan this month. It’s a great event as analysts get to mingle with top IT leaders in manufacturing firms and vice versa. Plex usually tosses a customer plant tour as well.

One notable data point was the consistency from these manufacturers in describing their biggest operational challenge today: acute labor shortages. One company after another told of delayed plant expansions, overly constrained labor markets, etc. It was amazing to hear this.

Plex also teased us that they, too, will likely have a new CEO soon. I would’ve submitted my resume but I never made it by the HR office.

Finance Accounting in the News

Harvard Business Review – In their piece, The End of Bureaucracy, authors Gary Hamel and Michele Zanini discuss how appliance maker Haier’s use of micro-enterprises presents a new way to manage firms in the digital age. There are a lot of implications in the piece for planning software vendors like Anaplan, Adaptive Insights (now Workday), Host Analytics and more.

I’ve seen variants of this technique before, though. One of the largest private firms globally has highly decentralized operations and gives every manager and above ‘decision rights’ for their piece of firm. I also remember Tom Peters, in his book In Search of Excellence, making the same point decades ago by recommending a company be broken into smaller, autonomous groups. This recent Forbes quote about that book states:

In Search of Excellence finds that excellent companies give people meaning, control of their work, and positive reinforcement. Years later Dan Pink wrote Drive and talked about what motivates people (autonomy, mastery and purpose),  Autonomy is made possible at excellent companies as they share a dominance and quality of culture and this makes for less process and policies.

What Hamel and Zanini’s piece adds to the discussion is the change needed to planning in a more digital and ever more rapidly changing business world.

BlacklineBlackline had their user conference this month. They used the opportunity to make a number of product announcements. One of these involved Blackline Compliance. That product helps manage internal controls in mid-to-large companies. The other announcement involved their platform.

The platform announcement was multi-faceted. It included:

  • More automated connections to ERP solutions. Blackline now has a Blackline Connector for Oracle.
  • Machine learning to facilitate transaction matching and complex reconciliation activities.
  • New dashboards

HR in the News

Amazon scraps its AI recruiting tool – In a very interesting piece by Reuters, we learn how Amazon came to halt the use of its secret custom recruiting tool as it had taught itself to reject women applicants for technical jobs.

This statement is particularly eye-opening:

In effect, Amazon’s system taught itself that male candidates were preferable. It penalized resumes that included the word “women’s,” as in “women’s chess club captain.” And it downgraded graduates of two all-women’s colleges, according to people familiar with the matter. They did not specify the names of the schools.

What this story does is confirm some of the concerns many have raised about the use of ML/AI tools in sensitive use cases like recruiting. The fact that the historical data contained a lot of male job seeker/job holder information triggered the software to ‘learn’ what defined career success. From there, the software applied its ‘knowledge’ to new resumes.

I applaud Amazon for acting on this and wish more HR tech vendors look inwardly at their ‘solutions’ too.

I know I’ll be retelling this anecdote at all kinds of client and HR events for years to come.

CSODCornerstone OnDemand made a couple of acquisitions recently. One deal involved Grovo. Grovo brings a library of 2,500 micro-learning courses. Cornerstone customers and Content Anytime users will have access to this content. The deal also brings the Grovo Create Tool – a content production tool. The deal should close in Q4.

Cornerstone also acquired Workpop to enhance its recruiting offering. Specifically, this deal helps employers hire frontline, local, entry-level employees. It plays well to Cornerstone’s 1,000 retail, manufacturing and healthcare customers.

Saba/Lumesse hookup – It’s official now, Saba closed its deal to acquire Lumesse. Saba and Halogen joined together a little over a year ago. Now, Saba has added Lumesse to the mix. Lumesse adds more talent acquisition functionality. It will provide more capability for RPOs and delivers a lot of EMEA customers to the deal. Those represent great Halogen cross-sell opportunities. For a contrary perspective on the deal, see this piece by the Enterprise Times.

Harvard Business Review – HBR has a piece titled “Better People Analytics” that describes a number of analytic needs in the HR space:

Most people analytics teams rely on a narrow approach to data analysis. They use data only about individual people, when data about the interplay among people is equally or more important.

While I’ve seen variants of this in some HR software solutions, those products rely on heat maps and social connections. The article covers a bit more than this. However, I want to see even more insights in HR analytics. No, I don’t need another pseudo-scientific flight risk tool, I want to see more insights involving the billions of people out there who aren’t your firm’s employees yet. I want insights re: the contingent workers your firm uses. Let’s focus on more than just existing workers. And, while we’re at it, let’s get some analytics that help identify managers with pathological shortcomings – those are the people that are driving away your best and brightest.

Biometric data and PrivacyHuman Resource Executive reported about a lawsuit filed against fast food chain Wendy’s for its use of biometric data. It appears that use of data like fingerprint-enabled time clocks could run afoul of laws like Illinois’ Biometric Information Privacy Act. This will likely be something all HR and time tracking solutions will need to review.

M&A/Investor Mania

There were a number of other deals this month beyond the HR acquisitions described above. Some of the more notable ones included:

SAP acquires Qualtrics – This deal came in at $8 billion. Remember, Qualtrics had revenues of around $300 million. That’s a whale of a multiple for this purchase. The deal makes sense if SAP’s sales organization can cross-sell Qualtrics to its global customer base quickly and thoroughly. I expect we’ll hear a lot more from SAP on this in short order. See also Dens piece on the deal.

LinkedIn acquires Glint – It’s a $400 million deal. Not a bad exit for Glint and a lot cheaper than the Lynda deal LinkedIn did about a year ago.

Warren Buffett/Berkshire Hathaway buy into Oracle – Berkshire Hathaway bought some 41 million shares of Oracle. This is roughly a $2 billion investment and makes Berkshire one of Oracle’s largest investors. According to an MSN piece, we see:

Unlike Apple, which continues to defy the law of big numbers by posting double-digit revenue growth, Berkshire's interest in Oracle appears to be because of its valuation. In its most recent quarter, Oracle's sales only inched up 2% year over year, after adjusting for currency, and its guidance for this quarter is for 0% to 2% growth.

This deal is interesting as Buffett has made investments in IBM and Apple, too. Buffett has always liked companies that sit on or generate a lot of cash. It’s why he buys a lot of insurance firms. I ended up becoming a Berkshire shareholder when Berkshire bought the Burlington Northern Santa Fe railway. While I still hold that stock, I will admit to some head scratching moments when Warren took his stake in IBM. I questioned his judgement on that deal, for sure. The Oracle one, if it’s predicated on Oracle’s maintenance base and cash reserves could be worthwhile. However, if Oracle is to catch Amazon, Microsoft, et.al. in public cloud infrastructure could be capital intensive and risky.

CRM/CX in the News

I’d like to give a hat tip to Gartner’s Hank Barnes. He tweeted about my Diginomica piece on why I thought the new craze in CX solutions wont be as spectacular as some vendors might hope. His tweet referenced his equally skeptical view on this matter. His piece complements mine and pokes at the CX washing going on today. It’s worth a read.

2018 12 Month in Brief pic 1

For the month to come:

December could be a slow month if my travel plans are a guide. Thankfully, the tech industry is never short of drama and change. It’s like watching the ‘in’ crowd in high school – something snarky is always afoot.

Until next month…