Microsoft and HP

Yesterday Microsoft and HP announced a deeper partnership through which they intend to offer solutions based on Microsoft Software and Hewlett Packard hardware with an emphasis on cloud computing. Hard to know what this really means and the reporting I have seen does not offer much in granular detail other than to recount that they intend to spend $250 million on the exercise.

Here are some thoughts on what could be significant about it:

Microsoft's strength is in the enterprise. If this deal pushes cloud solutions aimed at small business and consumers to HP it could be a good thing -- particularly since it would help Microsoft stay focussed on its strengths. Some of the reporting on the announcement mentions that there is an enterprise element to the HP partnership. I really don't get that. Microsoft and HP both have big ongoing relationships with enterprise customers and I just cannot imagine the companies throwing that business into this bucket.

HP is no Google in terms of consumer focus, but is well positioned to deliver the broader marketplace. So there is a chance HP could make it work.

Who else is impacted? As with many of these deals, the people not in the deal are as important as those named. The most significant is Dell. We do not know how this deal changes the relationship between Microsoft and Dell. We will have to keep an eye on that. Other players like VMware and Cisco will also be interesting to watch in the context of this deal.

So initially I think it is a good move by Microsoft. The downstream execution and the reaction of the other related companies will determine if is a winner of an idea. Either way, there will be more to this story.

Build it and They Will Come

Anyone with electricity, and probably many without it, know that Google introduced the Nexus One phone last week.  Early reports indicate it is a pretty cool phone, and in typical Google style, they are going it on their own by offering the phone direct to the customer.  Of course a cell phone is of diminished utility without a cell phone carrier -- but selling phones "unlocked" is not a new business model -- just new in the USA.  

Google is proud of its engineering heritage and has held long and tight to its belief that sales and marketing are not important.  It appears that may also be true for their view on customer service.  After all, with good engineering, products will sell themselves and there will not be any need for customer service.

Setting the bar at self selling perfect products is pretty high indeed -- so the Google story is getting even more interesting.  PC World reported last Friday that the customer service calls are starting -- so stay tuned!

Just like in the Field of Dreams, Google built it, and here they come.  Let's just hope they don't have any questions.

Convergence

All of us are watching the convergence of the telecom and computing industries from a vantage point so close to the action that we often miss the larger implications. The more cell phones get to be like computers the more we have to wonder about the role of the carriers. You know, the carriers are those guys that are processing billions of cell phone calls and mountains of data. The iPhone has accelerated their entry into the computing industry and the netbook and the Google phone push things along even faster. This is going to push the carriers into the channel marketing mix -- which will be an opportunity for some and a threat to others. The carriers could bring a very interesting new layer to our industry in 2010.

In addition, let's not forget the cable companies and their competition with You Tube and the fight over net neutrality.

If that is not enough, add in the Panasonic, LG, Direct TV, and Skype partnerships bringing down the price of video teleconferencing over the web and you have another dimension -- I have lost count -- is this the 4th or the 5th dimension of the telecom and computing convergence?

Yow!  This is going to be interesting.

Here are a couple of news stories on the Skype announcements:

Information Week             PC Magazine

Getting the Digital Dollars

It is often said in the advertising business that all advertisers know they are wasting half their money, they just don't know which half! Ken Auletta's new book "Googled" features this truth front and center. The book does a great job of showing how Google is working hard to eliminate inefficiency in the advertising market. The newspapers and other media types are all up in arms because they make a living out of selling both halves. The "Trading analog dollars for digital dimes" quote of NBC Universal CEO Jeff Zucker in Auletta's book is repeated over and over as the media industry tries to hang on to its current business model.

So does this mean that the advertising industry is going to get cut in half as soon as Google (or anyone) illuminates all of the waste? Clearly the media people in "Googled" think so - but I think not. Exposing and eliminating the waste will reduce the cost of customer acquisition. If half the money is being wasted due to the opacity of the industry, and all of the waste can be eliminated -- the cost per acquisition will also be cut in half.

This is the dream of the marketing VP. Not because the VP wants to cut the advertising budget in half -- but because at a lower cost per customer acquisition the budget will go twice as far -- and the overall volume of advertising will go up dramatically. It could even go up by more than 2X! No doubt advertising spending will rotate away from ineffective or non-quantifiable methods and towards measureable methods. But the total spend should go up as advertising gets more efficient.

We are all getting better and better at measuring the cost of acquiring each additional customer. Some might say it was more fun before when we just spent a bucket of money and got a bucket of customers. Measuring the cost of each new customer is definitely hard work. But it is getting easier all of the time and now we often can measure the cost of each additional acquisition. Data driven decision makers know the maximum amount they can spend acquiring a new customer. So they know when to stop an advertising or marketing campaign: when the cost of the next customer acquisition is higher than the maximum allowable cost. More efficient advertising means more advertising because it will take much longer before the maximum is reached.

True companies without the ability to measure their effectiveness will fail and jobs will be lost. I argue that more value, more new companies, and more jobs will be created on the measureable side of the equation and not just in advertising. A company with lower customer acquisition costs -- can acquire more customers for the same amount of money. More customers equals value and job creation.

What about brand building you ask? Isn't brand building non measureable by definition? That is also a great subject...
... let's just give the brand building dollars to the not for profit sector.

Predictions

No better way to jump into blogging than with a piece predicting the future.  It seems that years cannot start or end without lists of past events or lists of predictions about the future. I do love lists -- so this is a great time for me. Other than everyone's cheap attempts to crank up their pageviews by hiding the lists behind slideshows -- this has been a great year for lists.

I am going to resist the urge to create a list of my own. Here are a few thoughts about the things I have read.  The ideas in this posting are taken largely from the lists cited at the bottom.  So allow me to give credit to the authors by posting links to their posts.

Line Between Consumer and Business

The most important trend in the technology industry right now is the rise in importance of the consumer, and the resulting line that divides consumer and business. Not long ago the consumer technology market was only a fraction of the size of the business market. 2009 marks the first year that more computers were sold to consumers than to businesses. Admittedly the dollar volume to consumers is still less than to business, but the trend is unmistakable. The vendors are lining up on either side of the line with Microsoft, IBM, and HP largely on the business side, and Apple, Google, and Amazon on the other. Sure, these companies all want to be on both sides of the line, but wanting and doing are different things. But what makes a business a business? Is a one person business a consumer or a business? How about a 2 person business? 50 persons? It is an interesting exercise to consider where the line between the business market and the consumer market falls. Watch this page for a future article on the data supporting this thought. No matter where the line is now, it is clearly moving up in 2010 - making the consumer market even bigger and faster growing and the business market smaller. This will be a defining issue in our industry.

Social Networking and Media

Twitter and Facebook will not be the stars of 2010. Twitter will be purchased by someone, and Facebook may even have a wildly successful IPO. Twitter will start advertising and in 140 characters, we are not going to be able to tell the adds from the tweets, and we are going to lose interest in Twitter fast. Someone will then roll out a new thing or add the functionality like Linked In and Facebook did this year and boom -- Twitter will be last year's story. Someone else will come along and be the new star in 2010, and likely another new star in the year after. Facebook will continue to grow users but at a slower pace. At the same time, Facebook will fail to recognize the tipping point against it on privacy related issues and people will stop using the service. So Twitter and Facebook are to 2009 what AOL was to to 2000. We all still want a simpler internet existence without intrusive advertising, pirates or spammers. The very success of these services has brought in the advertisers, pirates and spammers already -- so we are going to be looking for other new new things in 2010.

The Bicycle Will Be Fine, Thanks

For several years we have built more and more features into products that only a fraction of customers have needed. From suburban dwellers buying giant Suburbans they don't really need to consumers buying Microsoft Office, we have foolishly overspent for features we never even intended to use. Many people have said that new simple services offered on the web are bicycles (Google Docs) trying to compete with Ferraris (MS Excel). 2010 will be the year that most of the world will convincingly say - The Bicycle is all that I need. This will stall the overall economic recovery because the dollars spent on the high end products are just not going to come back. It also presents many opportunities for the makers of the bicycles.

All Kinds of Noise -- No Real Change at Microsoft AND Google

In 2010 the competition between Google and Microsoft will get even more intense. The competition will drive all kinds of high profile activities -- mostly personnel changes at Microsoft and acquisitions at Google -- but by the end of the year Google will still get all of its revenue from search, and Microsoft will still make software for big businesses. So lots of action, not much real change.

Here are some of the lists I liked the the most so you can check them out and form your own opinions about what will happen in 2010.

eMarketer

Strategic News Service 

PC World

Read Write Web

Newsweek

The stage is set for 2010 to be a very interesting year.  Your comments are welcome.