In the technology world, selling new products is hard. Selling to enterprises is even harder. Small companies were (relatively) easy. They took a little bit of handholding to get your SaaS/software/hardware configured "just right" for them, but most of what they wanted pretty much fit into the offering anyways; it was "on the truck." As you expand up-market into larger customers, customization demands increase. They need: Integration with their (unique) login system Special compliance controls Unique flows and processes Added manual approval steps etc.

It has become commonplace to forecast that Uber, Lyft and other ridesharing services are a strategic threat to car manufacturers. After all, if "everyone" uses Uber, why would they bother owning cars? The problem with that argument is that it assumes that "everyone" lives where Uber and Lyft are headquartered: in a dense urban area with very little parking, going to other places nearby where there is lots of traffic and very little parking.

Today, I had a very interesting discussion with Rich Miller, a consulting colleague who has been around the block more than a few times. One of the interesting points he raised is that Amazon's AWS pricing doesn't quite work for enterprises. Let's explore how it is a problem and why it is so. At first blush, Amazon's pricing is intuitive: use an hour of an m4.xlarge, pay $0.239; use 2 hours, pay $0.

Serverless. Framework-as-a-Service. Function-as-a-Service. Lambda. Compute Functions. Whatever you call it, serverless is, to some degree, a natural evolution of application management. In the 90s, we had our own server rooms, managed our own servers and power and cooling and security, and deployed our software to them. In the 2000s, we used colocation providers like Equinix (many still do) to deploy our servers in our own cages or, at best, managed server providers like Rackspace.

One of the most popular recent television shows is CBS's "The Big Bang Theory," broadcast on Thursday evenings. In addition, the most recent 5 shows are available online on cbs.com. As with the live CBS broadcast, commercials are interspersed in the show - based on what I can tell at the same places as when broadcast in its normal slot. For decades, the entire broadcast television (and radio) business was based on advertising.

A few days ago, I had a conversation with a friend of mine who told me something shocking: a particular cloud company's gross margins on cloud products are below -40%. That is not a typo, it is minus 40% or worse. Essentially, the company is doing one of: burning investor money; running down their own cash reserves; borrowing from banks or the market; or subsidizing from other business lines. Whatever the method they are using to stay afloat, they are burning quite a hole.

I used to hate taking long day flights. If I had to spend 12 hours in the air from New York to Tokyo, or Zurich to Bangkok, or Tel Aviv to Newark, I preferred overnight flights. Even since the advent of on-demand entertainment, personal video screens and portable devices like the iPad, those flights just seemed to last forever. So most of the time I would fly overnight. However, the timing didn't always work out, and overnight flights tend to be significantly more expensive than all-day flights, often much greater than 50% more.

Where will VMWare be in 5 years? For many years, VMWare was practically synonymous with virtualization. It provided multiple virtual servers on a single physical server, with a great feature set, good (for its time) management interface, and enterprise customer support. Lately, VMWare has been under threat, primarily due to 2 factors: Public Cloud: When deploying to the public cloud, customers don't just wash their hands of managing compute hardware, storage and network.

In the cellar of Westminster Abbey in London, lies a lovely little café called the Cellarium, with all of the architectural design and feel of the Abbey. Of course, as it is in the heart of London, it has good tea as well. Earlier this week I was privileged to have a fascinating and wide-ranging discussion with Adrian Colyer, which led to 2 provocative questions: Will Microsoft open-source Windows?

At the risk of kicking someone when they are down, let's look at... GoPro. GoPro recently reported slower than anticipated sales, laid off 7% of their staff, and had their stock hammered (down 14.5% in a day). BusinessInsider did a straightforward if nice job showing their absolute revenue and relative year-over-year growth for the last 5 years. While total sales numbers are nice, the growth numbers aren't pretty.  

What does selling clothes to Macy's have to do with selling software, and cloud services, to enterprises? Everything. Earlier today, I was speaking with my brother-in-law, entrepreneur and consultant Kevin Pearl. Before starting a firm to improve capture of billing time for attorneys, accountants and consultants; before serving as a turnaround consultant; before building a firm that sold software to manage venture capital portfolios; Kevin ran a firm that sold clothing to large well-known clothing retailers.

Steve Denning has a great short article in Forbes, referencing Peggy Noonan on what Steve Jobs had to say about why big companies fail. The article is worth reading - actually, the entire Isaacson biography of Jobs is a great read - but here is the money quote: The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important.

I have no idea why it surprises everyone. Every time some technology goes through the "hype cycle", or the sector as a whole goes through a "we're not in a bubble" bubble, inevitably, when the hype dies down or the bubble bursts, people suddenly "discover" business fundamentals. Often, it is not the people discussing it who discover it. Rather, they are the ones reminding everyone that the fundamentals count.

With due respect to Manfred Mann's Earth Band, I just came across a great example of a business so blinded by their stale model that they cannot respond rationally to competitive threats: textbooks. Anyone involved in education, from students to professors to parents, knows that textbooks are exorbitant. There are several reasons for these prices: Market size: It is easier to sell 100MM Harry Potter hardcovers for $20 than a chemistry book that sells 20,000 copies.

Pricing is one of the most important - and mysterious - parts of a business. Price too high, and you lose customers; price too low, and you leave lots of profit on the table. An entire price consulting industry exists, with great leaders like Patrick Campbell of Pricing Intelligently. One important rule of thumb is that input costs should almost never determine the price of a product. What your costs do is have two effects:

I have been impressed with Heroku for a long time. Their simple to use platform-as-a-service (PaaS) has made it incredibly easy for software developers to deploy applications lightly and cheaply, and then easily scale them up to production scale. As an aside, the very design encourages them to develop their software in a well-architected fashion; see "The 12-Factor App." Just as Amazon Web Services infrastructure-as-a-service (IaaS) EC2 abstracts away hardware, so a PaaS abstracts away the operating system, allowing software managers to focus on software.

I often notice the incredible value of great product management. Unfortunately, it is something many experienced people do not get, simply because it is the one area of a business, and especially a startup, that cuts across the company. Every other group has a clear line of responsibility: Engineering builds the product. Marketing defines who will buy it and drives awareness. Sales sells it. Customer support supports it. Finance manages the cash, P&L and balance sheet.

Late last night, Hunter Walk, of HomeBrew Seed Stage VC, tweeted out the following: This shouldn't be too surprising; people and businesses buy the machine once, but the K-Cup refills are bought over and over again. This is why Keurig has been so intent on keeping machine users buying their coffee, by any means necessary. A year ago, I wrote how I found a mention in their annual report about digital rights management (DRM) to force Keurig machines to accept only "

Two weeks ago, we argued that, in the face of competition (and there is always competition), "Premium Pricing Just Doesn't Last." At the same time, there always will be premium priced products - Tesla and BMW, Apple Watch Edition, Oracle - but the question is how long these can maintain significant market share? A smart commenter, amelius, raised a fascinating point. Amelius compares premium pricing for substitutable products to restrictive licensing for software.

About five months ago, I looked into the "Not-So-Simple SIM Card." In short, I called for the abolition of the SIM-to-carrier-to-number tie. For those who never change carriers or travel, this doesn't matter much. You get your phone, you go to your carrier store - or a local retailer like RadioShack (RIP) or BestBuy - sign some paperwork, get a card, insert it into your phone... and never worry about it again.

After our article last week discussing the economics of moving into AWS vs. do-it-yourself (DIY), Jim Stogdill wrote an excellent follow-up about when enterprises aren't moving into the public cloud; Simon Wardley - whose strategic situational awareness mapping is in a category by itself and should be required reading for anyone responsible for strategy - continued with his input. In Jim's words, private clouds are like SUVs; they rarely make sense economically, but sometimes you buy them anyways because:

Do you have SLAs with your customers? Dirty little secret: they don't matter. All that matters is customer expectation in real time. You are running a service. You know that your enterprise customers are highly sensitive to availability, since they use your service to help them make money. Perhaps they even use you as part of their customer-facing platform. Nonetheless, you know you cannot provide 100% availability, even discounting planned maintenance.

Yesterday's article on the short life span of premium (and especially ultra-premium) pricing led to a robust discussion on Hacker News. In the article, I used Amazon Web Services (AWS) as an example of a company that actively tries to cannibalize itself. A smart commenter pointed out that AWS pricing, while falling continually, has nonetheless fallen more slowly than Moore's Law, according to which equivalently-priced capability should double roughly every 18 (or 24) months.

If there is one truism in the technology market, it is that premium pricing just doesn't last. If you are first to succeed in a new market - which is distinct from first to a market - then you often have a premium price product because you are the "first" and often the "best". The problem is that it just doesn't last. No matter how good your IP (Intellectual Property, like patents, not Internet Protocol), eventually competitors catch up with "

Years ago, a young man, let's call him D, with whom I had once gone to summer camp followed his dream and opened a meat restaurant. They had great big burgers, flaming wings, fresh onion rings and fries, a meat-lovers dream. Not only did I enjoy going there, but when a group of friends helped me move apartments before I got married, I took them there for a "thank-you" dinner.

Free Wi-Fi is coming! Well, perhaps not everywhere, but at every Hyatt hotel. I just received an email from Hyatt that they will offer free Wi-Fi for all guests in all rooms and lobbies worldwide, beginning 14 February 2015, just a month away. How did Hyatt come to that decision? Why wasn't it free before? What does it mean for their profits? Most important of all, what lessons can be learned for our businesses?

I expect this topic to get me a lot of flak. After all, everyone likes dumping on the airlines, including me. But hear me out. I fly a lot of miles every year, mostly in coach, sometimes in business. Most of the time, the journey is tiring and uneventful, sometimes it is annoying, and sometimes downright offensive. I regularly hear and read stories about the decline of comfort, service and value in air travel over the last 30 years.

Apple's philosophy for technology is, "just make it work." I had one of the early pre-iPod mp3 players. It was a great piece, lots of battery life, played every format out there at the time... and within a year I had replaced it with an iPod. Transferring music to this player and managing it was just an enormous headache. With iTunes and iPod, it "just worked". Fast forward to the year 2014.

I always get a kick when a long-storied company which is in decline tries to hook onto the latest, hottest market, thinking, "we will get into this market, and with our amazing brand, we will knock it out of the park!" This is the business equivalent of a Hail Mary pass... while throwing it off to the sides and into the stands, rather than down the field towards the goal line.

Bitcoin - and its focused leveragors and imitators like Ripple - have gained a lot of press and traction. The question that I keep coming back to is, what are they good for? I do not mean this in a cynical sense, but in a literal, "what is the best use case" sense? The answers I keep coming back to are two, and only two: Person to person payments International transfers I am, for now, ignoring the "

The Web is a tool. Like all tools (including swords), it comes with two edges. While in the short term it appears to give advantages in one direction, over time it can surprise you and cut both ways. Plagiarism When my wife, the rather brilliant Dr. Deborah Deitcher, PhD, was first teaching college students at Manhattan College (which is not in Manhattan, but in Riverdale), she warned the students very clearly that she understood the Web as well as they did, understood the temptations to plagiarize, explained what plagiarism was and what it was not - lack of knowledge was not going to be an excuse - and how it would not be tolerated.

Last week, I had a lovely "prix fixe" dinner with my wife at a very good steak restaurant for 50% off, courtesy of Groupon. The Groupon was definitely valid when I noticed it, but the terms and conditions required that you check with the restaurant for a particular date, just to make sure it was available and open. I called, spoke with the hostess. "Sure, it is valid, and tonight is fine, but we stopped selling that groupon a month ago.

Between the terrible events of 11 September 2001 and the financial crisis of 2008, US - and eventually global - housing prices rose to absurdly high levels. It is interesting how quickly people become used to high prices as "natural;" when I was selling property in 2009 in a bad market, just about everyone advised me to wait it out until prices returned to "their natural levels." For some reason, housing prices of 50% higher than their long-term average against income are considered more "

It is surprising, amazing, I cannot believe it! Gaming and now ad platform company WildTangent commissioned a survey from IHS Technology, and discovered that 71% of gamers prefer free games with ads over paid games. Next dairy companies will discover that users prefer milk, and Apple will discover that users prefer iPhones. Even without the vaunted expertise of IHS, I think any of us could have predicted that users prefer free games with ads over paid ones, provided the number of ads is unobtrusive relative to the cost of the paid games.

Last week, Eugene Wei, a former Amazon employee, posted an excellent article called the "Amazon profitless business model fallacy." Eugene was debunking the prevalent belief that Amazon seems to be highly value despite its not making a serious profit. To my mind, however, Eugene isn't debunking the "profitless business model" fallacy, he is debunking the "pundits actually know what they are talking about" fallacy. There are actually three kinds of profit in business:

Clay Christensen is famous for his disruption theories. Lately, interestingly, he has been bringing examples of some large companies that have been successful at innovating and hence disrupting themselves. One of the key point so this theory is why existing large players find it so difficult to innovate disruptively, and therefore give opportunity for tiny startups to overturn their markets. Essentially, it is in their DNA, and hence organization structure, projects, budgets and even comp plans, to protect their existing markets and squeeze more cash out of them.

In Part I of this series, we explored why the music industry is suffering, and what the market, technology and legal forces are that brought it to this point. In Part II, we discussed what the barriers to change are within the music industry, and what might be done to plan for the future. In this final Part III, we will look at some possible models. We begin with a caveat.

Recently, I had the experience of seeing two related events in the business of amusement parks. First, The Wall Street Journal, one the front page of its Tuesday, August 5, 2008, edition, had an interesting article on the financial troubles of Six Flags and the turnaround plan of its CEO and CFO. The short form is as follows: Six Flags is in trouble. Without going into too much depth, over the last three years, it lost $105MM, $203MM and $234MM, in 2005, 2006 and 2007, respectively.

So having gone through the above (see previous posts), there are basically two choices when it comes to implementing licensing schemes. Sell the upgrade. Many sales systems, even fairly primitive ones, support this. You create a separate SKU for each major release, and possibly for each minor, and a separate license key scheme for each major release (but not minor). The licensing ensures that different minor releases within the major release will allow cross-upgrades (or downgrades).

In the previous post we discussed implementing Option A: Sell the Upgrade. Now we will address Sell the Plan. Sell the Plan has a lot of appeal for ISVs, especially when you start to sell to businesses, non-profits, or any group that budgets. The benefits are: Predictable cash flow. The reality is that most individuals and organizations that have recurring charges simply keep on paying them. This creates more predictable cash flow for your ISV business.

As a follow-on to the previous post about licensing strategies for ISVs, I would like to discuss the nitty-gritty implementation details. It turns out that the open market has not been very kind to mISV firms, and have left with very few options, none of which provides the desired flexibilities. This post will discuss "Sell the Upgrade." A follow-on will discuss "Sell the Plan." So you want to implement sell-the-upgrade.

For the last several months, I have been involved with a particular very small ISV, almost a micro-ISV (mISV), as it prepares for growth. One of the key elements we identified is that its pricing model - unlimited free upgrades - is not exactly conducive to good revenues and profitability. Although it seems obvious, it needs to be stated, and for several reasons. Founders sometimes feel that to charge for upgrades would somehow offend existing customers.