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Peter Yared is the CTO/CIO of CBS Interactive, a top ten Internet destination, and was previously the founder and CEO of four enterprise infrastructure companies that were acquired by Sun, VMware, Webtrends and TigerLogic. Peter's software has powered brands from Fidelity to Home Depot to Lady Gaga. At Sun, Peter was the CTO of the Application Server Division and the CTO of the Liberty federated identity consortium. Peter is the inventor of several patents on core Internet infrastructure including federated single sign on and dynamic data requests. Peter began programming games and utilities at age 10, and started his career developing systems for government agencies. Peter regularly writes about technology trends and has written for CNET, the Wall Street Journal, BusinessWeek, AdWeek, VentureBeat and TechCrunch.

Many thanks to Bob Pulgino, Dave Prue, Steve Zocchi and Jean-Louis Gassée for mentoring me over the years.

Sunday, March 30, 2014

The Resurgent, Post-Windows Microsoft


This post was also published on TechCrunch.

Microsoft had become an oft-ignored, behemoth to the North, despite $77 billion in revenue, $57 billion in gross profits and $21 billion in net income. It seemed that the mobile revolution had passed it by. Although Steve Ballmer was already making many of the right moves, it took new CEO Satya Nadella to fully accept that Microsoft had to move beyond Windows into a new future of apps and cloud services.

The future of Microsoft is in selling its software, such as Microsoft Office 365, Microsoft Dynamics CRM and ERP, and Microsoft servers in the Azure cloud to business customers on whatever platform they like. Each of these products is arguably best-of-breed and cloud-based, and has a large customer base. Microsoft indeed has the ability to pivot, and pivot hard, as it did when it switched from pushing MSN to competing with Netscape in the Internet space. And Microsoft is once again not encumbered by antitrust restrictions from aggressively pursuing these markets.

There was a time when, if Redmond aimed its guns at a market segment, startups fled. Since the launch of the iPhone almost seven years ago, Silicon Valley startups have operated without any fear of Microsoft competing aggressively in apps and device-agnostic cloud services.

As the first step towards its new OS-agnostic future, Microsoft recently released its OneNote note-management software for the Mac OS, rounding out a full multi-platform strategy for the software, including Windows, Windows Phone, Mac, iPad, iPhone, Android and web.

Microsoft quickly followed up with Office 365 for iPad, in addition to its existing Android, iPhone and Mac support. Microsoft Office 365 is remarkably good, and offers a web only option that is priced the same as Google Drive with far better features and the familiarity of Office. Power users can pay more per month for small business premium that includes the desktop versions of the apps, so an IT department can offer different versions to different types of users. Office 365 now only has three different versions, versus the headache-inducing menu from years past. Most business buy Microsoft software through enterprise license agreements which will bypass the Apple 30 percent cut.

Although it is a huge step for Microsoft Office to now be available on all of these platforms, just touch-enabling software does not necessarily make it mobile first. Microsoft has to keep a sharp eye on startups like Quip that have completely rethought the office experience for mobile.

Microsoft Dynamics CRM and ERP are a billion dollar plus business and growing rapidly. Dynamics CRM is available as SaaS on all platforms including iOS and Android. Dynamics ERP is available as a cloud hosted solution but is not yet available on other client platforms.

Windows Azure cloud, which is rumored to be rebranded to “Microsoft Azure,” is also growing rapidly and provides a growth platform for .Net development platform, Microsoft’s Windows Server, Active Directory, and SQL Server database products.

Microsoft has an army of loyal developers who love its easy-to-use tools, and it is rumored that it’s going to acquire Xamarin, which lets Microsoft .Net developers build apps for iOS and Android. The companies recently signed a partnership, but an acquisition of this technology would be a huge step forward for Microsoft’s new mission of platform agnosticism.

So what of Windows?

Microsoft is not giving up on Windows, but it is going to stop tying its growth products to only one operating system. Windows 8.1, for all of its faults, is the same as Windows 7 once you ignore the Modern UI. And on a tablet, the Modern UI actually works quite well. I have been using a Lenovo Yoga exclusively for almost a year and have actually quite enjoyed it despite its quirks. In addition, Windows Server is seeing a renaissance as part of Azure cloud.

There is a report that Microsoft is seriously considering giving away a version of Windows 8.1, much like Google gives away Android and Chrome OS in order to drive more Google Search revenue, and Apple now gives away Mac OS upgrades.

Microsoft’s OEMs have been struggling to increase margin and have been extracting lower Windows licensing fees and even no licensing fees in some cases. However, these discounts could be used as a lever to finally get hardware OEMs into line with more stringent hardware standards.

With a free Windows on decent hardware and a $99 Office 365 home subscription, Microsoft can retain legions of value-oriented consumers (think Costco shoppers) that want to use the same computer at home that they use at work. While some urban Apple devotees may look with disdain on this strategy, there are many high growth, high profit companies that sell exclusively to middle America.

The saving grace for Windows Phone is that at some point, the apps market is going to calm down, and there will be 1,000 apps that matter to 99 percent of the population. Microsoft can pay each of those app developers up to $500,000 to port to Windows Phone, so it would cost $500 million for Microsoft to offer a phone that has the top 1,000 apps. Quite achievable for a company that has a $2.5 billion annual marketing budget and more than $100 billion of cash. The much-maligned Surface tablet is now a break-even business with almost $1 billion in sales. Even if consumers don’t buy them, Microsoft is selling large volumes to businesses such as Delta.

The operating system story for Microsoft is now one of slow growth and middling progress, which keeps it somewhat in the game without bogging down its application growth engines.

The other businesses

As many an analyst has stated, the Xbox and Bing businesses should be spun out. One option is to sell Xbox to troubled Sony so it can combine the declining consoles market into a single larger entity and gain efficiencies in production and retain AAA game developers. Yahoo could pick up Bing in order to accelerate its renewed focus on search.

Perhaps I have a tendency to favor the underdog, but Nadella has a great shot to make Microsoft relevant again with its new focus on selling its high-growth software to businesses on whatever platform they want. There was a time in the early 1990s when Microsoft made more money on every Mac sold than Apple did. With its new platform-agnostic strategy, this is a metric that Microsoft could attain again for every device sold to a business.

Saturday, March 15, 2014

Why Can't a Startup Build a Self-Driving Car?


This post was also published on TechCrunch.

On a 10- to 20-year horizon, large-scale technological innovation is going to center around machine intelligence, robotics and sensors. Each of these fields requires gargantuan amounts of capital and a lot of patience, a combination well beyond the scope of even the most progressive venture capital firm.

As Google has demonstrated with its self-driving car, the combination of machine intelligence, robotics and sensors can already perform better than a human at a complex task such as driving a car, something that 10 years ago was unthinkable to most people.

No doubt, Tesla has built an amazing car and after much trial and tribulation, brought it to market. However, General Motors had already shipped a production electric car years before. Tesla took advantage of the innovator’s dilemma, where legacy car companies are virtually incapable of embracing electric-only cars and integrating modern electronics.

Tesla’s roadmap includes “autopilot” and eventually “autonomous” features. Perhaps Tesla also will deliver these features slightly before legacy car manufacturers do, including Mercedes and Lexus, which are aggressively adding similar features. But the winner in this game is Google, which has a multi-year technology lead and can extract enormous licensing fees.

The amount of raw computing horsepower necessary for cognitive computing is massive. Integrating next-generation sensors such as LIDAR is extremely complicated. The regulatory environment for introducing smart machines is extremely unpredictable, and the required experimentation and unpredictable timelines of this type of work puts it squarely in the “research” side of research and development. And venture capitalists inherently hate research – they like development.

Even the biggest venture-backed play in machine intelligence, DeepMind, with $50 million in very patient funding and 75 top researchers on staff, was recently acquired by Google for $500 million. Google has been on a massive buying spree lately, snapping up the building blocks of future technology with robotics acquisitions, other AI acquisitions such as DNNresearch, and key hires such as Ray Kurzweil, who is considered by many to be the godfather of commercial cognitive computing. Google is among the only customers of D-Wave, a much-maligned quantum-computing company.

Companies like Google, IBM and Microsoft have been building out machine-learning teams that can leverage their investments in vast networks of computers built around the globe. The amount of transistors needed to match the number of neurons in a human brain is a tremendous 100 billion, and it will take us until around 2025 to replicate on a computer chip, according to Kurzweil, although this might be aggressive due to the physics around increasingly smaller transistors in microchips.

The market uptake of machine intelligence is going to take a while. IBM has shown that a computer can outperform humans at chess and Jeopardy, and is transitioning its cognitive computing work into fields such as medicine. Even at the scale of an IBM, shareholders are complaining about the cost of this transition and the head of the Watson group was recently replaced. If IBM’s Watson were a startup, its investors would have long ago forced it to sell so that they could put their capital into more efficient short-term and mid-term investments.

Other companies with large computing grids are starting to get into the game. Facebook recently kicked off an artificial intelligence lab with the hire of Yann LeCun from NYU, and also acquired speech recognition company Mobile Technologies. EBay hired Hassan Sawaf from SAIC to spearhead its machine-intelligence efforts. Yahoo! has spun a deal with Carnegie Mellon to access their researchers. Apple, with its relentless focus on the client side of computing, is struggling to keep up with making its email systems scalable, let alone keep its Siri acquisition on par with Google’s relentless drive towards machine intelligence.

The upside is huge. Every sector of the economy will soon enough have its own version of a self-driving car, even fields as advanced as medicine. As anyone with an undiagnosed or somewhat diagnosed medical condition can tell you, the amount of guesswork and over specialization of medical professionals is maddening. A computer can take a holistic approach and quickly narrow down what a problem could be, and iterate with exclusionary tests. Given the fundamental shift required, it will take quite a while for this transition to happen in fields such as medicine.

Despite repeated fears, startups are definitely taking on far bigger challenges than just photo and chat apps. But will startups be able to compete with these giants in areas such as machine intelligence? Perhaps Google, IBM and Amazon will offer Cognition-as-a-Service that would usher in a wave of new companies, much like Amazon’s Infrastructure-as-a-Service offering reignited the web.

IBM has created a $100 million investment fund for Watson-based companies and just made its first investment. Amazon could kickstart a cognition service by acquiring nascent cognition service companies such as Wise.io, Expect Labs, and BigML and offering them at scale. Now that would unleash a generation of “smart” startups.

Friday, February 21, 2014

Mobile Contacts Are Now The Real Social Network


This post was also published on TechCrunch.

Facebook’s surprising acquisition of WhatsApp signals that it has realized that users’ true social network is the contact list on their smartphones. Mobile contacts are usually limited to people a user knows well and actually communicates with, a veritable treasure trove when compared to the copious list of Facebook friends that many users have accumulated over the years.

Adding someone to your phone is more intimate than friending them on Facebook. And messaging someone through their phone number is much more intimate than a Facebook message, something that Mark Zuckerberg himself says is akin to informal e-mail. Facebook had the opportunity to own the social graph for new apps with Facebook Platform, which spawned multiple successful companies such as Pinterest that used the “follow all my Facebook friends” feature to build their own social networks.

Threatened by the emerging networks, Facebook decided to clamp down on new “competitive” social networking apps, and turned off access to its social graph for emerging messaging apps like Voxer and Vine.

Without access to the Facebook social graph, the new generation of mobile communication apps such as Snapchat and Secret use mobile contacts exclusively to build connections between users.

Younger and international users are particularly attracted to the mobile contact as the defining criteria of their true social network. As Path’s struggles have shown, attempting to force an intimate social network with the same real-name mechanism as Facebook does not work.

Social Network Identity Who It’s For
Facebook Real Name Casual acquaintances
Instagram Alias Aspirational following
WhatsApp Phone Number Actual friends

Facebook had already acquired the ability to have a unilateral, aspirational follow capability akin to Twitter with its Instagram acquisition. WhatsApp offers a social network of 450 million users that are intimately connected with each other by phone numbers.

With this acquisition, Facebook now controls the intersection of all three kinds of social graphs: casual acquaintances, aspirational following, and intimate relationships. And that’s worth quite a premium.

Sunday, January 19, 2014

Why The Big Picture Matters on Mobile


This post was also published in VentureBeat.

Chances are you’ve checked out Instagram, Tinder, Whisper or Snapchat within the last hour. Or maybe the last five minutes. They are some of the most popular and addicting consumer mobile apps today. And they have a remarkably consistent user interface: a big picture with an accompanying line of text.

Research indicates that reading is actually quite difficult for the human brain, which from the start evolved to capture and process mountains of information visually. The narrowing of information delivery instigated by text messaging and Twitter has trained users to communicate efficiently with fewer words. The paucity of text has allowed imagery to take over on the mobile form factor, as evidenced by the most popular new apps.

The attention-focusing layout of a big picture with accompanying line of text originated with the newspaper front page. Above the fold layouts were used for big events such as wars, royal weddings, and big sporting events. Or, in the case of The New York Post, every day.

This treatment first emerged on the web with memes such as LOLcat and has subsequently infiltrated every aspect of the Internet.

The picture with accompanying line of text trend has become so pervasive that Whisper, a popular app for anonymously sharing thoughts, automatically suggests somewhat contextually-relevant images for the user to pick from. The thoughts without imagery are actually somewhat hokey. Adding imagery makes them seem somewhat deeper, as Saturday Night Live showcased with its popular Deep Thoughts by Jack Handey interstitials:

Facebook and Twitter are including larger images in newsfeeds to accompany a short line of text, and newer apps like Circle and Jelly are combining the Flipboard-style text overlay on each image in a newsfeed, a look that Facebook and Twitter will likely also soon implement.

Snapchat even allows messaging with hand drawn additions.

Perhaps in the next phase of this evolution, there won’t even be a line of text at all. As the saying goes, a picture is worth a thousand words.

The only saving grace for the written word in 2014 may be the strong growth of Ev William’s long-form oriented Medium. While short-form communication continues to accelerate, a contra-trend of long-form content may materialize as well.

In our increasingly polarized, bifurcated world, there likely will not be much room for anything in between.

Friday, November 22, 2013

Email Is Now Just Another Stream


This post was also published on TechCrunch.

Only a couple of years ago, pundits were predicting an end to email. But instead of fading away, there’s been ever-increasing email volume and usage. Rather than being replaced by Facebook and Twitter streams, email is actually becoming a stream itself.

Mail systems are evolving to match the new volume of email, and users will increasingly see only algorithmically vetted emails. Some other emails may be shown below the vetted email, and the rest will flow away into temporal oblivion, just like uninteresting social posts from a few hours ago.

Implications for marketers are significant. The days of the average AOL or Yahoo! mail user scrolling through every email in their inbox are rapidly fading. Email has been especially important in e-commerce sales and customer re-engagement. For e-commerce in particular, email marketing exceeds the performance of social advertising. Large-volume email senders will need to make a greater effort to send emails that are both personalized and interesting to the recipient.

The email tsunami problem is pervasive. Several Silicon Valley folks have already committed the unfortunately termed “email suicide,” where they give up on reading unread email and start anew. Others are adding email auto-responders stating that they will not necessarily see email. New vendors such as SendGrid have helped bring on the deluge by dramatically lowering the price of sending volume email and democratizing access with simplified onboarding and easy developer APIs.

Google has added several features to Gmail in an attempt to add some order to the chaos of email. The changes will effect both email users and marketers. With Gmail features like Priority Inbox, Gmail Tabs, and Circles, users are increasingly engaging only with algorithmically vetted email from senders they know. Priority Inbox is only a satisfactory product and needs to evolve to automatically mark as “important” email from senders that a recipient repeatedly opens, especially if the recipient replies. Next-generation email clients like Inky go as far as sorting email by relevance rather than date.

For marketers, sending a ton of email without any user engagement will soon become counterproductive. For each type of volume sender, a new balance will have to be found between sending numerous emails and still achieving desired “open rates” and “clickthroughs” — mechanisms by which an email provider like Google can detect whether or not the email is of interest to a user. Much like how “edge rank” increases for Facebook posts when the people like, share or comment on it, “mail rank” will be an increasingly important benchmark for email marketers to measure their effectiveness.

At CBS Interactive, we send over 200 million emails a month, ranging from news summaries to personalized fantasy sports updates, to an audience of 270 million unique users. We have corporate standards and systems to ensure that recipients can easily unsubscribe from unwanted emails. However, given these upcoming changes, we will need to look at overall open rates from a particular property and begin to proactively prune users that have no interest in emails we send.

The shift to email as a stream will have personal implications as well. People may have to be introduced via a mutual party rather than sending a cold email, especially if the sender has sent numerous emails that have not entailed or received a response. Even personal emails from people you know may soon be treated like a Facebook or Twitter post, where a user either immediately responds, such as with a Facebook like or comment, or instead lets it flow into the ether. Much like social posts, senders will likely shift toward keeping email messages short and to the point.

Facebook and Twitter both have nascent but unique takes on messaging. Facebook messages that are not from one of your friends go into an “other” folder that is rarely read. Twitter direct messages can only be sent to people who follow the sender, although Twitter is experimenting with opening this up a bit.

Stream-oriented companies like Facebook and Twitter essentially charge brands to target their own customers by allowing brands to purchase promoted posts for their fans and followers. Email providers may soon sell “promoted emails” where a marketer can target a user in their priority inbox. Users may revolt, but in the end they are getting email for free, so it will be hard to complain. Email has become a stream, and as the adage goes, when you’re not paying, you’re the product.

Thursday, August 22, 2013

How to Sell to the CIO, Part 3: Closing the Deal


This post was published in the Wall Street Journal's CIO Journal.

After almost two decades of selling enterprise infrastructure to IT organizations, I have spent the last two years on the other side of the table as the CIO/CTO of CBS Interactive. This is part three of a three part series on how to sell to CIOs.

In part one, I provided tips for getting into an account and in part two I discussed how to navigate the sales process. Now it’s time to close the deal.

Timing

Deals are going to take as long as they take, and there is really not much a vendor can do to make all the stars align within a big enterprise. A sophisticated vendor understands that large enterprises have a lot of processes in place to close deals and an aversion to new vendors. There is generally no shortcut through legal, finance and other internal approvals.

When a vendor asks for deviations so that they can make a number or close the deal in Q4 as they promised the board, it makes them seem weak and engenders doubt. It leads everyone internally to ask, “Are they really so desperate that our $150K is a make or break for them?”

While there’s no way to tactfully ask for a deal to get expedited, a vendor should understand a company’s process and track that the deal is going well. We had a deal with VMware Inc. that slid for two quarters for various reasons. They were so patient and diligent that in the end, we took them out to dinner.

Pricing

Sometimes vendors agree to a price range at the beginning of a sales process and then change the price when it’s time to close. Agreeing to terms during contract iteration and then shifting parameters around and returning something completely different for each subsequent iteration makes a vendor look untrustworthy and unreliable. We once got very far along with a vendor, showed them how to pitch to our business units, had everyone lined up to switch to this vendor, and then they started playing tactics like this and we walked away.

When the reasons behind pricing are not clearly communicated, the vendor gets blamed. We once requested a tiered price instead of a flat fee for a deal to access segmentation information ad hoc. It was a reasonable request that the vendor accommodated, but unfortunately a rumor spread through our organization that we were paying by the impression to access our own data. The pricing was so customized that we had a hard time getting buy-in. As word of the pricing debacle spread, it reflected poorly on the company. So if the pricing model is customized in order to close the deal, be sure that it is very clear why this is the case and that the information is disseminated widely.

Deals always seem to get hung up on indemnification. While everyone seems to know where a deal will end up, it often takes weeks of back-and-forth between legal and a couple of ultimatums to close. If I ever run a software company again, I will be sure to have two pricing tiers: greater indemnification at a higher price, less indemnification at a lower price. You pick, and we all save ourselves a big headache.

Reputation Matters

The biggest surprise I had upon running a large IT organization is the level of information sharing and collaboration between CIOs at different companies, particularly about vendors. Most CIOs and IT VPs are all very accessible, candid, and frank with each other about what products they are using, how the vendors are doing, and how they make internal decisions.

Vendors should be aware that their performance quickly makes the rounds, both in a particular vertical and across different verticals. This type of diligence accelerates as more players across finance and legal get involved in a deal. “I heard they completely screwed up at Company X” will kill a deal even if it is on the verge of signing. Vendors need to make sure that they have happy customers.

In addition, executives often transition between companies in a vertical such as media or finance. One of my biggest internal stakeholders for a video platform had a bad experience with a potential vendor at his previous company — a cable channel without a large video-streaming offering. The vendor CEO’s reasoned that the previous company was small, and that we would be treated a lot differently as a large customer. Wrong answer. A much better approach would have been to figure out exactly what went wrong at the previous account, remediate it, or at least offer a “lessons learned” on how they have improved service.

Reputation is also important globally. If a vendor does a global deal with a company but doesn’t provide good service to the satellite locations, the international offices will go out and find their own vendor, causing a lot of thrash throughout the company. A global deal is not done until it’s delivered well internationally.

Account Management

Once a deal looks like it is about to be signed, there is typically a hand off to account management. A lot of vendors fail at this step. Salespeople need to be incented to ensure that there is a clean handoff. Vendors would also be wise to ensure a single account management point of contact, especially for larger organizations. Handing us an organizational chart with different contacts for professional services, technical issues, and billing makes us feel like we are not getting what we paid for.

And finally, a note of caution about growing organically within an organization: Although it can look like a vendor has traction because they are used in multiple departments, they can still be replaced. For example, in the cloud file-sharing segment, we were running Dropbox Inc., Box Inc., Google Inc.’s Google Drive, and others. When it became clear that we needed one official cloud storage vendor, our corporate IT folks took all the vendors through a rigorous process and picked a single vendor. Soon after, the other vendors were blocked at the firewall level. To stay relevant, a vendor should stay ahead of the customer with new features, provide excellent service, and be proactive if there is downtime or failures.

Sell to Yourself

The best thing a vendor can do is have staff who are domain experts at what they are selling and also staff who have worked in a decision-making capacity within enterprise IT. Sometimes that’s not possible, so I’ve shared my experiences to give vendors the inside look on how enterprise IT makes purchasing decisions and how to optimize time for everyone involved. A clear, straightforward pitch, a salient case for how your product will help the customer, and a good deal of patience go a long way when it comes to selling to the CIO.