Building the Industrial Enterprise Part I: The Elements of an IOT Platform

As enterprises start embracing smart devices to automate business processes, the need for a platform will evolve all the way from a fancy requirement to a key element of enterprise IOT deployments. In the past, I have been vocal about as the adoption of new forms of data consumption or data production technologies in the enterprise typically creates new requirements in areas such as security, analytics, integration etc. The internet of things (IOT) promises to take this principle to a whole new level producing new platforms that will power the industrial enterprise.

While the initial flavors of enterprise IOT platforms are starting to emerge, they are still very basic from the capability standpoint. That statement can only seem logical if we consider the fact that enterprises are just starting to adopt IOT technologies and the requirements of real world IOT solutions are rapidly changing. Having said that, there are a group of capabilities that we believe will be foundational to enterprise IOT platform. Let’s start with the following diagram that I believe provides a good foundation for an enterprise IOT platform.

From the previous diagram, we can identity the following capabilities that should be considered when considering enterprise IOT solutions.

IOT Protocol Layers

An enterprise IOT platform should be able to receive and send data using IOT protocols such as XMPP, MQTT as well as binary payload formats such as protocol buffers. This layer should adapt the data produced from smart devices so that it can be processed by other elements of an enterprise IOT platform.

Complex Event Processing  Layer

Enterprise IOT solutions are notorious for continuously producing large volumes of data. The vast majority of that data comes in the form of events that provide telemetry data and don’t have a lot of meaning individually but that can be aggregated to describe specific conditions. This characteristic makes it completely unpractical to integrate IOT devices directly with business APIs. Instead, a complex event processing layer will aggregate the data produce

Event Integration Layer

As events are collected from different devices in an IOT topology and processed by the CEP layer, the results should be integrated with different backend systems. To enable this capability, enterprise IOT platforms should enable connectivity with enterprise backend systems or APIs. This model will facilitate the integration between the data produced by smart devices and traditional enterprise systems.

Real Time Analytics

Providing real time telemetry and visualization about the data generated by smart devices is an essential element of an enterprise IOT solution. To enable this capability, enterprise IOT platforms should provide real time analytics features that can visualize the aggregated data in real time providing intelligence about the runtime behavior of enterprise IOT deployments.

Mobile Device Management

Enterprise IOT topologies are typically composed of hundreds or thousands of smart devices. The security and management of those devices should be one of the key capabilities of enterprise IOT solutions. In that sense, enterprise IOT platforms should include a flavor of device management that can scale to thousands or tens of thousands of devices.

Data Security

As any other new trend in the history of enterprise software, enterprise IOT will require new levels of data protection, privacy and access control. Those capabilities should be present at the platform level so that they can be holistically applied across different solutions.

The capabilities listed in the previous sections are just some of the essential elements of an enterprise IOT platform. As the enterprise IOT industry evolves, new requirements and capabilities will emerge that will shape the next generation of enterprise IOT platforms. In future posts we will analyze the individual elements of an enterprise IOT platform

 

The Enterprise Minimum Viable Product: Focus on Viable Instead of Minimum

The minimum viable product (MVP) is one of the great concepts pioneered by the Lean Startup methodology. Conceptually, the MVP includes only the basic set of features that make a product production ready and nothing more. Obviously, the MVP concept has become one of the essential mechanisms to ship software efficiently and quickly incorporate feedback from real customers. However, while the MVP mechanism has proven to be an incredibly effective vehicle in the consumer market, there are some major challenges on develop solid MVPs in the enterprise world.

The whole MVP principle is based on shipping the essential feature set to make the product usable, get it in front of customer, study their behavior and incorporate their feedback into subsequent versions of the product. AS you might imagine, this process is not that simple in the enterprise software world in which the complexities of companies can complicate the dynamics between an enterprise software startup and its potential customers.

Having struggled with the characteristics of the right enterprise software MVPs for almost a couple of years now, I can point to a few challenges that most enterprise software startups will encountered when trying to get customers to adopt MVP-type products.

The User is Not the Buyer

One of the reasons that make the MVP concept works so well in the consumer market is because the user of the software is typically the ultimate buyer. Because of this reason, user feedback will directly make the MVP more appealing to potential buyers. This story is quite different in the enterprise world on which the people trying the MVP are rarely the ones making the ultimate purchase decision. In that sense, enterprise software startups need to be able to carefully evaluate the feedback received from an MVP, filtering the noise from the features that will make the product more relevant to potential customers.

Time Commitment

Getting enterprises to commit time and resources to evaluate an MVP-type product can be a really challenging endeavor. Differently from the consumer market, potential buyers in the enterprise are constantly bombarded with different assignments that will distract their attention from your valuable product.

Overfeature Culture

For decades, enterprise software has evolved in the middle of a culture that value the number of features over the simplicity and usefulness of a product. By presenting an MVP version of your product to enterprises, you might run onto a wall of prejudices that tend to associate the number of features in a product with its robustness and enterprise readiness.

Burning Bridges

Given the complexities of enterprise software sales cycles, startups need to be very careful when/how to position an MVP product to customers. If not explained correctly, the MVP might cause enterprise to be disappointed and not consider adopting your software just because they misjudged the purpose of the product at that stage.

In my opinion, there are some fundamental differences between the viability of the MVP approach in the enterprise and consumer markets. Despite the validity of the approach, I think enterprise MVPs can’t be too minimum and must be very viable 😉

 

Enterprise Software Lessons: Avoid the Early Adopters Sirens Songs

In enterprise software, customer acquisition is the main factor that differentiates winners from losers. Understanding the process of winning customers, the required time, typical sales cycle, parties involved, etc are essential to successfully implement the correct growth strategies in an enterprise software startup. In the early days, enterprise software startups need to do everything at their disposal to win customers and increase adoption of their products.

While the first customers of any enterprise software startup are always the most exciting ones, their behavior can be really misguiding in terms of predicting long term customer acquisition strategies. I like to refer to this problem as the “early adopter’s siren songs”.

In Greek mythology, were dangerous and devious creatures, who lured nearby sailors using enchanting and irresistible songs that deviates them from their normal course. Using this analogy, in an enterprise software startup, you can think of early adopter customers as a bit of a siren song that can deviate the product from its normal trajectory.

Early customers are a great thing to have as an enterprise software startup. These companies are willing to take a chance on your new product and invest in your success. However, early adopters are not a direct representation of your target customer population and, consequently, of your ultimate business models. From a customer profile standpoint, early adopters tend to be more forward thinking, risk taking and innovation hunger than most companies. In that sense, your early adopter customers can send the wrong signals in terms of the customer acquisition models and metrics of your enterprise software product.

As an enterprise software startup CEO, you have to fight very hard to get early adopter customer but you have to drive even harder to get passed the early adoption technology inflection point. Until you get passed that “inflection point” you won’t be able to get a clear picture of the customer acquisition models that work for your enterprise software product. Early adopters are a great sign of the initial traction of a specific enterprise software product as well as the viability of a specific idea but can rarely be considered an indicator of long terms business and execution models. Establishing customer acquisition strategies and projection based on early adopter customer are not only unreal but highly misguided representation of the real adoption and long term business models in an enterprise software startup.

From an enterprise software startup perspective, the transition from early adopters to mainstream customers is one of the hardest thing to accomplish. However, until you get to that point, any metrics , long term projections or business models won’t be based on real facts but on dangerous songs of sirens.

 

Does Enterprise Software Needs Sales People?

The sales staff is one of the traditional elements of enterprise software companies that has been heavily questioned by the new generation of companies in the space. A lot has been written about the new software acquisitions models in the enterprise and how companies today don’t need to rely on traditional sales mechanisms. Companies like Atlassian claim they have acquired tens thousands of customers without a single sales executive and passionately promote that model as the cornerstone of the new generation of enterprise software.

These days, enterprise software sales staffs are associated with the old boys, the Oracles, IBMs and SAPs of the world. Sales guys are not cool, they think about money and not about changing the world and they are expensive. These days, enterprise software can spread viraly, purchased with a credit card on subscription basics. Factoring all this, do we really need sales people in an enterprise software startup?

The answer is: ABSOLUTELY YES!

I have thought about this problem for a long time and tried different models. At this point, I couldn’t be blunter about my opinion on the subject. To achieve scale, an enterprise software startup MUST have a sales staff. What we do need is a different type of sales guys and new and innovative sales models.

Let me try to explain.

While you can certainly establish an enterprise customer based without a sales staff, it’s almost impossible to achieve a decent scale following that model. Selling to large enterprises can be a lengthy and complex process that needs the patience and dedication of a sales executive. When selling to large enterprises, you need to deal with procurement departments that have been trained to get any possible discounts in your software, IT departments that tend to be adverse to changes and new technologies and rigorous compliance and policies that most of us find ridiculous. Having a solid sales staff can and will help to win those large accounts that, otherwise, will require the full attention of the management team.

Having said all that, I do believe that effective enterprise software sales are fundamentally different from the traditional models. Market phenomenon such as globalization and economies of scale, technology movements like software as a service, software distribution models such as app stores, cultural movements such as the “consumerization of the enterprise” are just some of the factors that we can leverage in the new generation of enterprise software sales. As an enterprise software company, there are a few tips that might help you improve the dynamics of your sales organization in this new world.

Leverage Fremium Models

As I mentioned in a previous article, fermium models do work in the enterprise. A fermium model will help you increase your customer population while allowing your sales team to focus their attention on those customers with the potential to convert to a paying model.

Selling to the Buyer

One of the main problems in enterprise software is that the people testing the product are not the ultimate buyers. Involving the decision makers early on in the evalution process will do wonders to expedite your sales.

Make it Simple

I know it sounds cheesy but, as an enterprise software company, you need to obsess to make your software as easy to acquire as possible. A simple and transparent sales model will streamline the software acquisition processes for your customers.

Disclose Pricing

Complimentary to the previous point, part of making a sales process as simple as possible is to provide your customers with all the information they need in order to evaluate the product. Pricing is one of those aspects that a lot of companies tend to only disclose after they have gotten in contact with the potential buyer. That’s completely ridiculous, disclosing your pricing model will make it easy for your customers to evaluate your software and will avoid unnecessary negotiations.

Find a Champion in IT

In any enterprise software sales process, there is a huge difference between sales that require the involvement of the IT department and the ones that don’t. Rightfully so, IT groups tend to be extremely conservative when adopting new technologies and can be very demanding from the software compliance and policy standpoint. However, IT groups can also be your biggest champion if the value proposition is clear enough. If your sales process requires IT involvement, my advice would be to get then involved at the very beginning of the process and find a few champions within the IT organizations that can help you navigate the complexities of the process.

 

 

Microsoft-Yammer Deal is the Florence of Enterprise Software

Florence and Siena are the two Italian cities that had the most impact in the Italian renaissance. Even though the movement itself was originated in Tuscany, Florence is often associated with the expansion of the  renaissance movement throughout that Italian peninsula. Is we can, for a minute, trace a parallel between the rebirth of  enterprise software and the Italian renaissance then Microsoft’s Yammer acquisition can become the Florence of enterprise software.

During the last few days we’ve heard strong rumors that Microsoft will be acquiring enterprise social media pioneer Yammer for a price between $1B-1.6B. As a matter of fact, if the rumor holds true, the deal is likely to be announced in the next few hours. Yammer provide enterprise social networks capabilities to thousands of organizations across the globe and has a very strong presence within Fortune 500 companies. After a few financing rounds, Yammer’s valuation is reported around $500M but the value is far from directly correlating to revenue numbers which is reported to be around $20M.

Regardless of your opinion related to the terms of the transaction, there is no doubt that, to the day, Yammer’s acquisition represents the most important moment in the history of this new generation of enterprise software. While this new movement has already experienced outstanding successes such as Jive’s IPO or the acquisitions of Rightnow, Success Factors and Taleo for multi-billion dollar valuations, Yammer’s acquisition is set to have a more profound impact in the enterprise software industry.

Why is that?

Yammer’s influence in the new enterprise software movement goes way beyond its technology contributions and expands onto the commercialization, economics and adoption models of enterprise software technology. If you think about it,  Jive’s IPO had very little influence in the new enterprise software models and SAP’s and Oracle’s acquisitions of Taleo, Rightnow and Success Factors were strongly validated by revenue models and traditional customer acquisition processes.

Yammer, on the other hand, has established a strong enterprise customer base by challenging a large number of the traditional enterprise software concepts. Microsoft’s Yammer acquisition strongly validates that the economics and dynamics of enterprise software are changing. With this deal, Microsoft is telling the world that the old school of enterprise software might benefit from a few lessons from the new boys:

• Market share matters as much as revenue: As in the consumer market, enterprise software valuations can be correlated to market share rather than actual revenue. While Yammer’s revenue numbers might not be impressive, their number of customers and the dependency those customers have on Yammer’s technology is a great asset for Microsoft.
• Fremium works: Yammer was one of the pioneers of the fermium pricing model for enterprise software. Microsoft’s acquisition validates that these new type of pricing models can be very effective within enterprise customers.
• Sexy and simple interfaces win: Yammer is not a super feature rich product and its main value proposition is a very simple one: improving the communication within the enterprise. However, Yammer accomplishes this goal by providing a super sexy, incredibly intuitive and astonishing simple interface. Compared to most enterprise software products, Yammer’s interface might look ridiculous but, as always, we should remember that in this industry simple and open tends to win.
• Partnership matters: If you have been following the market, Microsoft acquisition of Yammer should not come exactly as a surprise. Since last year, Yammer and Microsoft have partnered to expand SharePoint’s social networking capabilities with Yammer. This acquisition is a testimony that long term partnerships can evolve into successful outcomes for both parties.
• Mobile-First Matters: Mobile devices are one of the main channels by which people use Yammer. By acquiring Yammer, Microsoft is acknowledging that mobile-first consumers are also relevant in the enterprise.

You can probably tell I am super excited about Microsoft’s Yammer acquisition. I believe Microsoft will get an all-star team head by David Sacks and a rock solid product and Yammer directly benefits from Microsoft’s dominant presence in the enterprise software world.

What do you think? Is Microsoft-Yammer deal as important as I think it is? Is $1.2B too much? 😉