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March 2013

Don’t Blame Your Salespeople

I read yesterday that Oracle blamed its latest quarterly earnings miss on a "lack of urgency" by the sales force.

Anytime you blame the sales force for missing revenue or earnings targets it's usually a bad sign. But in this case, Oracle's CFO may be right… although not in the way she meant.

Oracle's cloud-based revenues, which it had forecast to increase by three percent year on year, instead fell by two percent. Oops. To be fair, Oracle was affected more by its declining hardware sales, but it was the cloud-based revenue performance that caught my attention. I recently attended some Microsoft Office 365 partner events and I got to hear from partners struggling to adapt to a subscription revenue model. That experience made me think of one explanation for Oracle's situation.

What I heard from partners at these Office 365 events was that they were accustomed to making a good deal of the revenues in any deal from the sale of software licenses. Now, with the subscription model (and given the current structure where Microsoft has a direct billing relationship with the customer), these partners are seeing a big chunk of up-front revenue disappear, to be replaced by much smaller commission payments, spread out over time. It was clear to me that these partners recognized that their business model had to change to adapt to market acceptance of cloud-based services. But they were trying to understand how they would replace the revenue they were losing from up-front software license sales.

So how does this apply to Oracle?

First, understand that sales people are not stupid. And the best ones would never be characterized as having a "lack of urgency". So what gives? It may be a simple matter of economics.

You're an Oracle sales rep. Which would you rather sell to your customer?

  • $50,000 worth of software, where the customer pays up front
  • A three-year subscription for a service for 100 users, at $20 per user per month

In the first scenario, you make $50,000 towards your revenue goal for the quarter. And (depending on your commission rate) you make a nice sum over your base salary. In the second scenario, your up-front commission is much lower and (depending on how compensation is set up for selling cloud-based services) your contribution to quarterly revenue goals might be much lower. There's a saying that "salespeople are coin-operated," which I always took to mean that they well understand their marginal revenues and costs and act accordingly.

So it wouldn't be a surprise to find that Oracle reps are favoring on-premise vs. cloud-based applications in their selling efforts. This just illustrates Clayton Christensen's thesis in The Innovator's Dilemma, that it can be very hard to make the shift from one disruptive technology to the next one. Oracle no doubt understands that it has to change its business model. Understanding what's needed and executing, however, are two different things.

So maybe Oracle's sales reps don't lack a sense of urgency. Maybe they just understand math.


Product Managers on the Road, Weekend Edition

Note: I started this post a week ago, as I was on my way to New Mexico for a one-day ski trip.  It was written sort of as-it-happened so don't expect too much literary refinement!

Image

So I'm on my way to Albuquerque, New Mexico. I'm headed there to meet up with my son Brian for a day of skiing in Taos, about two hours away. It's my first trip since I renewed my passport, and my first flight in maybe a year. So, on with the random observations…

  • SJC is quite different than I remember it, at least getting to long term parking is different. First, it's called "Economy Parking." OK, that explains the lack of "Long Term Parking this way" signs. And no, I can't circle around the north end of the runways to get to the long-term parking lot I usually go to; that one's only accessible from De La Cruz/Coleman Ave.
  • So glad I printed out my boarding pass on Southwest Airlines ahead of time! I was able to skip the lines and go straight to baggage check (FREE baggage check, thank you Southwest!).
  • Had to be told to remove my shoes before going through the metal detector. Rookie mistake!
  • People are wondering why I'm carrying around my down jacket, aka Puffy or Puff Daddy. Hey, maybe I don't need it in San Jose or Las Vegas, but I will in New Mexico!
  • Our gate is directly across from the Illy espresso bar in Terminal B… torture!
  • I must be like a dog… I never noticed the "order here" and "pick up here" signs at Jamba Juice because they're way above my head.
  • SJC offers free Wi-Fi (after you watch a commercial). The iPass business model continues to erode.
  • So my flight to Albuquerque stops first in Las Vegas. That explains all the bachelorettes, fraternity boy groups, folks trading stories about where to get the best drinks and cheapest food, and the abundance of women with surgically enhanced breasts waiting to board my flight.
  • Judging from her makeup, I'm pretty sure the San Jose gate agent is moonlighting as a Las Vegas showgirl.I'm pretty sure I'm the only person on this flight who won't be getting off the plane in Las Vegas.
  • We haven't even boarded and I've already heard a "lost wages" reference.
  • There are nine of us going on to Albuquerque. So it's guaranteed that the other two people in my row are among them.
  • When the pilot said it would be "bumpy" going into Las Vegas, he meant, "We're going to re-enact that part of Voyage to the Bottom of the Sea where the SSRN Seaview collides with the giant sea creature."
  • Always interesting when the airport shares a runway with the local Air Force base, as is the case in Albuquerque.
  • Brian's hotel is full of college students attending an indoor track meet at the convention center next door.  Reminds me of basketball tournaments at the (then) Reno Hilton.
  • Why am I always nervous before I go skiing?
  • Special thanks to my hairdresser for telling me about the Bavarian House in Taos.  It was definitely worth the long ski run to get to it!
  • As we sit outside at the Bavarian House, I realize that my beer is getting colder as it sits waiting for me to drink it.
  • Skied down several mogul runs… not by choice.
  • Perfect timing: we're both ready to stop skiing at 2:30, just as the snowfall picks up and the mountain disappears under the weather.
  • Even at 25, I still have to talk Brian off the ledge occasionally.
  • The New Mexico highway rest stops are nothing to write home about.
  • Bighorn sheep crossing—now that's cool.
  • But our favorite: the "cow crossing" signs with added "UFO crossing" decals.
  • You can't beat New Mexico architecture.
  • Either there are a lot of empty houses around, or there are a lot of people that only spend the summer in New Mexico.
  • It's odd that the food in New Mexico is great, but there's really no "fine dining" experience.
  • There's Mexican food, and there's New Mexican food, and they're not the same thing.
  • Your basic choice: do you want red or green sauce with that?
  • Who knew there was a local New Mexico wine industry?
  • Brian (after we've driven through Santa Fe and the snow is blowing sideways): "Siri, get us the hell out of here!" Siri: you should take up your existential questions with someone more qualified than me, preferably a human."
  • As the weather front descended on us while driving back to Albuquerque, Brian and I both thought of the alien space ships from Independence Day.
  • The turn-by-turn navigation app clearly has not mastered Spanish pronunciation.
  • Why does the female voice in the Albuquerque Doubletree elevator have a British accent?
  • Leave it to Brian to know the names of the New Mexico congressional delegation, and be able to pick them out of the list of people waiting for a first class upgrade on his flight back to Washington.
  • You can't beat traveling with your adult children.
  • The storm has passed through Albuquerque and is headed east. Me, I'm headed west thank you!
  • Ah, San Diago, whales va….
  • I can't wait to do this again.

Out With the Old

I realize that most people don't get sentimental about telephones; I'm just a little weird that way.

M2616

This little gem, a Meridian M2616 phone, has been my companion at CGNET for the last year or so.  And the Nortel Meridian 1 Option 61 it's connected to is one that I helped CGNET pick out way back when.  They needed a system that could handle more than a dozen Primary Rate Interface connections, to support a voice-over-frame-relay service they were offering.  And since I was the guy in charge of PRI at Nortel, I had a vested interest in seeing this baby work.

Good times, yes.  But all that talk of "multimedia convergence" from back then has caught up with CGNET.  In today's lingo, it's "Unified Communications."  

And so we've installed our Microsoft Lync 2013 system, which provides for instant messaging, "presence," and audio and video calling.  So my phone, pictured above, is being retired in favor of a Jabra headset and Lync software client:

Lync client

 

The sentimental part of me hates to see the Meridian gear retire.  But I have to admit, I love the new Lync capability.  For instance, I was just on the phone with a business partner and was getting ready to say, "I'll have our tech lead call you."  That would have delayed getting the information he needed to get something set up for me, something I wanted to start Monday morning.  Instead, I checked my Lync client, saw that our tech lead was available, and clicked a button to conference him into the call.  We had our discussion, and everyone has what they need to keep our project going.  I love it!

I can already foresee the death of that phrase, "I'll try to transfer you now but in case I lose you..."