RIAA Asks Court for $4.5 Million in Copyright Case

There’s a trial happening this week in a Rhode Island federal courtroom that would be comical if it wasn’t so sad.  The Recording Industry Association of America (RIAA) is suing a Boston University graduate student for copyright violations when he downloaded 30 songs from an illegal file-sharing site.

No one disputes the ownership of the copyrights in this case but the case brought by the RIAA is a borderline psychotic episode in the formation and destruction of markets that happens in any economy.  The RIAA sees a simple copyright infringement but what’s really at stake is a business model that is on court mediated life-support.

As most people who have not spent the last six months in Tibet know, the record industry’s business model of selling songs burned into CD’s has evaporated in the face of digital download from legal sites like iTunes and illegal sites too numerous to name.  The RIAA has chosen a legal route to protecting its intellectual property (IP) rather than innovating by embracing technology that would make it possible for customers to behave in a legal manner rather than as pirates.

No amount of legal maneuvering will change the direction that the market is dragging the RIAA in.  Moreover, RIAA’s vindictive prosecution (What else can we call it?) of a penniless graduate student is most likely doing much to impoverish his parents.

For what end?

The marginal cost of producing a copy of a song in the digital era is, what?  Nil?  If so, can it really be said that even this illegal download harmed anyone?  I know the counter argument is that if everyone does it, all of a sudden there is no market, no incentive for artists to invest their time and talent in making music.  But I disagree.

In “Free: The future of a Radical Price” Chris Anderson argues that producers of goods and services will increasingly adopt free as the base price to induce customers to purchase upgraded products and services.  Already in the music industry, some artists are giving away their songs to build customer lists that they can then market to.  The marketing takes many forms from selling tickets to play dates and events to soliciting ideas for new compositions.

In the free approach, we see a network forming that consists of artists, consumers, venues, and possibly record labels though when the marginal cost of producing a copy of a song is nil it means the record companies have to figure out a new angle.

That’s what the RIAA case is really about.  The RIAA is dead in the water, out of innovative ideas for engaging with its customers so now it is cannibalizing them and it is a disgusting sight.  Regardless of the outcome in court I hope the defense has the wits about them to sell the movie rights to this story.  Better still, if I was studying filmmaking right now I couldn’t find a better subject for a documentary.

On-premise strength

I am hearing from vendors that their on-premise CRM sales in the early part of this year are pretty good.  No one has briefed me ahead of their earnings calls but the results from late last year and Q1 seem to be pretty good.

I should probably wait until the numbers for the last quarter come out from the vendors but I’ve seen enough to call an obvious trend.  Despite the robust growth we see in SaaS software, the market in conventional on-premise CRM software is still very good — at least from the revenue perspective.  It’s not surprising — there are a lot of enterprises that are still wedded to the on-premise model.  On-demand’s growth is great but it comes off a smaller base.  There are multiple factors to consider here.

First off, there is the issue of net new business and up-sell business such as a customer adding seats or adding modules.  That all counts but once a company elects to go with a particular kind of solution (on-premise or on-demand) it will be much less likely that the company will flip.  Not saying it doesn’t happen, it’s just not highly likely.

Then, there is the software category to consider.  There is a great deal of demand in the call center for on-premise solutions but I think there is a division developing.  Small call centers might be more receptive to an on-demand solution.  For example, very large call centers — north of about 500 seats — can make a good case for an on-premise approach.  That many seats can be accommodated by a SaaS solution too and I expect that in the future we’ll see many more call centers going on-demand.

Some of the big factors for on-demand call centers are the cost of real estate and the availability of workers within a geographic area.  I fully expect that as the economy recovers we will again see gas prices north of four bucks, which generally means that the ride to work is going to become more expensive.  Call centers hire people at the lower end of the pay scale and these people will feel the hit more acutely.  So my thought is that on-demand distributed call centers will be on the rise to accommodate the commute.  We could even see a surge in the number of agents working from home.

But back to the staying power of on-premise CRM software.  Based on the numbers I have seen, the conventional vendors are still bringing in a lot of revenue.  What I am not seeing is apples to apples comparisons.  Too often we compare the revenue from deals for on-premise and on-demand as if they are qual.  After all revenue is revenue, right?  Not so fast.

The on-demand guys only report current revenue, not what’s coming in year two or three from the deal so their revenue looks smaller than a big licensing deal where all the cash comes in at the beginning.  If you compare the revenue numbers from each kind of vendor you might get the impression that the on-premise guys are light years ahead.  I am not saying that they are not light years ahead, but counting seats would be a truer measure of success when comparing on-premise and on-demand vendors.  Those people responsible to sizing markets would be wise to consider seats as well as revenue.

If the call center is one of the strong points of premise-based CRM then sales and marketing might be the place where on-demand shines.  Again, there are a lot of organizations that use premise-based SFA but even vendors like Oracle, who offer both flavors, report strong results for their on-demand solutions especially where a customer might decide to run both.  For different reasons sales and marketing seem to be more at home on the Web.

SFA has become a very mobile application with sales people using their BlackBerries, iPhones and other smart gadgetry to do their work.  Laptops and desktops are still in the mix but it makes the most sense to use an application that spans all the platforms.

With some minor exceptions sales process and marketing applications seem to be the best of breed standouts.  Suite vendors do not seem to have figured out marketing to the degree that independents like Kadient, Manticore, Eloqua, Market2Lead, Omniture, iCentera, Savo Group and many others have.  The notable exception seems to be Oracle with its gadgets and widgets.

So as the market sizing season begins and earnings are announced my single plea would be to get all of the reporting bodies to show us the seats.  I know Wall Street wants revenue but my view is that revenue is increasingly becoming a secondary indicator.

Agita

Microsoft’s difficulties with delivering software continue.  Internet Explorer version 8 (IE8) is the latest example.  An article on ZDNet today said the company plans to ship a patch to users.  I have to say that the company has usually taken a pro-customer and pro-CRM approach to dealing with customer problems.

Last week I downloaded an update to MS Office for the Mac (version 12.20) only to discover that it would not open any of the new file formats like .pptx.  I found that incredible — their proprietary format and they can’t open it!  I had been working on a presentation in .pptx for several weeks and it was due the day the upgrade failed.

Not to worry, I tried to down-rev the update by going back to an automatic back-up I keep on my Time Machine.  If you don’t know what a Time Machine is, you should.  In that one device there is a routere and a large server grade disk.  The Time Machine does automatic back-ups while I work with negligible overhead.

I had never used the Time Machine for a restore before and didn’t know how to do the restore.  I called Microsoft and got several pieces of good news.  First, the support call was free because it involved a known problem that was Microsoft’s fault.  Second, the people in the call center are Mac experts and my agent was able to walk me through the process.

That’s great as far as I am concerned.  What started as a great deal of agita for me ended with real satisfaction.  Nonetheless, it would be very nice if Microsoft could get out of the graceful recovery business and back into the business of making bulletproof software products.

NetSuite summer announcement

The headline on the press release read: “NetSuite Offers Sage Partners Major Incentives to Begin Growing their Business on the NetSuite Cloud” and I figured, it must be summer.  For the last few years, Sage has announced an offer like this.  For the last couple of years it was a take away program for salesforce.com customers.

I like NetSuite, they offer a good package of ERP and CRM software delivered as a SaaS service.  They’ve made a lot of smart moves in the last couple of years including their IPO (which was not just smart but brilliant) and an apparent decision to move up market from their original SMB focus.

Going after larger companies made sense because I think NetSuite found out that their then target market didn’t have all of the resources — human and financial — needed to implement such an all-encompassing suite of software.  Though the product is good, any ERP implementation comes with a great deal of thought work that’s needed to rationalize business processes before automating them.  I think some small companies just choke on the effort.

Now it looks like NetSuite is trying to go after the SMB space again, this time with a full court press on Sage’s partners.  Just as I like NetSuite I like Sage too.  As a company Sage certainly has product and partner issues, but any company does.  What’s interesting to me about the NetSuite PR is the hyperbole it exudes.

Though the PR has several quotes from Sage partner take-aways the text is over the top.  One paragraph starts with, “NetSuite expects this program will find a warm reception in a Sage channel partner community wracked with fear, uncertainty and doubt about the future of on-premise applications…”

Wracked with fear?  Really?

I have to say I used to wonder about Sage too and about when they’d get their SaaS act together.  They’ve been late to the party, but not AWOL, they have products, especially in the CRM world.  Lately, though, I’ve concluded that Sage might know something about the space that I’ve been missing.  It’s a rather conservative market from the perspective of new product adoption.

The obvious success of SaaS in CRM may be enough to move the ERP partners but maybe not.  Undoubtedly some will move, the PR is proof of that.  But building a successful partner program is something that takes a great deal of investment in time and money.  And although NetSuite has been in the partner business for some time already, I think they’ll have to execute very well to make in-roads here.  It’s a conservative market and it’s summer.  In a recession.

As the Zen master says in an old joke, “We’ll see.”

Selling Thought Leadership

This spring and early summer have been fertile times for social media and CRM.  The traveling shows, Sales 2.0 and Enterprise 2.0, made stops here and each had some interesting ideas on offer.

For sheer completeness I tip my hat to Enterprise 2.0.  If you are wondering what the Enterprise 2.0 fuss is about it’s considerable and it relates directly to social media and ultimately to CRM.  Netting it out is difficult but here’s an attempt.

As corporations flatten out some of their decision making authority goes down closer to the customer and some of it evaporates to be reconstituted on the customer side.  Rather than a traditional command and control or hierarchical organization structure we end up with something more like a network.  Social CRM is the front office analog.  Social CRM aims to have more direct conversations with customers rather than attempting to tell them what to do.  You could get all of this from a wonderful book, “The Cluetrain Manifesto” published in 1999.

As is typical of big concepts, it took about ten years for the seminal ideas in “Cluetrain” to percolate to the market.  But now that the ideas are here they are leveraging things like twitter and Facebook and other sites to remake the corporate landscape.  Beyond that they have the potential to remake our lives too.

With all of this as background, I have been thinking about the implications for CRM for a long time.  What might seem intuitively obvious may not be and there are many ideas lurking that have not bubbled up yet.  For example, you might think it’s a slam dunk that social networking would make for a great conventional marketing tool but there I think you’d be wrong.  Some people are advocating for social media as if it was e-mail on steroids.  Sure, you can reach a heck of a lot of people for zilch with social media but there’s reach and then there’s reach.

In truth social media is about intimacy built on trust which is why spam doesn’t work with e-mail and why trying it with social media will be a colossal flop.  But social media is good for marketing and sales if you — the marketer and the seller — can build trust over time and become what I refer to as thought leaders.

In a revision of Andy Warhol’s famous dictum that in the future everyone will be famous for fifteen minutes, someone (wish I knew who) recently said that with social media everyone will be famous to fifteen people.  That’s pretty clever and it goes to the heart of thought leadership.  Think of your Facebook friends and your twitter contacts and there are probably more than fifteen people on your list but  the number is small by cosmic proportions and that’s the point.  You are, to one degree or another, already famous to a tight circle of people, some of whom you know well and others you hardly know at all.  But they respect you and your opinions to some degree and that’s probably much more than they know or respect some corporation or politician.  You can use this in business with social media.

The challenge for sales and marketing is to learn how to tap into these circles of trust without violating anything or anyone.  We know this intuitively and it’s why spamming won’t happen in social media — it will not be tolerated.  With that in mind the new model for selling is leveraging social media to disseminate thought leadership.

We already know that people think about and discuss purchases with their friends and acquaintances long before they enter a sales process and the trick will be for sales people to be seen as truthful sources of authoritative information in their own territories.  Thought leaders, in other words.  That’s not easy but it can be done, but it can’t be done using old methods.

How often do you get links to things on the Internet and what are those links for?  There are many links for articles but increasingly those links lead to other media like pictures and video.  I think that is a big hint.  The modern sales glossies, white papers, brochures and Powerpoint slides are all of another time — the era of hierarchical command and control.  The era of broadcast advertising.

My hypothesis is that much more of this material will find its way into low cost and easily produced video and ultimately I would not be surprised if it also included music.  Your favorite TV shows have theme songs so I don’t think this idea is that far fetched.  (I also have two kids in music school who will need jobs someday.)

Taken as a whole I think this gets us to the idea of selling thought leadership.  You can’t expect to sell anything until you have convinced the customer of the correctness of your line of thought.  Today too many vendors are letting random chance do the educating.  That’s going to change.

Birth of the new

Note: Historian William Manchester once described 1968 as the year everything went wrong.  Hard to dispute that.  Two assassinations, riots and a pointless war added up to a meltdown.  If’ ‘68 was all of that (and more) then 1969 might be seen as the beginning of what we think of as modern and our first attempts to put it all back together. The first fruits of the great technology shift were evident in the moon landing and the generation that would make technology so much a part of modern life found its voice.  Like the Big Bang, the echoes are still all around us.

What a summer for remembrances.  Forty years ago a couple of people landed on the moon and a half-million of them landed on Max Yasker’s farm in upstate New York for the Woodstock festival.  That might sound like ancient history but of course without the space program who knows where the technology industry would be today.  And the people who propelled the industry in its early years, and even today, were largely of the Woodstock generation.  Hold those thoughts.

Closer to home, this year also marks the first decade of the Cluetrain world — ten years since the publication of the “Cluetrain Manifesto.”  I was re-reading it on the beach the other day.  It’s a seminal work and not exactly beach reading material but with the perspective of ten years it was interesting to consider it in context with our love of technology and the aspirations of the Woodstock generation.

It seems to me that the last decade was mostly lag time between the ideas embodied in the book and the reality of today.  Along the way there have been many false starts and wrong turns but what fascinated me most is this: Despite Cluetrain’s ample warnings that people want to be treated like people, not some demographic to be marketed at, corporations enabled by CRM and its related disciplines disregarded the warnings.

Sound too harsh?  Maybe it is, but not by much.  Did the Woodstock ethos melt away or was it simply submerged?  I think it was submerged waiting for appropriate technology.

The early years of CRM were heavy on management and light on everything else.  SFA quickly became a tool for managing sales people more than deals, call centers too often became places where calls went to die and call handling time became a metric.  And marketing automation?  An accounting system to manage marketing spend.

Then something wonderful happened, something that Cluetrain alluded to but could not predict because it was an unknown unknown.  Social networking evolved rapidly and made it possible for the Internet to deliver on its promise, which looks a lot like an incarnation of some of what was best of the Woodstock era.

Ten years on (I could have said ten years after but I didn’t) we have Twitter and Facebook, Linked-in, MySpace, YouTube and a lot more ways to share ideas.  In the short term, it gives life to Bill Gate’s observation that we overestimate what we can do in two years and underestimate what we can do in ten.

More importantly, social computing is finally changing the ways we live and work — ways that are at once profoundly human, surprising and humbling.  Technology, both social and otherwise, is destroying industries that were once pillars of our civilization.  The Internet is eroding the revenue base of newspapers, magazines, radio and television while social media makes all of us the heroes of our own lives as bloggers, innovators, arbiters of taste and product reviewers — and that’s just in our private lives.

Our work lives are nothing like those of our older peers who can easily remember a time when not even a fax machine was part of regular business.  We are enormously more efficient and productive and in more normal times these traits drive phenomenal economic growth.  We communicate — asynchronously most of the time — with the expectation that others in our circle will receive and respond if our thoughts are interesting.

And the corporations we work for and buy from have at last gotten the message that our attention and loyalty can not be taken for granted.  We are not out of the woods yet.  Too often people and corporations take the view that the new social technologies are things to be bolted onto old ideas and the result will enable them to sell more and faster.  But that’s not where we are.

We are at the point of a great paradigm shift — actually many shifts, which is makes these times so interesting.  With so many iconic companies and whole industries teetering, we are at the point where the Woodstock generation thought they were.  Energy, finance, communications, transportation, food, healthcare and who knows what else — a perfect storm — all need to be rethought to one degree or another.  The thing that unites these efforts is how to reorganize the relationship between producers and consumers, vendors and customers, and us to ourselves.  What a great time to be in this business.

Reading tea leaves and headlines

The headlines in Thursday’s New York Times give force to the notion that the recession is, if not ending, not getting worse.  Employment is always a lagging indicator and there is no good news on that front but leading indicators such as profits at investment banks and some good profit news from tech heavy weights are reasons for hope.

The headlines most interesting to me:

Google’s Profit Surges as Advertising Stabilizes

IBM Raises Guidance, Profit Blows Past Forecasts

JPMorgan Earnings Soar as It Finds Profit in Slump

That’s all good but it helps to keep in mind that the bad news of earlier quarters was built into these items.  In other words, some of these reports had as their foundations steep loses or small forecasts from the beginning of the year.

Most interesting to me is the Google and IBM news.  These items suggest some thaw in a long winter in the tech sector and give reason for optimism that the second half of the year may be better that the first.

Newspapers: Fixing the wrong problem

There’s this old chestnut about the light at the end of the tunnel — you have to beware that it isn’t an on-coming train.  I feel like I am watching a slo-mo train wreck in the newspaper industry.

My local paper, the Boston Globe, is owned by the New York Times and like most American papers it is in tough financial straits these days. The parent company told it to cut costs or else and the typical response was a pay cut for Globe employees.

I say American because newspapers are thriving elsewhere and publishers charge about three times the American rate.  And would you believe it, Americans aren’t even close to the top of the heap in per capita readership.  But I digress.

Ok, times are hard.  I get it.  But we are not simply watching a financially constrained company deal with reality, here.  We’re watching as some executives try to preserve an old business model rather than adapt.  Ad revenue is being slurped up by more nimble technology situated on the Internet.  Everyone I talk to implicitly understands that the solution to the papers’ woes is to charge for on-line content.

It ought to be a no-brainer.  Most papers including the Globe already have a Web presence so the issue is not whether but how to tariff for it.  I have written elsewhere that this is a manageable problem.  Good, fast, cheap on-demand software already exists from companies like Zuora and Aria to name two that enable on-line billing and payment.  No big deal, you could implement a newspaper’s Web billing plan over a weekend and then begin the gradual process of moving customers over.

So what did the Globe do?

They built a new Web interface powered by Adobe Air and began promoting a downloadable application.  Apparently the thought is to provide store and go capability so that customers would not stay logged in all day.

Normally I try to follow mom’s advice and not say anything rather than something bad but this is beyond stupid.  First, it solves a problem no one had.  We can all read journalism from any number of papers without a special reader.  We login and sometimes stay logged in because that’s how we get breaking news.  In fact, one of the important benefits of on-line papers is immediacy, the Globe ought not to be worried about logins.

Next, and most obvious, several surveys I have seen indicate that a sizable population gets it and is willing to pay for the content.  The Globe should not be so concerned about turning people off with fees.  Most of us understand the benefit of convenience that comes with on-line news.

Finally, the Globe has invented what may turn out to be the world’s greatest buggy whip.  Ten or twenty years ago a reader might have been a good idea.  That was an era of dial-ups, VPNs and such.  In the ubiquitous computing era bandwidth isn’t much of an issue.  What is, is the Globe’s balance sheet which would be helped immeasurably if the Globe and the Times simply cut to the chase and began charging for their content.  The need is there, so is the technology but for some reason, leadership and intestinal fortitude haven’t showed up for work.

Praise for the establishment

I know I’ve been hard on some well established software vendors recently and to ensure that you know I am not on a crusade I thought it would be interesting to review some of the good stuff they’re doing.  I am especially interested in Microsoft, Oracle and SAP.

Microsoft

A year ago I ditched my Windows XP machine in favor of a Mac and I have since bought three more Macs — I gave one to my mother-in-law and I have to say it and she have been great.  She’s apparently gotten what she needed in the way of quick practical advice from their support team and only called me once or twice.  She’s in her 70’s too.

All that aside, Microsoft may have disappointed me with Vista and XP — I wasn’t pleased that my old computer sank under the weight of all the Internet junk that crept into it — but Microsoft Office on the Mac is a very good product.  So there.

Apple makes iWork, also a very good office suite, but I just wasn’t ready to go there.  I dabble with it, especially Keynote, a presentation package that’s in some ways better than Powerpoint, but mostly I am a loyal Office user.  I need to get familiar with Google apps but that’s another story.

Microsoft also just announced that they’ve got more than a million users on their CRM system.  That’s good but before anyone makes claims of superiority, please recall that it was the first million and the second million users that made the market and they were harder “gets” than later millions.  Microsoft’s CRM customers represent later adopters and while a license is a license is a license, it must be said that later adopters are in many ways easier to get than early adopters, especially if the vendor is also new like Siebel and Salesforce were.

Microsoft CRM has some interesting characteristics though I still see no point in offering hybrid solutions that can run on-premise and on-demand.  I understand the debate about how some customers might not be ready to go on-demand and that’s fine.  Just don’t tell me that on-demand is just a delivery option.  On-demand is the future, the twenty-first century and the gateway to ubiquitous computing.  That’s not just a delivery option.

OK, so I am trying to praise Microsoft, and I am.  I look forward to their migration to all things on-demand like Office and I hope they get out of their funk of being fast followers.  Following fastly works better intra-paradigm but we are in an inter-paradigm era and that requires real leadership not followership.

Oracle

For a big company Oracle is remarkably agile thanks mostly to the exertions of Anthony Lye.  He’s another fast follower and my advice for him is the same as for Microsoft.

Oracle is an interesting amalgam of companies and technologies but also of cultures and technology eras.  That parent company and founder date back to the emergence of the relational database.  That part of the company still does benchmarks and good for them— we still need speed, speed and speed in databases.  Other parts of the company are a mix of applications and eras the two biggest being ERP and CRM or more generally back office and front office.  It’s all there, a social archeologist’s dream.  I think the big challenge that is taking many years to play out is streamlining all this, carefully winnowing some and backing the right next generation.  A lot of that — but by no means all — is on Anthony Lye’s back.

Interestingly, under Lye’s leadership Oracle CRM has made some notable leadership strides.  They’ve taken an approach to social CRM that I have not seen in many other places.  Their Gadgets and Widgets for things like deal management, loyalty and lead discovery are clever.  They have other ideas too, so I am less inclined to think of Oracle as purely a fast follower.  They will be interesting to watch.

SAP

Of all the companies I know, SAP has one of the nicest array of broad-based CRM products but I don’t think they are effective at marketing it all.  SAP appears to be selling to the installed base which makes sense since they’ve captured so many companies as customers.  I recently met with members of their CRM team and was favorably impressed with the depth of software for the front office even in areas like social CRM.  They’ve got a well thought out strategy for using video too — maybe the best I have seen.  But it’s all premise-based.  SAP’s challenge is to develop some better messaging around their existing products (I think) and to do something definitive on the SaaS front.

On that second point, SAP’s customer leanings and culture (not to mention current practice) indicate to me that they might have more time to get SaaS right.  Their customers seem to me to be later adopters of things like SaaS.  That doesn’t give them eternity to adopt a clear direction on SaaS, just a bit more time.

So there you go, praise for the big guys.  They really have a lot of smart and sincere people doing good things under admittedly hard conditions.  I speak of the difficult contortions one has to make to transition the technology and business paradigms from premise-based to on-demand.  As I noted in the last post, it’s a tough nut to crack — like rent and alimony.

Commoditization

Dan Jenkins, a venerable writer for Sports Illustrated and author of many novels about sport (he wrote Semi-tough, for example), coined one of my all time favorite Texas-isms.  It was a beautiful way of describing something just bordering on impossible.  In one of his books a character says that something is “Tougher than rent and alimony.”  I have long ago lost the context but even today rent and alimony are my acid test of true difficulty.

I never thought it would be possible to exceed rent and alimony for their sheer descriptive power and I believe that time will bear me out.  But to that nifty phrase, I feel compelled to add another idea because it is my observation that there is nothing more difficult than watching a product line commoditize knowing full well that your company must change while being totally unable to.  If nothing else, rent and alimony wins on brevity.

If change was easy in business, then everyone would be doing it but the fact is that it is a Herculean task.  Why else would so many major software companies watch as on-demand technology got better and better while doing nothing or next to nothing to embrace the new delivery model?

I suspect that making the technical argument for change is the easy part of the equation and the hardest part is dealing with shareholders.  As shareholders — and we are all shareholders — we play an interesting game of self-deception.  We intuitively know when change is needed but, nonetheless, we also know that often times, stock in a public company would crater if the market determined that a company’s business model was to suddenly change so that it would make less on purpose.

Far better to let the air out of the balloon in a slow deflation than in a burst.  In a deflation we all play a game of false hope, maybe the balloon will magically re-inflate, maybe we can break even and get our money back — maybe, baby.  In reality it is a one-way trip to exhaustion.  Rather than taking the decisive steps needed to save the company, albeit as a reduced revenue machine, we persevere tinkering with the old products and old business model hoping to forestall the inevitable.  More nimble competitors nibble at our undersides.

There are any number of examples today of companies or even whole industries that could greatly benefit from changing business models despite the negative potential for their share prices.  The first is the newspaper industry.  We are at a silly point in the evolution of news delivery where papers are owned by large corporations that seem to want to protect their business models more than their businesses.

Newspaper readership is in decline in America (though not elsewhere) and parent corporations are nonetheless loath to do anything to change the model of printing the news.  They give away their content on the Web afraid of charging for it despite the evidence that doing so can be profitable (the Wall Street Journal) and that recent surveys show readers are more than willing to pay for content delivered electronically.

I hear the loudest analysts say that electronic content delivery would not replace the revenues from print, but I hear very little about cost reductions in labor, transportation and printing.  There is a solution to this, which is to simply wait until the print news business further deteriorates.  Then some of the largest newspaper corporations might qualify for a federal bailout or the further reduced projected revenues of dying business might balance out with the prospects of the new paradigm.  Conversion would then become a “no-brainer” with no irony intended.

The second example is the software industry and I fear that the American software industry — the jewel in our high-tech crown — might go the way of newspapers.  For despite the fact that we have wonderful examples of forward looking companies like Salesforce.com, NetSuite, RightNow, Google, Facebook and hundreds of others crafting the software paradigm of the twenty-first century we still have too many conventional software companies watching their stock prices.

The conventional companies are big and form the backbone of global computing.  They have names like Oracle, SAP and Microsoft and while some are making good efforts to convert their business models, the tasks are great and some have barely started.  Kudos to Oracle and Microsoft for increasingly offering SaaS solutions.  You can debate whether their solutions go far enough or if they are simply extending the old paradigm but they are making progress.

Microsoft worries me at the operating system and office automation products levels though.  Google’s announcement that it was building a stripped-down operating system that gives small computers just enough functionality to get to the Internet is brilliant though it remains to be seen whether they can deliver.  Microsoft now finds itself on the other side of an equation from its position as the disrupter of mainframe markets.  In the 1980’s we were told that nothing had the power to stop mainframe computing but somehow client-server networks took over.

At risk is Microsoft’s deep penetration in desktop operating systems and office products.  Google has a plan to deliver it all over the Internet — free — which could be a big problem for Redmond.  Of course Google has to deliver but the sheer number of vendors in the SaaS space means that even if Google fails in the attempt, there will be other challengers.  It’s not impossible, but it is rather hard to beat free, so what does Microsoft do?  Wait for the threat to materialize or take action?

The standard playbook says stand pat but as playbooks go it has a disastrous track record.  Time, as they say at Apple, to think different.