Fragmentation in the mobile market

At last week’s Web 2.0 Summit in San Francisco, Morgan Stanley’s Mary Meeker gave an insightful talk on the economy and internet trends.   She asserts that the mobile internet will be bigger than most people think.  Her slides are here with the ones on internet trends beginning on page 28.  Let’s look a little more closely at the complex, rapidly morphing telecoms market – where the action is now largely in mobile devices.   For a pithy overview of the telecoms industry, allow me to copy from that industry’s changes as cited by the eComm conference in Amsterdam that is concluding today:

• Telecom is becoming software
• Today’s model of the telephony and SMS cash-cows will significantly dry up long-term
• ”Phones” are becoming general purpose always-on computers
• A march is underway to change how spectrum is allocated and utilised
• Applications innovation is being democratised
• The media industry is converging with personal communications
• Internet-style ecosystems are starting to pressurise the traditional value chain
• Search engines and computer manufactures are encroaching into the space
• App downloads; media content and even communication streams are increasingly routing-around operator’s billing systems
• The telecom kingdom is fragmenting daily.

What is a supplier to do?   Let’s look at smartphone operating systems and the Symbian operating system in particular, backed by the likes of Nokia, Sony Ericsson and Samsung, and as of this year,  an open source venture.  Speaking on the subject of innovation at a London’s  Symbian SEE 2009 show yesterday, noted author Geoffrey Moore declared that the only recourse for members of the Symbian ecosystem  is to copy as fast as they can the innovations made by Google and Apple, commoditize those innovations, and use Symbian’s huge installed footprint to turn the tables on its competitors – or lose share to Google and/or Apple.  In other words, copy Microsoft’s strategy when faced with the upstart Netscape and use its platform to commoditize and integrate its competitors’ functionality. His slides are here.

Moore also predicts that there will only be one winner amongst smartphone mobile operating systems.  He expects that within two or three years we will see which one will reach a critical tipping point. In Symbian’s favour, Google he said is disadvantaged by attention deficit syndrome – it keeps on innovating and has trouble concentrating on anything long enough outside its core advertising/search business.   Apple he claims prefers to occupy prestige brand positions.   Microsoft has problems breaking out of blue collar mobility.

Whilst copying competitor innovations and leveraging a huge installed base may help guard aganst some encroachment, I am not so sure we will see a consolidation in the near term.   I suspect mobile ISV’s will continue to have to port to several OS’s for the next decade if they want to grow from tens of millions of dollars turnover to hundreds.   Mobile infrastructures vary widely between regions and consumer profiles.  Where Japanese demand high sophistication, developing countries need inexpensive basics.   An elderly person is likely to use a different handset to that of a much younger facebook, YouTube addict.  The sheer size of the smartphone market, diversity in use types and supporting infrastructures have made it possible for different mobile business ecosystems to thrive, unlike the simpler and smaller early PC era that Moore often cites.  There is room in the mobile market for diverse approaches, devices and ecosystems – so fragmentation will probably continue for at least a few more years.

Finding Microsoft Partners in the Undergrowth

If you look at a list of partners sorted by size of partner, major vendor’s partner ecosystems usually look like very flat pyramids.  They will have a few very large partners, companies that may be of the same size or exceed that of the vendors, and a large number of companies that are smaller - many very much smaller.  For smaller partners, acquiring new customers is challenging.  Based on a study I did recently, the smaller partners value very highly the traffic and leads generated from a vendor’s site.  

For vendors with a partner network in the tens and hundreds,  it is usually pretty easy it put together a simple to use  directory that connects prospects and partners.  Microsoft, on the other hand, never seems to get this right, in spite of the fact that partners are its main route to market. Having worked on a number of projects for Microsoft and Microsoft partners, and prior to that for Microsoft competitors, I have always used their partner directories.  Though I appreciate the depth and breadth of their ecosystem, I have always been baffled at the company’s inability to classify and serve up partner information in a way that is simple enough for ordinary customers to make use of.  Their latest attempt, Pinpoint, which overlays results on a map is still off the mark.  Because the partner network is so vast, the task of accurately pigeon holing each and every partner never seems to get addressed.  And it is a poor showcase of their technology.  Perhaps as part of their ecosystem revamp, this gap will finally be addressed.   Meantime, if you need to find a reliable Microsoft Partner for hosted messaging, I can recommend a very good one.

Facetime with partners

Like a few other vendors, Novell cancelled its partner event, Brainshare, this year and has announced that it is reviving that vendor/partner meet.  

In speaking with technology partners, particularly ones from Europe and Asia, I am often told how much they value networking with other partners, learning what solutions work for partners in other regions, learning what overall trends are likely to affect their customers and establishing a personal, trusting relationship with vendor sales, marketing and technical personnel through face to face dialogue.

A year’s hiatus is not too bad a thing – it makes people on both sides of the fence realize the importance of that mode of learning and personal contact.   No newsletter, webinar, account visit, training class, let alone blog or tweet can come close to the hurly burly, frenetic, serendipitous speed dating that occurs when gaggles of partners mingle with other partners and their strategic vendors.  It is the fastest way to build a trusting ecosystem and has a high ROI where companies depend upon indirect channels as significant routes to market. That ROI is all too often not measured (one of the things my company can do) in terms of partner loyalty and pipeline which is one of the reasons why partner events suffer early blows from the accountant’s axe when sales turn south.  It is like turning off your email system and handing in your mobile phones to save costs. It is a direct communication medium, just as essential to a healthy indirect business, as those media we regard as fundamental utilities.

Changing a Partner Program & the New Microsoft Partner Network

 Partner programs grow like coral reefs on steroids, rapidly accreting new forms, morphing into shapes that bear no resemblance to the outcrop that provided its original bedrock.  Microsoft’s program is such a reef, providing shelter and structure in a diverse ecosystem of partner types and business models.  Every so often a program needs a refresh, a shock to take it to the next level and it hopes that changes announced last week at its Worldwide Partner Conference will do that. Microsoft cannot hope to broaden its partner base – it already has 640,000 businesses within the program – the majority of all companies serving other companies in information technology.  The issue is quality not quantity.  There are already 16,400 Gold partners, the highest level of achievement within the program.  To differentiate within that level and the middle, Certified tier, Microsoft currently has 46 competencies corresponding to different sets of products or types of services and business models.   It wants to raise the bar. Microsoft, like many other companies could create a higher, platinum tier, but that would further complicate the program. The company has as one of its aims to simplify as well as purify the program.  

Partners want certainty.  Anytime a program changes, whether or not it will, in the end, benefit the partner, stresses a partner’s business.  Every new benefit proposed by a vendor always comes with a price tag, either explicit, or implicit in time, focus and energy.

Customers want certainty.  A vendor’s seal of approval should be a good indication of future partner performance.  When a partner’s program changes those changes need to be communicated and embedded in customer minds. 

And vendors want certainty that their interests and the end user’s interests are in balance and being well served.

The first change the company announced was a rename of the program itself, from the Microsoft Partner Program to the Microsoft Partner Network,  a more partner focussed sounding phrase.  Partner to Partner networking is a benefit of most partner ecosystems.  As Microsoft put it, “We want to create passionate communities where partners share best practices, spark innovation, and discover opportunities to serve customers better.”

The second change is that, by November, Gold partners must have participated in the Microsoft Customer Satisfaction Index (CSAT).   The index (or indices as it is a composite of scores) is flawed.   It is purely quantitative and relies on getting respondent details third hand. Four times a year, a request to participate in the survey is sent to contact email addresses provided by partners wishing to participate in the CSAT program.  Firstly, because Microsoft does not know who the significant influencers are in most of its end customers, it must rely on partners to supply those names.  Because partners perceive they have a vested interest in getting high CSAT scores, and because Microsoft has a vested interest in viewing individual partner scores, partners are more likely to provide details of satisfied customers.    Within partners, usually only the salesperson knows who the supporters (and detractors) are.  Salespeople are likely to be asked to provide contact names.  As individuals they have a vested interest in providing only the details of happy campers.  Plus account managers are likely to “assist” a customer to fill out the survey.  Secondly,  gauging satisfaction and loyalty in a changing business is complex.  It is in no way as straightforward as it is with individual consumers.  Relying on quantitative indices alone is foolhardy.  Raising the competence bar is a much better way of ensuring that customers are being served well.

To signal that the bar is being raised, Microsoft is changing the name of the two higher tiers, from Gold Certified to Advanced Competency and Certified to Regular Competency.   One question every vendor should ask before changing a program is this, “Will this change deliver more value to end customers?”  Because end users are used to the Gold Certified and Certified labels, the new names deliver less value in the short run.  If the competence of partners rises substantially in step with the name change, then in the long run, it may be a good thing.  The jury is out on this one.

Microsoft is also reducing the number of specializations from 46 to 30 and (thankfully) simplifying how they are known.  For example, “Custom Development Solutions competency with Application Infrastructure Development specialization” becomes “Software Development”.    The five specializations under Microsoft Business Solutions competency (e.g. “Microsoft Dynamics AX specialization”) become “Enterprise Resource Planning.”  Throughout the program, Microsoft has adopted the same principle of simplification and translating into a language that is meaningful to customers.  That is common sense and a signal that Microsoft is getting more in tune with its end customers.

But is Microsoft raising the partner quality bar, or is this just window dressing? Beyond compulsory participation in a customer satisfaction system that can so easily gamed, and language, how are these changes going to deliver more value to the end user?  At first glance, most of the competency requirements – technology exams and customer references –  do not appear to have changed.   There are lessons here for any vendor building end customer value through partner routes to market.

Linkedin and Sales Channels

As technology partners tend to be early adopters of some types of social media, I thought it might be interesting to look at how some individuals working in technology partners are using social media.  Now, I have railed on about small samples with big pretentions, but I thought I would share with you some crude observations of the  first 109 individuals I looked at.  They were from around the world working in various job functions in companies varying in size from large enterprises to medium sized businesses, with an even split between those with technical, sales and line management roles. There were 17 individuals from APAC, 48 from EMEA, 1 from Latin America and 43 from the US.  I only looked at whether they had a LinkedIn profile and how many contacts they had.  I may broaden this to 500 individuals, time permitting, to get more a accurate picture.  Though some individuals on LinkedIn keep their profiles hidden, revealing only their job function, I knew enough about these people’s responsibilities  to know there were none like that in this sample.

In the US, 23% had no profile, whilst in Europe that figure rose to 40%.  Of the 6 Germans in the sample, none had LinkedIn profiles.  Checking on Xing, which originated in Germany, I could not find them there either.  Likewise of the 9 people from Singapore, China, Japan and Korea, none had LinkedIn profiles.  In India, France and the US there was much evidence of use.  In the US, of those who had profiles, there were on average 64 contacts, whilst in EMEA it was 65.  The crude observations are these – LinkedIn is popular in India, some European countries and the US.  Penetration is low in most Asian countries and Germany.

How is LinkedIn being used? One can surmise that the most obvious reason contact lists are built  is because people wish to feather their nest in preparation for a company switch, but many people use it as a glorified contact list. As with Plaxo, you can be fairly certain that if someone changes company, you will still be able to get in touch.  But are they using it, as headhunters do, to prospect – to look for contacts of contacts?  I am told that is how it is being used by some partners.  A recommendation from an existing client is a powerful endorsement – but why not just ask the client directly instead?   Perhaps the best endorsement they make will be a phone call to another decision maker not on LinkedIn.