What's with the subscription revenue obsession?; what's your synergies?; een huishouden van Jan Steen
This is a long edition. What can I say? The deal here is to empty out my “notebook” at least once a week no matter how short or long. I was in Warsaw for a day this week: Prague and Brussels next, and then not too much until VMware Explore EU in November. I hope.
Octopus getting into a bathtub, at Zachęta, Warsaw | Flickr
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Where does the obsession with SaaS/cloud revenue come from?
Most tech companies (as in companies selling tech, not Facebook & co.) are obsessed with converting their revenue to cloud and SaaS revenue. They want to show that they’re growing that revenue either on its own (the public cloud companies) or that they’re conferring traditional licenses software revenue to SaaS/cloud/subscription1.
Listening to this week’s Software Defined Talk, it occurred to me that I’ve never read why this matters. I was absent this week. Matt and Brandon talked about the ongoing weirdness of Oracles’ cloud growth: they talk about growing revenue but, anecdotally, very few people talk about using Oracle cloud. As Matt points out, if you throw in the revenue of recent acquisition Cerner, you can get a huge boost in SaaS/cloud revenue. But…Oracle had to, you know, spend billions buying it, and is Cerner really “cloud”? Matt says no. (I bet Cerner is obsessed with characterizing its revenue as SaaS/cloud as well!
All those “shenanigans,” as Matt calls them aside, I was thinking: why does it matter? Money is money, why does the architecture of the software effect share price?
I don’t think I’ve ever read an explanation of why financial analysts - “Wall Street” - cares. (This is something Rachel Stephens could write up in a fun way, I bet!)
Us nerds care about that revenue as an indicator of how widely used each vendor’s/cloud service’s2 stuff is. We use to track how good of a job they’re doing in cloud. Is Oracle’s cloud as widely used as AWS, Azure, or Google? We can use revenue to indicate something there…but you can slide too easily into worrying about licensed revenue versus “subscription” revenue. If I pay in a subscription model for a database, but run that database on-premises with manual operations support and developers have to open a ticket to create a new column on a table…that’s not really “cloud” revenue, and who cares or is sold as a subscription or a perpetual license?
What is nerds care about is the architecture of the software in question: is it a cloud architecture (no matter which side of the firewall it runs) or a…not-cloud(?) architecture?
But, listening to vendors’ financial reporting over the years, this move to subscription pricing and business models is really key. I get the feeling that in financial analyst’s spreadsheets, there’s some conditional cell background color settings that mark “subscription” revenue as green and “license” revenue as red.
But…why? Money is money.
You could say that buyers want to purchase subscription models instead of licenses. In my personal IT spending (and yours too, most likely), I hate subscriptions! I want to but the software once and not have to keep paying for it. I think the creatives have aged out of this, but: people got all upset when Adobe moved from a license model for Creative Suite to a subscription model. It means you pay more over the long term! (And whether that is true or not [I’d think so for Adobe’s revenue!], the perception is that it’s a trick to get more money.)
I guess if you said that financial analysts are concerned that on-premises is going to try up in five to ten years - the software’s architecture is going to “expire” and thus people will stop buying it - then the obsession with SaaS/cloud/subscription revenue would be valid. But…come on…are analysts really paying attention to software architecture?
You could say that, like with Adobe Creative Suite, SaaS/cloud/subscription models drive up total customer value (TCV), that is each customer ends up paying more. Which, seems true…but then someone needs to write a memo to all CFO’s that’s like “stop this move to SaaS/cloud/subscription!”
Tech companies need to move to a cloud architecture and delivery model for sure - people want it and it’s technologically better. But there’s something wonky with people getting obsessed about revenue categorization here.
Card Game, David Teniers the Younger | Michael Coté | Flickr
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$200 of an awesome conference
Our annual conference, SpringOne is coming up, December 6th to 8th in San Francisco, CA. I have a talk on my upcoming book (pahmplet - whatever), The Legacy Trap. And there’s all sorts of other good talks on programming, DevOps, platform engineering, but also all that culture and process stuff. We should have the full content catalog posted real soon now.
You should come, it’ll be fun. When you register, use the code COTE200 to get, that’s right, $200 off.
Three Fun Things About Coding
I was asked for some comments on National Coding Week (in the UK). Here’s the rough ideas I sent over.
I miss coding - it was one of my favorite things to do and I haven’t done it since 2005! I enjoyed three parts.
First, figuring out what to do in the first place. It may seem straight forward - you just write code to change the UI in your app, do something like transfer money, or something more exciting. But, really, what you find is that you have to explore what the actual problem you’re solving is, and the best way to solve it. For example, you might think that transferring money was simple: you just make a UI that takes the recipient’s name, bank info, and the amount. This is one way to do it, but figuring out how to use QR codes to do it is much better: then you can email or message requests, or do it right on your phone. You discover what to code by studying how people are using your software and then trying many different things, observing how people use your software, and coming up with new approaches. It’s so much find to explore and discover.
The second part is the actual coding itself. Learning how to write the actual programming languages is fun, learning how the language wants you to think: how do you describe what a “user” is? How do you sequence out transferring money? How do you handle any errors? And then, the act of just writing code that you think work and actually seeing it work is very satisfying…of course, it often takes many rounds of coding and testing to get code that works.
The third part is the best reward: seeing people use your software, knowing that it’s being used and is useful. When you’re writing code you can feel isolated from, well, most everything. But, then when you hear about or see someone using your code, you get a good thrill: something you worked on is useful!
Learning to code takes a lot of time - years to be “fluent” in it. But getting good enough to enjoy yourself and do some basics doesn’t take long ago. The key is to learn to love learning, imagining new ways to solve problems, and continually exploring. All that effort is worth it because it can be so enjoyable, whether in the three ways I like it, or however you get happy from it.
My Content - CONSUME IT
Software Defined Tak #377 - “Coffee is for Closers” - This week we discuss Oracle’s Cloud Growth(?), Starbuck’s blockchain-based loyalty program and André Staltz’s “Time Till Open Source Alternative” article. Plus, some thoughts on free coffee…
Above, The 3 Part Stack to Digital Transformation - when I’m asked to give a brief, opening keynote to set the stage of “all this digital transformation, Tanzu, cloud, whatever it is you do stuff,” this is the talk I’ve been giving of late.
Dagger.io, programable pipelines, platform engineering, and more. An interview with Solomon Hykes, Alex Williams, and me from VMware Explore - There’s a lot going on in the build, pipeline, CI/CD, supply chain space - so much so that there’s all these phrases for the concept. Dagger.io is taking stab (hahahahah…) at builds and pipelines. In this Tanzu Talk podcast episode, Alex Willians of The New Stack and Coté talk with Solomon Hykes to answer the question “what is Dagger?” We also discuss platform engineering, the concept of programable pipelines, and how Dagger wants you to think.
I’ve liked fancier words for “notebook” like wunderkammer or waste book. So let’s try that section name out for a bit.
“In the picture, me going over startup deck #385 for the upcoming PepsiCo Labs Warehouse Automation program.”
I haven’t taken the time to understand tab groups in Safari (especially when it comes to why I’d use them over bookmarks, which I use a lot). So, I’m trying it out to see what the deal is. You can pin a tab which, effectively, makes it a bookmark (it’s persistent). I dunno. Here is macstories on how you’re supposed to use/think of tab groups: “The idea behind tab groups is easy enough: if you find yourself constantly opening a lot of tabs, and if some of those tabs are related by topic or domain, rather than storing all of them in the regular tab bar, you can send them off to a tab group, where they’ll live (and sync) separately from your other, ungrouped tabs. Therefore, tab groups are, effectively, standalone ‘filters’ for your open tabs that help you make better sense of all the tabs you have in Safari.”
“Johnny, are you mean to your own sister?” “Of course!”
I forgot my passport on a recent trip. I had time to bike back and get it. When I got back, I thought, I just need to keep my passport in my backpack at all times because I always have my backpack when I travel. (This is a constant practice of mine: always keep things in the same place/thing: for example, I always keep my keys attached to me, even inside my house. The only time I forget my keys is when I’ve forgotten to attach them to me. ANYHOW.) I was worried about losing my passport or having it stolen if I always had it in my backpack. But then I realized: I have never in 40+ years of life lost my backpack or had it stolen. I am worrying about something that does not exist and it is preventing a good habit. Catastrophizing, albeit on a minor scale.
At some point I need to decide to start living for myself again. To be the one in control of my life instead of my whims and weaknesses, my fears and anger, other people’s priorities. I am always putting myself on hold while I wait for the storm of crap to float past and to the to do list to swap over to to-did.
I read a few years of Tom MacWright’s “recently” posts one morning. They’re the monthly round-up of stuff and activities - life blogging and links blogging as we used to call it. There are many links in this edition from there. I don’t want to ascribe him with any attributes, so I will use the passive voice purposefully here: you’ll see there’s a lot of thinking and linking on the topic of being comfortable with where you are in life: being comfortable with “enough,” rather than constantly striving and being stressed out that you should be working more, achieving more. That is a good theme for people like me who think they should always be working, be more productive, not so much strive more, but achieve more. In my line of work, it means “publishing” more. Instead, one should be more comfortable with calling it, saying “well, I’m done with all that work and have arrived at the point where I can start living, just hanging out.” The problem as I write about something is: yeah, but start doing what? What is the new project I can start working on? And that mentality is exactly the problem: at a certain point of wealth (which mean, more or less, security and stability) and skills and achievements, you can just decide to do…nothing? That also bring the guilt of privilege. If you are “set” enough in life that you can afford to do nothing, perhaps you should start helping others - another project to strive at and be productive in! And there you are again. The Puritan work-ethic really messes us Americans up; in constant, I notice more and more, the European-ethic that stayed on this side of the Atlantic is, more or less, OK with doing nothing. In fact, that is a goal of European life: “cafe culture” in France, the stereotype that that Dutch people leave work at exactly 5pm. You could call this “decadence,” but that belies an American-bias. Perhaps that’s one framing of the reoccurring them in MacWright’s posts: getting comfortable with decadence and slowing realizing that the concept is just a made up notion, that it is usually psychologically damaging.
Meanwhile, the Euro and the US dollar are equal, the Euro having fallen dramatically over the past year. I asked a Polish co-worker why their country had so much inflation recently (yes, they’re not on the Euro) and he said it was because the government spent too much money on welfare (an American word Europeans don’t use - I forget their common phrases for that). And I was thinking: “well, I mean, is taking care of people such a bad goal?” In America, yes. I mental experiment here, especially for my fellow Americans is the ponder the question: “if your economy is suffering because you’re spending too much money taking care of people…what are the morals of your economy and the people who care about it?”
“In this article we’ve highlighted the dangers of technical debt and how it can grow quietly in the forgotten corners of our estate.” (From draft of a short piece on Tech Debt by Bryan Ross)
The bad news is, it takes a really long time to bike to the Amsterdam office. The good news is, it takes a really long time to bike to the Amsterdam office.
There are two reasons I eat too much: I like the food a lot (like Texas BBQ or tex-mex). Or, I am bored (like in an airport lounge, or just passing the time at home). The second happens the most and is the easiest to fix. I SHOULD DO SOMETHING ABOUT THAT. (It should be said, though, that the two chicken thighs I just ate in the Warsaw lounge were tasty. NO REGERTS.)
“Massive and enveloping, like a faded Valkyrie. All that black hair.” -A Murder of Quality: A George Smiley Novel, John le Carré.
Susan Mogul exhibit at Zachęta, Warsaw - a fun way of mixing up mediums, e.g., shopping bags with stories of the pictured item on them. A poster with a short anec-note about herself. Lots of text on things, autobiographical and meta commentary on herself. An obsession inherited from her mother with taking pictures and videos of everything.
Maybe I should use a different picture for every talk I give, whether in slides or when the conference organizers ask me for a headshot. A different bio each time would be fun too.
“Change is, of course, to be deplored, “Nicola Griffith
Festive Family Meal, Jan Steen
What do you bring to the table? A consideration and reminder of the importance of SYNERGIES.
“Instagram Reels Struggles, Meta’s Mistake, TikTok at Code”, Ben Thompson:
cloning isn’t enough. The fact features don’t offer useful differentiation does not remove the need for differentiation: the key is figuring out what else can be leveraged” - in many strategies, people forget to think about what their companies does differently or uniquely has that will make their product/service appealing.
In M&A, for example, you need ask the question: what about having these two companies together will allow us both to make more money than staying separate? If there isn’t an answer, the deal probably shouldn’t be done.
Similarly, when competing based on product, you need to find the “competitive advantage” that your company has: with Internet companies, the existing user base and customer base (advertisers) is often key. This isn’t that great of a long term plan: you need reasons for those customers to stay other than inertia.
As a further thought-playground: what competitive advantage does each public cloud provider have over the other two? I don’t follow public cloud much anymore, so I don’t know: but it seems like not much, at least increasingly. They all sort of so the same thing…?
Private cloud vendors (like mine) use the competitive advantage of an existing user base, the need/want to use multiple clouds instead of just one (“multi-cloud,” or “heterogenous systems management” as I would have said in the 2000’s), and often the kind of skills gap that Lydia Leong pointed out recently. The biggest differentiation that private cloud (traditional) vendors have is the idea that IT never goes away: you always have “old” IT stuff that needs to be managed. At best, it is not even “old” it is just a different type of IT. Retaining users/customers, then, is about helping them (slowly and reliably) evolve that existing IT, as needed. (Keep an eye for my upcoming pamphlet on this topic from a user’s perspective Escaping the Legacy Trap).
There is also feature differentiation here and there, but in the long-term those can be duplicated or just appropriated as Amazon’s infamous practice of freely taking open source data bases and data things shows. However, simply being “better” can be a huge competitive advantage, especially if there are high barriers to your competitors just taking your stuff and duplicating it. For example, again, Amazon, but also kubernetes - something that has quickly eroding commercial value on it’s own: all the stuff you build on-too of kubernetes to make it usable by developers and “enterprise ready” is where the commercial value is. As people quickly find, kubernetes does very little on its own.
Anyhow: when doing strategy and product management, always figure out what you have that is unique, or, at the very least will make customer choose you over your competitors. It’s common sense, but as with all common sense, not followed enough.
Metrics for Digital Transformation BLAHBLAH
I moderated a panel on metrics in (enterprise-y) software development and delivery this week. It was great fun as the three panelist had a lot to say on “the human side.” You should watch the recording. Sure, it’s a webinar and you have to register, but it’s well worth it.
Here’s some background reading I did:
How DevOps teams are using—and abusing—DORA metrics, Bryan Finster - Of course, the most important thing is focusing on business outcomes - is the software useful, achieving your goals? And: ‘improving metrics should never be your goal. As Goodhart’s Law states, “When a measure becomes a target, it ceases to be a good measure.”
His talk on the topic is good.
DORA Metrics: How to Measure Software Delivery Performance - (1) Nice write-up, (2) cool one pager/cheatsheet, (3) NOW THAT’S SOME CONTENT-MARKETING!
The Bean King, Jacob Jordaens | Michael Coté | Flickr
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Relevant to your interests
No more free coffee as bankers return to Goldman Sachs - if your company can’t afford free coffee, something is wrong with their finances and their culture.
Sharing in the presence of computers and corporations - “But how much of Placemark should be open source? And how much should I share? While Placemark has plenty of bugs and problems, there are a few elements which are really good, and they’re good because I’ve invested time, energy, and now money into learning and progressing through failure. Is it good to just spill every secret, when someone might just quietly implement it in a purely-proprietary system?” - The good will and behavior of The Community is different now, eroded as everyone else has come in. More people now want to make money instead of just sharing ideas-as-code: “But the community feels different now, now that many of its participants have different values. When you share something for free, the first thing that happens is that someone else will sell it.”
Wealth vs. Getting Wealthier · Collab Fund - “the process of becoming wealthier feels better than having wealth.”
Stewart Brand’s Dubious Futurism “What he had just as he had had as a child, was an unending stream of notions.” And also this summing of all things bad in recent history from a sort of cyber-leftist perspective: “Edward Snowden and Uber and Facebook as a tool of genocide and Jeffrey Epstein and coal-fired Bitcoin-mining plants, he might have secured an uncomplicated legacy.”
From the Marketing BS Briefing: AI or Not Edition - When the metric becomes the product: “C. Thi Nguyen argues that the internet is giving far more short loop feedback than ever before - which is leading to more and more experiences being optimized for that short term feedback. Products need to be delivered quickly and work for the first few weeks (short review feedback), but don’t need to last years (long term feedback). On the margin it is now more important that food look good (when shared on instagram) than taste good. Worth reading the entire review that explores things like knives, board games, fast fashion and more. As a marketer we need to be aware of the short term, but there are huge arbitrage opportunities for going after the long term when your competitors are not.”
The Book of Reed Hastings, Revisited - “After all, the Netflix share price was around $500 when the book was released; it’s since nose-dived by more than half. Subscriber numbers are declining. As spending has ballooned, hit rates on series and movies are below some rivals, according to consumption measurement firms. Morale, from my casual survey of sources at the company, is low. The whole concept of “talent density,” or recruiting the best people by paying the top of their personal market, feels odd when many of those same people are now being laid off or nudged out. And while the rival studios haven’t exactly abandoned their Netflix emulation, they’re definitely pulling back on spending and trying to differentiate. True competition has finally come to streaming, and Netflix is no longer special.” The Halo Effect is certainly very real and common. On the other hand, “culture” is a long-term thing that is supposed to make companies great, but also get them through and out of hard times. Maybe the Netflix culture will do that, and then we’ll have a sort of reverse Halo Effect…or whatever.
What Silicon Valley “Gets” about Software Engineers that Traditional Companies Do Not - “‘Silicon Valley-like’ companies think of engineers as value generators, and creative problem solvers. Traditional companies think of them as factory workers.”
Caesar at the Rubicon, Wilhelm Trübner, 1878 | Michael Coté | Flickr
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I re-discovered that you can plop Flickr links into button-down.email and it will render them…as you can tell. I dislike the way it displays with my name and stuff, but you know: the point of the waste book is to be quick! I like Flickr a lot, really like it. I hardly use it since, you know, no one is there in favor of the other photo place. I’ve used it forever and it has more photos of mine than probably any place. (I made all of them private several years ago during some privacy-concern phase but have sense selectively made new ones and old ones public.) I wish it had evolved and was still around. But, HERE WE ARE!
OK, time to stop and send.
I am using all of these words because various vendors mean different things when they say “cloud revenue.” For some, it just means IaaS and PaaS. For others it includes SaaS…and some as I get to count “app that works over/with the Internet” as cloud too. ↩
this is another annoyance for people who want tidy writing: you can’t really use the phrase “vendor” to mean “public cloud company,” and you can’t use “cloud” to mean a vendor who sells on-premises software (and also public cloud software). They are all, in my heart, “vendors,” but that seem slide incorrect usage. ↩