Platform or Application...Fish or Fowl?

Everybody claims to have a platform. But having a platform and being a platform company can be two very different things. To be clear, I am talking about "innovation platforms”. In his book The Business of Platforms, Michael Cusumano differentiates between transaction platforms and innovation platforms. Transaction platforms bring together different parties to conduct transactions just like Amazon, eBay, Über, AirBnB, and others do. Innovation platforms provide the foundation for a variety of technology applications.  

The innovation platforms deliver benefits such as greater engineering efficiency by providing a shared technology layer and the ability to customize the deployment for every enterprise.  But the ultimate prize is when the platform attracts other vendors who build their commercial applications on it. This way, the platform enables an ecosystem of partners who build applications that take the platform into new markets.  

A platform strategy is quite different from an application strategy. Platform vendors are courting applications, while application vendors compete with them. Yet, most application vendors claim to have a platform too. So, can they have their cake and eat it? Let’s take a look at a few examples: 

AWS  

AWS is decisively a platform company. As far as I know, they don’t build or sell any applications. AWS is clear in its strategy to attract developers from companies that build applications on it. AWS lives off that. And it lives pretty well. Those application companies are the AWS customers and AWS treats them as such. 

Apple 

Apple too is a platform company. Apple has not one, but multiple platforms including MacOS, iOS, and AppleTV. Apple also builds applications - from office applications such as Pages, Numbers, and Keynote to consumer entertainment applications such as Apple Music, Photos, and Apple TV+. Yet, Apple keeps all its platforms open to any competing application. They have no problem knowing that most MacBook users use Microsoft Office or Google Suite instead of Pages or Numbers. They also don’t make it at all difficult for their consumers to run Netflix or Spotify apps, even if those applications clearly compete with other parts of Apple’s business. That’s what platform vendors do.  

Salesforce 

Contrast that with Salesforce. Salesforce started as an application company but over the years, it developed a robust and widely used platform, Salesforce Platform. Yet when it comes to deciding between selling their applications and letting partners have their share of the deal, Salesforce sales reps never hesitate to push the partner under the bus. Just ask companies such as Conga, FinancialForce, or ServiceMax, companies that have built their business atop the Salesforce Platform but eventually ended up competing with Salesforce. Once Salesforce saw that there is a large enough market opportunity these vendors uncovered, it decided to build an application of its own. That’s not how a platform vendor operates. 

Microsoft 

Microsoft is a converted platform vendor. The company operated as an application company for decades, but since the Satya Nadella era, it appears to have shifted to a platform strategy. For years, Microsoft Office had a complete lock on the desktop productivity market and the company did everything it could to protect that franchise. Sure, Windows was the platform, but the big money was always in Office. In fact, Microsoft’s repeated failures in mobile computing can be directly traced to its strategy to defend MS Office at all costs. They tried, again and again, to squeeze the bloated Windows OS onto a smartphone in order to make it possible to run Office on the mobile devices. That strategy actually made a lot of sense, but it didn’t work. It took another 3 years after Stephen Elop’s “Burning Platform” memo before Satya Nadella took over as CEO and made Azure the primary focus of the company. Today, Azure makes billions for Microsoft and I am writing this article in a free version of Office 365, the cloud-based successor to MS Suite...on a Mac. Microsoft is finally behaving like a platform vendor.  

Oracle 

Oracle has gone through the opposite transformation as Microsoft. Oracle started as a platform vendor. Oracle Database was a platform upon which entire commercial applications were built. Back in the days when I was marketing on-premises software such as Documentum and OpenText, running on Oracle DB was a thing. Yet, Oracle started diversifying into applications back in early 2005. The biggest moves were the hostile take-over of PeopleSoft in 2005 and the introduction of Oracle EBS in 2007. Since then, Oracle was investing more and more into applications, and good for them, because as the cloud arrived, running on Oracle DB became less relevant. Today, Oracle is a full-fledged application player that competes with a myriad of other application vendors. 

 

IBM 

Eh, sorry...does IBM still make software? I have no idea. 

Google 

Google is probably the one company that looks like it is trying to be both. Google Chrome on the desktop, Android on the mobile device, and Google Cloud Platform are all legitimate platforms. At the same time, if anyone stole some business away from Microsoft Office, it’s Google. The Google Suite or Workspace as they call it now (so, 1990s) is becoming quite prevalent today. But in terms of strategy, Google is behaving like a platform vendor. Right now, I’m typing this article in Office 365 within Google Chrome and Google doesn’t seem to mind that at all. This is very different from when you tried to use a Windows version of WordPerfect or Lotus 1-2-3 back in the 1990s. And so, Google is a legit platform vendor. 

Stripe 

The supposedly hottest of the unicorns is at crossroads. Their payments infrastructure looks very much like a platform, powering payments for companies such as SAP, NetSuite, Salesforce, Zuora, and Aria. However, the moment Stripe introduced its own billing application, it effectively declared a war on all those companies. Sure, it will pretend for a while that they can all be friends, but ultimately, Stripe applications such as billing, invoicing, and spend management compete with the vendors that would want to use the Stripe payments infrastructure. That makes Stripe an application vendor, effectively abandoning its platform strategy.

  

Snowflake 

Here’s another beloved unicorn. Snowflake has been so far strictly following a classical platform strategy. Their data warehouse is under the hood of many commercial applications today. All those applications are taking Snowflake into places that Snowflake would have never ventured. Snowflake doesn’t offer any application of its own. Sure, they provide some tools and utilities such as data science and machine learning, data engineering, and cybersecurity, but those are never competing with the applications such as billing or fleet management that are taking advantage of Snowflake. Yes, Snowflake is a purebred platform company. 

Conclusion 

There are very few real platform companies. There might be many that claim to have a platform, but when it comes down to deciding between their immediate interest and the interest of their ecosystem, they are forced to show their true colors. Prioritizing the ecosystem over the short-term interests is a tough call to make for any software company. But those that dare to take that path earn the great prize. Just look at AWS, Apple, Microsoft, Google, and Snowflake – these platform companies are pursuing the platform strategy and killing it.  

Sure, you can be a very successful application company that doesn’t really care about being a platform. If you grow big enough, you may even attract an ecosystem of applications. Salesforce and Oracle are a good proof of that. But you can’t be both. You can’t pretend to have a platform company while competing with the companies that hitch their future to your platform. Yet that’s exactly what companies like Salesforce and Stripe do. 

The bottom line is that you can make a great, successful business out of being a platform or an application company. But you have to choose. 

 

They Should Be Business Tools

A few weeks ago, Google decided to quietly sunset Google Glass. They never said it publicly and in fact they might be considering another strategy for the device, but by all measures, Google Glass as we know it has failed. There are many theories for the reasons of this failure ranging from privacy concerns to the lack of social acceptance for walking around with geeky glasses. My theory is that the failure may be related more to the $1,500 price tag as consumer gadgets are simply not supposed to be that expensive.

Sergey Brin wearing Google Glass

That’s perhaps really the problem. Google Glass was certainly too expensive as a gadget for consumers but it likely wouldn’t have been too expensive as a business productivity tool. Most companies wouldn’t have a problem with the devices price, particularly with the customary volume discounts, if it demonstrated tangible benefits.

I can think of numerous business applications for Google Glass – from instructions while operating or repairing complex machinery, to patient records during surgery, to production data on the assembly line and supplier data in the warehouse.

But none of that was ever a priority apparently. Instead, Google put all their efforts into marketing Glass to consumers. The consumers may represent a greater opportunity in terms of volume but the enterprise market may represent a greater opportunity to optimize revenue. Just ask Microsoft.

There have been other technologies that I thought would have benefited from this strategy. Microsoft Kinect for Xbox comes to mind. While popular with gamers, the novelty of gaming via full body motion control is now wearing off. Let’s face it, most gamers want to shoot at aliens while sitting on their sofa and the Kinect is not the optimal weapon for that.

I would have hoped that we’d see Kinect being used in business – the repair technicians with oily hands reviewing designs, foremen at construction sites reviewing blue prints, surgeons with sterile hands reviewing patient records, farmers with dirty hands, lab technicians working in gloves – there are many use cases for gesture-based interaction.

When gestures are not practical, voice-based interaction might be appropriate. This is another technology that might have a greater application in the professional world than in the consumer space, at least given the current state of voice recognition. While the consumers relish in finding out the shortcomings of the still relatively new technologies such as Apple Siri or Amazon Echo, the business use cases may be more feasible. The business vocabulary is more precise and predictable, particularly in the given context. Professionals usually have to learn their business vocabulary as part of their job training and that makes it easier and less ambiguous.

Consumers usually resort to calling a company’s 800-number only after they failed to accomplish something online. At that point, we are exposing the already frustrated consumer to a voice recognition system that is far less mature than the web site and expect it to deliver a great experience. People usually don’t call in to do something that can be done with a smartphone app – like to check their account balance. In the business world, on the other hand, users are already trained to use a fairly precise language and their voice commands are usually in the context of a specific data set or business process.

“I need the Q3 revenue data for Europe broken down by product group” is much easier for a machine to understand and act upon than: “I want to buy a companion ticket for my spouse using my miles to match an already issued ticket purchased by my employer”. This relatively common task requires many additional data points - ticket number, flight numbers, account number, name and DOB of the traveler, seating preferences, credit card number, etc. – and that is very difficult for a voice-driven system to piece together.

Apple Watch. Yes, I want one!

A few weeks ago, Apple launched its new Watch. By all measures, it is already a success even though it won’t ship for another few days. The demo by the Apple team was very impressive and the press reviews are glowing. I have no doubt that the Apple Watch will become a success. But I wonder about the practical use cases of the Watch for consumers. So far, most wearable devices have focused on fitness but that market is very saturated already. The serious athletes will be hard to separate from their specialized Garmin, Timex, and Suunto watches. The hobby athletes are well served by the Fitbit, Jawbone, and Nike Fuel fitness trackers or they simply keep using their smartphones.

I can’t help but to wonder about the business use cases for the Apple Watch. There are many possibilities – approving process tasks, participating in simple collaboration activities, delivering business context-relevant information, etc. Smart watches are looking for a killer app and sharing your heartbeat is probably not it.  I suspect that we could find it sooner in business rather than the consumer space. 

Google Glass page on March 31, 2015

File System in the Cloud

Today, Microsoft and Dropbox surprised us all by announcing a partnership. According to the announcement, Microsoft Office applications on mobile devices will be integrated with Dropbox to allow direct access to documents from within the Dropbox folders. This is a big deal.

With this announcement, Dropbox has the chance to effectively become the file system for mobile devices – the file system in the cloud. This is something that Apple didn’t include in all the ingenious plans for its iOS operating system. Apple has always claimed that applications and their data need to be compartmentalized. But people wanted a file system – perhaps that’s what 30 years of DOS and Windows dominance have taught us. Dropbox came up with an alternative and it became hugely popular.

Apple eventually relented and started introducing iCloud as a way to share data in the cloud, primarily for music and video content that is. Yet Apple didn’t pay much attention to documents, which opened up the window of opportunity to the likes of Dropbox, OneCloud, and Google Drive. Not to mention that only a few users have figured out how Apple iCloud actually works.

Since then, Dropbox has been a run-away success, attracting well over 300 million users. Google, Microsoft, Apple, and dozens of other vendors attempted to follow in their footsteps. Now, it would appear that Microsoft is conceding the race to Dropbox. That alone is huge. Microsoft OneDrive struggled from the beginning to gain any meaningful market share and now, its future is uncertain.

The greater deal yet, is the fact that by way of closely integrating with Microsoft Office, Dropbox really has the opportunity to become the default file system for mobile devices; a cloud based file system – something that Apple failed to deliver.

The announcement begs another question. Giving up on OneDrive in favor of Dropbox is a massive concession. Microsoft doesn’t concede anything often. Dropbox got itself a sweet deal and Microsoft didn’t do it just because it gives the users a choice of storage. Sure, Microsoft gets more money from selling Office than they ever would get from OneDrive, but I suspect that Microsoft is likely getting something more in return. Today, we can only speculate what it is. If I were to place my bet, I’d be putting my chips on Microsoft Azure right now, at the cost of Amazon EC2. I suspect that Dropbox may be leaning closer to Azure now. But that’s of course just speculation.

Today, the world may have changed a bit. Or, maybe it changed a lot. Dropbox has been given the opportunity to become a major force in the cloud-a mobile game of thrones. It doesn’t change much for the enterprise customers who will still need to ask whether the consumer-focused Dropbox is an adequate solution for sensitive corporate data. But in the consumer space, Dropbox has been handed the keys to the kingdom.

Accessing files in Dropbox from within Office on iPad. Cool!