Internet and Technology

The structural, technological, strategic and human facets of a business become complex as the organization expand in size.  There is a direct correlation between the managerial inputs and the size of the business.  The larger the organization the more demanding it becomes for the management to initiate its managerial function.  As small businesses advance to transform into large corporations, the managers and investors are confronted with more challenges to put the company into performance.  It’s therefore evident that running small business entities is quite simplistic and easy than operating big businesses.  This does not mean that investors should not strive to have their business expand.  In fact, when businesses grow, it provides more opportunities for the investors to earn good returns.  There is also a test of ability to apply the human skills of intellectual, intuitive, cognitive thinking and conceptualization in business management.  The investors are able to enjoy the economies of scale in a larger proportion compared to their counterparts with the small businesses.  Otherwise, who doesn’t want to have a large piece of the economies of scale in the business platform?  Some of the advantages that small businesses have over large companies are;

Less capital requirement

There is obviously little capital required to set up of small businesses as compared to large corporate.  This implies that more prospective business investors can manage to establish small businesses.  It must be agreed that the financial aspect is one of the setbacks to setting up of businesses. Large business entities require enormous amount of starting capital and many people who would like to put up businesses are tumbled around constrains of financial abilities.  Although with the visions, aspirations and plans to have big businesses, they end up starting small entities and build up their visions from that platform.  The small businesses profile provides a building block for the larger entities.  With good managerial initiative the small business owners are able to transform the small entities into large corporate.  It’s just a matter of time and focus and soon an investor begins enjoying large economies of scale.

Easy management portfolio

Due to the fact that the structural, technological, and human aspects of small business are inexpensive, there is easy management of these resources.  The manpower is controllable, the financial resource is manageable, the technological innovations are sizable and the strategic approaches are simplified.  Basically there is less input in the management aspect of small businesses.  It thus requires a basic understanding of business operations to run a small business which would be difficult in the case of large corporate.

Less cost implications on risks and uncertainties

The small businesses are preferred by many because of the conceptual framework in cost analysis in case of eventualities.  Indeed, there are fewer costs that are attached to risks and uncertainties in small businesses.  Any way, businesses are but just about taking risks, and when the events of uncertainties occur, there is a cost implication.  The amount in which a small business suffers is much less than in the case of large businesses.  For instance, when a natural disaster such as an earthquake strikes in an area, the big businesses suffer more losses than the small businesses.  Nevertheless, investors should not shy off from running big business where appropriate, as the opportunities are great in terms of monetary achievements.

Article by Daryl Chapman

Executive Summary

Viral loop companies create something that people really want, and then as a result the people spread their product. Examples of these companies are Hotmail, eBay, PayPal, MySpace, Facebook and Twitter. These companies are successful because they incorporate virality into the functionality of their product. “What’s the sense of being on Facebook if none of your friends are?” Penenberg really “hits the nail on the head” with that question and all the companies discussed in this book create that same question for their business. The great part of viral marketing is that people will make your product grow just by using it.

            The book is broken down into three parts: Viral Businesses, Viral Marketing, and Viral Network. The first big viral loop company was Tupperware. Tupperware was the first example of the FNR (friends, neighbors, and relatives) concept. It offers the product credibility, because people only tell others about something unless they think it is good.

We have become accustomed to rely on the Internet every day. Most of us do not realize that the Web hasn’t always been as great as it is today. In the early days “surfing the Web was inefficient, time consuming, and largely restricted to those fluent in arcane computer systems.” Marc Andreesen’s browser, Mosaic, became the Internet’s first smash hit, and resulted in a powerful word-of-mouth marketing campaign.

The viral coefficient which is the number of additional members each user brings in. If the coefficient is 1, the company will grow but only at a linear rate. If the coefficient is above 1, it will achieve exponential growth. The viral plain of today is the Internet. Penenberg states that “we are hard-wired to socialize.” We are “biologically driven to commingle online and off.”

            We are hooked on speed and the more we do, the less time we have to do it. Three technological innovations were spawned from our busy and speed addicted lives: screens, microprocessors, and ubiquitous connectivity.Hotmail was the first webmail service. Its creators “realized that they should create a way to meld two of the greatest uses of the Internet: email and the Web.”

Scaling is a massive challenge that all viral expansion loop companies reach at some point. Gmail is a product that beat the scaling system by controlling its rate of adoption. They accomplished this by doing an invitation based sign-up system. The Web’s growth caused there to be a void in the area of transactions. PayPal, which was originally designed for the Palm, was the first on the scene. At one point, PayPal was losing $ 10 million a month to fraud. They solved this problem by creating one of the first “captchas”, which forced registrants to enter a random series of hazy letters into a box. They were eventually able to get the fraud level below one percent.

            Not many people know that the creators of MySpace were a spammer and a hacker. Tom Anderson was given probation after hacking into a Chase Manhattan Bank data center when he was 14. Tom saw Friendster’s vulnerability and with Chris DeWolfe they built a competitor. MySpace was able to come out on top as a “wild and wholly alternative, partly by accident” because of a HTML coding glitch. YouTube was originally created as a Web version of the viral sensation of Hot or Not. There was a need for something like YouTube because “viewing video clips on the Web was often frustrating and inconvenient.”

            Social networks have become a global online phenomenon. They account for 25% of Internet traffic according to Penenberg. The three ways viral loop companies spread are organic, invitation, and viral spam. Organic and invitation are the most prevalent, with one of them being present in each of the viral loop companies. Organic just means that the company is spread with “little or no prompting” and invitation just means that friends invite others to join. Overall, Penenberg is giving businesses the information they need to create a viral loop in their product or company. Anyone in business should read this book and their business and/or products will improve.

The Ten Things Managers Need to Know fromViral Loop

1.            Eliminate all the single points of failure in your company.

2.            Be prepared for scaling, capacity, and volume increases.

3.            Always worry about “keeping the lights on.”

4.            Eliminate any bottlenecks that may arise, and know your upper limits and capacity.

5.            Be prepared to change course if your viral strategy is not panning out or if it is a false start.

6.            Try to make your product free to end users, at least initially.

7.            Keep things simple where possible.

8.            To advertise well, catch the searcher when they are actually looking for the information.

9.            Always work to improve your product’s virality and viral coefficient.

10.            Work to earn a reputation for speed and reliability.

Full Summary of Viral Loop

Introduction

Viral loop companies create something that people really want, and then as a result the people spread their product. Examples of these companies are Hotmail, eBay, PayPal, MySpace, Facebook and Twitter. These companies are successful because they incorporate virality into the functionality of their product. “What’s the sense of being on Facebook if none of your friends are?” Penenberg really “hits the nail on the head” with that question and all the companies discussed in this book create that same question for their business. The great part of viral marketing is that people will make your product grow just by using it. 

Section 1: Viral Businesses

Tupperware and Ponzi Schemes–the Original Viral Models

The first big viral loop company was Tupperware. Some people in their company found that people did not buy the products unless someone demonstrated how they worked. As a result, home parties and patio parties came about to not only help spread the product, but to virally spread the product.  A cycle was started where more parties caused more buyers which caused more sellers who caused more buyers and so on. Tupperware provides an example of the viral cycle of a company. First they reached a point of nondisplacement where not other competitor could touch them then they reached a point of saturation and began a decline. Tupperware was the first example of the FNR (friends, neighbors, and relatives) concept. It offers the product credibility, because people only tell others about something unless they think it is good. Penenberg ends the chapter by saying “the frictionless Web would prove to be a potent force for businesses that followed Tupperware’s viral-loop example.” With that statement, he sets the stage for the rest of the book.

The First Online Viral Expansion Loop

We have become accustomed to rely on the Internet every day. Most of us do not realize that the Web hasn’t always been as great as it is today. In the early days “surfing the Web was inefficient, time consuming, and largely restricted to those fluent in arcane computer systems.” A man named Marc Andreesen set out to fix this early problem. He created a browser that was reliable and easy to use. This came at a time when computers were about to get big and people would need a tool to navigate the Internet. His browser became the Internet’s first smash hit, and resulted in a powerful word-of-mouth marketing campaign. He also discovered the network effect, which means that the more people who have the product, the more value someone else with the product is to each person already with the product. Another term that was discovered is a positive-feedback loop. Simply put the more people who discovered his browser, the more who spread it. The creator of Mosaic went on to create an even better browser called Naviagator. It was considered “the spark that touched off the Internet boom.”  The reason Navigator isn’t here anymore is that it had not reached a point of nondisplacement and Bill Gates was able to find a way into the Web browser viral market. He disrupted Navigator’s virality by making Internet Explorer as the default browser on Windows and now it is the standard.

The Spreadable Product as New Business Paradigm

This chapter introduces the viral coefficient which is the number of additional members each user brings in. If the coefficient is 1, the company will grow but only at a linear rate. If the coefficient is above 1, it will achieve exponential growth. Penenberg introduces viral networks by giving a few examples: eBay, PayPal, YouTube, MySpace, and Flickr. Some of these were stacked atop each other, but that is discussed further in chapters to come. Another term brought up in this chapter is a double viral loop in which a product “spreads two ways because every network creator is a user and every user is a potential network creator.”

One of the most informative sections of the book lists the shared characteristics of viral loop companies. Since launching a viral loop company is not easy, the author shares the characteristics of successful companies with the readers. The first characteristic is that they are Web-based, meaning they are better suited to the “frictionless world of the Internet.” The next characteristic is they are free; specifically users consume the product at no charge. Organization technology is the third characteristic and it means that they don’t create content, but their users do and the company simply has to organize it. The next characteristic he listed is that the company is employing a simple concept. The product has to have built-in virality, which means the “users spread the product purely out of their own self-interest.” Another characteristic is extremely fast adoption, and he gives the example of Hotmail which gained 30 million users in 30 months. Also the company needs to have exponential growth, a virality index of one or above, and predictable growth rates. The product needs to have network effects, meaning the more that join, the more that have incentive to join. The product should also have stackability, meaning it can be laid over another viral network to foster each other’s growth. He gives a couple examples of stackability: PayPal & eBay and YouTube & MySpace. Those are discussed later in the book. Finally, there are two points that viral expansion loop businesses reach: the first is the point of nondisplacement and the second is ultimate saturation.

Penenberg introduces yet another term in the third chapter and it is the viral plain. The viral plain of today is the Internet. In this viral plain, we have three instances of our self: the public self which is who you present to the physical world, the personal self which is who you are when you are alone, and the digital self which reaches far beyond the other two onto the web. Penenberg states that “we are hard-wired to socialize.” Research even shows that “engaging with friends helps us live longer and better lives” and that we are “biologically driven to commingle online and off.”

We are hooked on speed and the more we do, the less time we have to do it. Three technological innovations were spawned from our busy and speed addicted lives: screens, microprocessors, and ubiquitous connectivity. Screens are what allow people to “interact with virality.” The cost of the parts used in making microprocessors is “one-millionth of what it was in 1968.” The ubiquitous connectivity came from our lives being so much about mobile Internet capability. All of the “interconnectedness” we have today carries risk. There are viruses, bots, hackers, and buffer overflow attacks. The advantages of the Internet far outweigh these cons.

Section 2: Viral Marketing

The Perpetual Viral Advertisement

            Beginning in Chapter 4, Penenberg begins to talk about examples of viral expansion loop companies. The first is Hotmail which of course was the first webmail service. Before webmail people were tied down to one computer because of email. Luckily a couple guys by the names of Sabeer Bhatia and Jack Smith “realized that they should create a way to meld two of the greatest uses of the Internet: email and the Web.” Hotmail spread by word of mouth and “word of mouse.” Hotmail was successful in earning a reputation for speed and reliability. Hotmail became a viral loop company that grew faster than any company in history and made each of the creators $ 75 million richer. They set the stage for other companies to follow suit.

When the Audience Decides What’s Good

            Broadband allows us to consume the Web instantly and has become the new railroad. Two things came to the Web and made quite an impact: music and pirates. These two allowed for the forming of Napster, the first peer-to-peer network, which of course spread virally. Penenberg states that “it’s hard to feel sympathy for a multibillion-dollar industry, the recording industry has trouble rallying the public around its cause.” Who can say they haven’t downloaded some music illegally at some point in their life?

            We dash through life at a frantic pace. We don’t pick up newspapers anymore, because we know everything in them is a day late. Basically the Web is killing the newspapers, because it is the new medium and it meets our demand for new information.

Viral Video as Marketing Strategy

            This chapter shows how viral a Web video can be and reap great benefits for a company. The example the author uses is the Mentos/Diet Coke fountain replica. Even Mentos said, “It reflected our personality.” This example shows that a company has to let go of their brand, meaning their product should allow for a forum of creativity. Mentos went with the video and their product was able to sell better because it got more popular. The free publicity was worth $ 10 million to the company. But the “craziness with Mentos” didn’t fit Diet Coke’s “brand personality.” Viral Web videos like this one offer the audience a “value proposition.” Penenberg states that “People want to engage in the content.”

            The worse thing a company can do when one of these Web videos comes out using one of their products is send out a cease-and-desist letter, which FedEx did. A company called Blendtec has made a series of YouTube videos called “Will it blend?” and it caused them to sell four times as many blenders. When trying to accomplish what Mentos and Blendtec did, Penenberg says that “you have to have a light touch and be careful not to act like a guy in his mid-fourties trying to be a hipster.”

Section 3: Viral Networks

eBay and the Viral Growth Conundrum

             Scaling is a massive challenge that all viral expansion loop companies reach at some point. As these companies spread, they are sometimes “forced to invent whole new technologies and practices.” Friendster is an example of a company that refused to make scaling possible. They had a growing number of members, but their main problem was the four degrees of social connections. These “connections” were increasing faster and faster and were dragging down the system and causing problems for users. Just ridding their product of those connections could have made them the Facebook of today. Gmail is a product that beat the scaling system by controlling controlling its rate of adoption. They accomplished this by doing an invitation based sign-up system.

eBay was started with all the following in mind: “complete transparency, equal access for all, [and] price would be whatever the highest bidder was willing to pay.” Those characteristics made eBay what is today and caused it to be very successful. eBay at one point hit some of the scaling problems mentioned earlier. They had multiple single points of failure in their setup and the one thing you have to do with a viral network is “keep the lights on.” eBay was able to find that to be able to beat the scaling problem, a viral loop company has to find its upper limits, capacity and any bottlenecks.

PayPal: The First Stackable Network

            The Web’s growth caused there to be a void in the area of transactions. The only way to do online business with a nonmerchant, meaning someone not accepting credit cards, was to mail a check or money order. This was against what the Internet was about: “instantaneous communication and convenience.” The mobile cash concept came in to fill that void. PayPal, which was originally designed for the Palm, was the first on the scene. Interestingly enough it took off on eBay, causing its creators to say “This isn’t designed for eBay.” It actually made perfect sense, because sellers on eBay were looking for a better way to complete transactions online. The great thing about PayPal was that it was free and it “didn’t lay the responsibility for fraud on its users.” This was the first time a viral network (PayPal) was stacked on top of another viral network (eBay).

            PayPal hit a snag and its name was fraud and it threatened to run them out of business. At one point, PayPal was losing $ 10 million a month to fraud. PayPal called upon a “Fraud Fighter” to come in and fix their huge problem. He accomplished this by creating one of the first “captchas”, which forced registrants to enter a random series of hazy letters into a box. This was able to help the system determine if a registrant was a human or a machine. The next thing the “Fraud Fighter” did was create a tool “to automatically flag suspicious activity and freeze the accounts.” With just these two fixes the fraud level dropped below one percent. PayPal now was able to achieve a point of nondisplacement once those problems were fixed.

Flickr, YouTube, MySpace

            Flickr was the first viral network to stack on top of the “expanding blogosphere.” Flickr was created as a “primitive social network with photo share capability and incorporated tagging to better organize photographs.” This was one of the first times tagging was used and finally allowed a photo to be easily found.

            Not many people know that the creators of MySpace were a spammer and a hacker. Tom Anderson was given probation after hacking into a Chase Manhattan Bank data center when he was 14. Tom saw Friendster’s vulnerability and with Chris DeWolfe they built a competitor. Friendster was struggling with scaling, server bottlenecks, and user backlash of their policing of the site. MySpace was able to come out on top as a “wild and wholly alternative, partly by accident” because of a HTML coding glitch. The profiles users created were able to be “vehicles for self-expression.” Like Friendster, MySpace had a network concept. Unlike Friendster, they realized it made it “virtually impossible to scale” and eliminated it. Interestingly he eliminated it by making himself everyone’s friend. Most users didn’t even mind not being able to “track out their degrees of separation anyway.”

            YouTube was originally created as a Web version of the viral sensation of Hot or Not. There was a need for something like YouTube because “viewing video clips on the Web was often frustrating and inconvenient.” YouTube came in as a faster and quicker video experience. Like many other viral loop companies, YouTube showed that once a viral network achieves a viral loop and a point of nondisplacement, it can’t be stopped. Their “viral loop was even more potent then MySpace’s [viral loop].”

Tweaking the Viral Coefficient

            A man by the name of Michael Birch set out to create a viral business and wanted to use Hotmail as his model. He wasn’t successful at his first few attempts, but along the way he was “learning what worked and what didn’t.” His first success was called Birthday Alarm. Birch constantly kept tweaking his site to get it right and he discovered that the “simpler he made things, the more viral the site became.” Birch wasn’t satisfied with just Birthday Alarm.

Have you heard of Bebo? Birch wanted to create a copycat of Friendster using his Birthday Alarm code. He adopted a “grow-at-all-costs network effects model.” Bebo was created in the United States, but it went in a surprising direction. Most people haven’t heard of Bebo, because it took off in the United Kingdom. Birch and his wife created a viral popular site and sold it to AOL for $ 850 million dollars (more than News Corp. paid for MySpace).

Viral Clusters

            Social networks have become a global online phenomenon. They account for 25% of Internet traffic according to Penenberg. The main example Penenberg draws from in this chapter is Facebook. In the beginning, Facebook was aimed at college campuses. Mark Zuckerberg, the creator of Facebook, said that “by offering a superior and more efficient product, you can pretty predictably displace any competitor even if they have network effects.” Zuckerberg was always trying to make Facebook better and make it keep growing. One way he did this was to add the “people you may know” feature, which bumped up its viral coefficient. Zuckerberg’s ultimate goal is to make Facebook the global standard for social networking.

            Throughout the book, Penenberg gives the readers examples of viral companies. Most of them got big and got bought and that is their usual strategy. Many “naysayers” claim that viral companies like Facebook in “social network land” will not ever be able to find a way to make money off of them. The author ends the chapter with, “if history is any they are wrong.” Just look at the social applications that have spawned off of Facebook. This leads the reader to the next chapter where advertising is explained.

The Search for the New Ad Unit

The chapter starts off with a historical perspective on conventional wisdom that was wrong. In 1876, the “president of Western Union brushed off Alexander Grand Bell’s telephone as little more than an ‘electric toy.’” An Oxford University professor predicted that the electric light would never be heard of again after the 1878 Paris Exhibition. A client was advised by a banker not to invest in Henry Ford’s company in 1903 because the “horse is here to stay, but the automobile is only a novelty.” A more recent example is given of Bill Gates who was “years behind in seeing the promise of the Internet.”

When the Web first got big, people had trouble believing that money could be made off of it. The challenge to proving them wrong was convincing people it was “safe to share their credit card information over the Web.” Penenberg then goes on to explain how Google surpassed all the competition. They prevailed because Google maintained a simple interface and focused on their underlying search technology. The competition was worried about adding more to their “menu of offerings.” Google was also at the forefront of intent based advertising, meaning the advertisements caught a “searcher at the very moment they were looking for the information.” Normally we don’t want to see advertisements, but when we are shopping we would love to see exactly what we want.           

Penenberg reminds the readers of a time when there were only three television networks and a third of the audience could be reached at one time. Now the audience is “fragmented” in the new media landscape. The question for marketers to ask is, “How can marketers cut through the clutter to get their message across to consumers who are increasingly hostile to having their time interrupted?” The answer is that the “ad has to offer a value proposition,” meaning the advertisement needs to engage the audience. 

            With all of the world’s interconnectedness, privacy has become somewhat of an issue. The typical American is caught on camera two hundred times. Penenberg gets right down to it and says that the “battle over privacy has already been lost.” He then goes on to say that the “loss of privacy could mean the opportunity to build a better society.” Penenberg makes a great point by sharing that “there is a phenomenon in peoples’ interaction.”

Epilogue

            In this section, Penenberg compares viral companies to humans and there are shocking similarities. We are viral creatures and creating viral loop businesses is just part of who we are and what we do. Then he goes on to explain how viral loop companies spread. The three ways are organic, invitation, and viral spam. Organic and invitation are the most prevalent, with one of them being present in each of the viral loop companies. Organic just means that the company is spread with “little or no prompting” and invitation just means that friends invite others to join. Overall, Penenberg is giving businesses the information they need to create a viral loop in their product or company. Anyone in business should read this book and their business and/or products will improve.

Personal Insights

Why I think:

The author is one of the most brilliant people around because:

Adam L. Penenberg is brilliant, because he was able to convey extraordinary technically challenging material to normal people in a way they can understand. He is bringing the concept of a viral expansion loop to many people who have never heard of it in just over 200 pages. I have never read a technology based book so interesting before. He gave great insight into many of the companies of Silicon Valley. The author chronologically explained the birth and maturity of viral networks, not an easy feat. He even made a website showing how what his book talked about works. He is one of the few authors I know of that can actual do what he writes about.

If I were the author of the book, I would have done these three things differently:

Gave more in-depth definitions of the underlying definitions in the book, since they are used all throughout the book.

Added a chapter on specifically how a business person can either implement a viral loop into their existing company or start a new viral loop company on a step-by-step basis.

Gave more information on how a non-profit organization can implement a viral loop.

Reading this book made me think differently about the topic in these ways:

I now realize how much it takes to make a company like Facebook or eBay to be where it is today. I never thought of just why they were able to grow so large.

Now I understand what it takes to advertise a product in today’s Web based market.

I have an understanding of how viral loop companies didn’t just pop up, they have been in the making since the 1920s.

I’ll apply what I’ve learned in this book in my career by:

I will put more effort into using the full power of the Web in my business.

Keep my product simple, because that’s the way customers like it.

I will prepare for scaling and bottlenecks and keep an eye out for bottlenecks in production or processing.

Here is a sampling of what others have said about the book and its author:

“What others (scholarly and magazine reviews – along with on-line reviews – not simply reviews off the back of the book) have said about the book and its author?”

            Overall, all the reviews I found had great things to say about Adam L. Penenberg, the author of Viral Loop. Publishers Weekly describes the book as “solidly researched and briskly-written.” They also say, he “has certainly done his homework.” Publishers Weekly says that the author “captures a great business and tech story, as well as a defining moment in out online culture.”  Ivana Taylor calls Viral Loop “not only educational, but really entertaining.” Penenberg was able to accomplish this because he is a journalism professor and writes for many well known magazines. He is an “expert in explaining highly technical information to an audience that needs to learn and understand it.” Companies should use Viral Loop as their “bible for helping small businesses build their brand and business online.” Judy Brink-Drescher of the Library Journal writes that “Penenberg provides insight into the entrepreneurial minds behind the most successful and most disastrous corporate viral attempts.” She also writes that this book will “appeal to anyone curious about the legendary rise and rebirth of Silicon Valley.” On Google’s Books site, 26 out of 29 reviewers give the book four or five stars. Penenberg seems to have really “hit the nail on the head” with his book, Viral Loop.

Bibliography

Brink-Drescher, J. (2009). Editorial review. Library Journal, 134(19), Retrieved from

http://www.libraryjournal.com/article/CA6705440.html?q=viral+loop

Taylor, Ivana. (2009, November 21). Review of viral loop. Retrieved from

http://smallbiztrends.com/2009/11/review-of-viral-loop.html

Web exclusive book reviews. (2009, October 26). Publishers Weekly, Retrieved from

http://www.publishersweekly.com/article/396596-Web_Exclusive_Book_Reviews_10_26_2009.php?q=viral+loop

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Contact Info: To contact the author of this “Summary and Review of Viral Loop,” please email shawn.parker@selu.edu or shawn@shawnjparker.com.

Biography

David C. Wyld (dwyld.kwu@gmail.com) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/. He also serves as the Director of the Reverse Auction Research Center (http://reverseauctionresearch.blogspot.com/), a hub of research and news in the expanding world of competitive bidding. Dr. Wyld also maintains compilations of works he has helped his students to turn into editorially-reviewed publications at the following sites:

Management Concepts (http://toptenmanagement.blogspot.com/)

Book Reviews (http://wyld-about-books.blogspot.com/) and

Travel and International Foods (http://wyld-about-food.blogspot.com/).                

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Introduction

Strategic Fit is what businesses use to combine resources together in order to lower cost. There are a various number of ways that businesses do this and it takes a lot of collaboration among many different areas of the business. The different ways that businesses do this will be discussed more in detail in this article.

The Idea in a Nutshell

Strategic Fit is when the value chains of different businesses present opportunities for cross-business resource transfer, lower costs through combining the performance of related value chain activities, cross-business use of a potent brand name, and cross-business collaboration to build new or stronger competitive capabilities.

The Top Ten Things You Need to Know About Strategic Fit

1.            Strategic Fit in R&D and technology activities: Businesses with technology sharing benefits can perform better together than apart because of potential cost saving in R&D and potentially shorter times in getting new products to market. Also technological advances in one business can lead to increased sales for both.

2.            Strategic Fit in supply chain activities: Businesses that have supply chain strategic fits can perform better together because of the potential for skills transfer in procuring materials, the benefits of added collaboration with common supply chain partners, greater bargaining power, and added leverage with shippers. This also helps with securing volume discounts on shipments that get ordered.

3.            Manufacturing-Related Strategic Fits: Strategic Fits in manufacturing-related activities can represent an important source of competitive advantage in situations where a diversifier’s expertise in quality manufacturer and cost efficient production methods can be transferred to another business. Another benefit from doing this is the ability to consolidate production into a smaller number of plants and significantly reduce overall production costs.

4.            Distribution-Related Strategic Fits: Businesses that have closely related distribution activities can perform better together than apart because of cost savings in sharing the same distribution facilities or using many of the same wholesale distributors and retail dealers to access customers. For example when Conair Corporation acquired Allegro Manufacturing’s travel bag and accessory business in 2007, it was able to consolidate its own distribution centers for hair dryers and curling irons with those of Allegro, which saved money for both businesses.

5.            Strategic Fits in Sales and Marketing Activities: By doing this the business save money because the same distribution centers can be utilized for warehousing and shipping the products of different businesses. Also there may be other competitively valuable opportunities because businesses can transfer selling, merchandising, advertising, and product differentiation skills from one business to another.   

6.            Strategic fits in Managerial and Administrative Support Activities: At General Electric the managers that were involved in GE’s expansion into Russia were able to expedite entry because of information gained from GE managers involved in expansions into other emerging markets. The lessons GE managers learned in China were passed along to GE managers in Russia, allowing them to anticipate that the Russian government would demand that GE build production capacity in the country rather than enter the market through exporting or licensing.

7.            Strategic Fit in Economies of Scope: In economies of scope costs reductions come from operating in multiple businesses; such economies stem directly from strategic fit efficiencies along the value chains of related businesses. The greater the cross-business economies associated with cost saving strategic fits, the greater the potential for a related diversification strategy to yield a competitive advantage based on lower costs that rivals.

8.             Strategic Fit adds Profitability and Gains Shareholder Value: Capturing cross-business strategic fits via a strategy of related diversification builds shareholder value in ways that shareholders cannot undertake by simply owning a portfolio of stocks of companies in different industries. Also companies pursuing diversification can achieve 1+1=3 financial performance and be more profitable.

9.            Strategic Fit in Companies Diversifying into Unrelated businesses: any company or business that can be acquired on good financial terms and that has satisfactory growth and earnings potential represents a good acquisition and a good business opportunity. Businesses do this in order to expand themselves by getting a company that is already established and joining them to increase the customer base.

10.            Strategic Fit presents opportunities for transferring competitively valuable expertise, technological know-how, or other capabilities from one business to another. It also combines resources to create new strengths and capabilities thereby lowering costs for the business.

The Video Lounge

http://www.youtube.com/watch?v=zc467tDNqA8 In this video clip he explains how he strategically fit attributes from another well established company into his in order to help his business. He made sure that the business he chose was exactly what his company needed in order to lower costs.

My Take

Strategic fit is still relative today, especially since our economy is the way it is right now. Now more that ever businesses are finding was to save money by joining forces with other businesses, by combining the performance of related value chain activities and other cross-business related activities. For example Dell’s strategic partnerships with leading suppliers of microprocessors, circuit boards, disk drives, memory chips and other PC-related components have been an important element of the company’s strategy to diversify into servers, data storage devices and LCD TVs. These are products that include many components common to PCs and that can be sourced from the same strategic partners that provide Dell with PC components.

References

J.E., Strickland, A.J., Thompson, A.A. (2010). Crafting and Executing Strategy: The Quest for Competitive

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Contact Info: To contact the author of “Top Ten Management on Strategic Fit,” please email Aaron J. Lodge at Aaron.Lodge@selu.edu or Alodge100@gmail.com.

Biography

David C. Wyld (dwyld.kwu@gmail.com) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/. He also serves as the Director of the Reverse Auction Research Center (http://reverseauctionresearch.blogspot.com/), a hub of research and news in the expanding world of competitive bidding. Dr. Wyld also maintains compilations of works he has helped his students to turn into editorially-reviewed publications at the following sites:

Management Concepts (http://toptenmanagement.blogspot.com/)

Book Reviews (http://wyld-about-books.blogspot.com/) and

Travel and International Foods (http://wyld-about-food.blogspot.com/).                

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Executive Summary

            The Sassy Ladies’ Toolkit for Start-up Businesses is a very relevant, useful tool for anyone interested in being her (or his) own boss.  The book takes the idea of starting a business and breaks it down into steps.  The authors use the metaphor of a journey to aid the entrepreneur in starting down the road. 

            The book starts off having the prospective business owner visualize a variety of things.  She should visualize herself performing the job she has chosen and where that will get her in her life.  It also encourages the use of positive thinking and has her change negative thoughts to positive affirmations.  In each chapter there is encouragement, bolstered by pertinent advice.

            Throughout the book and at the end of each chapter there are exercises to maintain focus to accomplish the task at hand.  The questions posed at the end of each chapter ask not only to state what was discussed, but how the business owner will apply the ideas put forth, to her particular endeavor.  The exercises require a good amount of thought and provide a practical means to accomplishing each individual step.  Approached properly, performing these exercises would seem to make the business start-up process almost fool-proof. 

            Not only do the authors offer advice, they have quotes of other successful women in business throughout the entire book.  At many points the authors give their own personal opinions on a topic, many times differing from one another greatly.  The other women business owners reinforce the ideas the authors are conveying and expand on them to foster a deeper, more precise basis of the information offered to the reader.

            Charts are used extensively throughout the book.  They offer information in a format that is easy to read and allow for simple comparison of information given.  The charts offer information about an item, along with a basic description, resources to find out more about a given topic or item, and the pros and cons of the item.

            Appendices are used for many of the chapters.  These provide examples of the ideas put forth within the corresponding sections.  A sample email is provided in one appendix that could be used as a template for correspondence the business owner would use to contact potential business associates or clients.  In another appendix, samples of simplified financial statements along with explanations of them are useful for the new business owner to gain a better understanding of the economic position of the business.

            Resources are listed at the end of every chapter.  They provide the reader with the ability to further research things that are most relevant to her needs.  The resources include websites, movies, videos, books, magazines, articles, and products.  With each resources listed, a brief synopsis is given to clarify what that resource has to offer.  The Sassy Ladies website is a resource used in all the chapters; each web page has more in-depth information on the chapter’s subjects.  They also provide links to more worksheets and exercises that could be helpful.

            The book was well written and very well organized.  It took the reader through each step of the process, explaining in detail the actions that should be taken at the appropriate time.  There was constant encouragement along the way.  The authors have found success through trial and error, and in this book, pass along knowledge and insight gained from their own journeys.

The Ten Things Managers Need to Know from The Sassy Ladies’ Toolkit

 Managers should have a positive outlook and encourage the same in those they manage.

With regard to the above, managers should know how to make use of negativity.  A negative remark should be used as a challenge or it should be used to give the manager insight as to the potential weakness(es) of a plan.

A manager should always be aware of the competition.  Whether the manager is a top level manager at a large corporation, viewing the competitive forces within the market, or a candidate for a position within the firm, attempt to know as much as possible about the competition.

It is always in the best interest of the company to have a plan of action.  Whether it is a five year plan or a daily to-do list, planning is essential.

Contingency planning is also essential.  There are so many things that can go wrong; anticipating what can be done to counteract, circumvent, or directly address problems should be considered.

Organization is absolutely required.  All aspects of business require some degree of organization, but two key areas are workspace and time management.

All businesses have weaknesses and so do the individuals who manage them.  It is best to discover and be aware of weaknesses and compensate for them in some way.  What a manager cannot do for herself can be done by others who are more competent at performing the task.

There are many new and emerging technologies that could be put to use to the manager’s advantage.  There are, however, some drawbacks to many of them, and the manger should be aware of these also.

Networking is important.  Having a group of business acquaintances is extremely useful in the business world.

Realizing that “No” should not be considered a dead end.  It should be taken as an opportunity to be creative and discover new ideas or avenues to accomplish goals.

Full Summary of The Sassy Ladies’ Toolkit

DREAMING ABOUT YOUR BUSINESS               

Define what the dream is.

The business owner should identify some ability, product, or specialized knowledge that is marketable.

She should also identify the values that she desires in her business and her life.

 Focus on making the dream a reality.

Practice visualizing the dream.

The business owner should imagine herself in her business, performing the required tasks.

She should see the benefits that she will reap from being her own boss.

She could be in control of her time.

She could have more quality time for her family, because she has allowed herself the flexibility to do so.

Think positively about the plan

Negative self-talk should be avoided.  Change phrases from, “I can’t do this”, to, “I’ll learn and try my best”.

The business owner should surround herself with supportive people who encourage her to attain her goals.

The business owner should perform exercises that properly place her on her desired path.  She could do this by answering questions like, “What small things can I do consistently to keep me on the road I’ve chosen?”

DETERMINING THE FEASIBILITY OF YOUR BUSINESS

A customer base should be identified early on in the business planning process.

The business owner should aim at a potential target market.

Decide whether the business should sell consumers or provide its services to other commercial entities.

The business owner should research similar businesses in the market, against which she might be competing.

Determine competitors’ pricing structures.

Make note of the market’s openness to new entrants.

Note positive and negative characteristics of competitors and decide which to mimic and which to avoid.

A pricing structure needs to be established.

Identify fixed costs that the business will incur, such as rental expense and utilities

Identify variable costs per item or per unit of time.

Determine a mark-up that allows for profit.

Identify negative feedback and use it to the business’ advantage.

By receiving any negative feedback, the business owner will be able to address shortcomings that she may have overlooked.

Test the business idea by polling family, friends, and colleagues.

An “elevator pitch” should be created. 

A basic overview of the business that should take the approximate amount of time it would be spent on an elevator ride. The speech should not be too long because most listeners will lose interest quickly.  She should practice the pitch on people close to her who she trusts to be honest and offer suggestions for improvement.

PLANNING YOUR BUSINESS

An action plan should be created to establish the course taken to establish the business.

Decide what needs to be done within the coming year.

Narrow down the “year list” to decide what should be done within the month.

Take action today on an item you have planned to do within the month.

The business owner should take steps to be better informed and prepared to go into her chosen field.

 She could enroll in a course that teaches general business principles.

She should subscribe to journals and other publications that relate to her field.

She should attend networking events to gain understanding of local business conditions.

The business owner should create a viable business plan.

 She should write a mission statement defining the business’ purpose.

She should include any experience and credentials she has.

The organizational structure (i.e. sole proprietorship, LLC) should be included in the plan.

WORKING FROM YOUR HOME OFFICE

The business owner should establish a base for operations.  In the beginning, that would most likely be a home office.

 A dedicated office space should be established.  This could be a spare room, a closet, or small part of a kitchen counter.

 In order to run a business a means of communication is a necessity.  Setting up telephone service should be a priority, whether a cell phone, her home phone, or a dedicated business line.

In the wired world, internet presence it also a necessity.  If a web site is not possible at start-up, a professional-sounding email address will suffice.

Equipment needed to run the business should be purchased.

A computer and printer are a must.

Filing cabinets are very useful for organizing records and storing office supplies.

 Time management is a challenge that must be addressed early and regularly in the business process.

 A daily schedule should be established.

Down time should be included in the schedule for many reasons, such as unexpected occurrences.

Allow time in the daily schedule for both business and personal errands.  Doing this will free your time on weekends.

The business owner should use technology to her advantage.

 A Smartphone or PDA keeps information on hand, and is very portable.

A business card scanner could be a useful gadget to carry in a briefcase.  This is a simple way to manage business contacts that might otherwise be lost.

MARKETING YOUR BUSINESS

An appropriate name for the business should be chosen.

Ideally, the name should be descriptive.

If the owner chooses to use her name, without any additional descriptions, a tag line should be used.  Examples of tag lines are:  “BMW – Sheer driving pleasure”, “Pampered Chef – Discover the chef in you”.

A marketing plan can be developed by the owner, or if finances allow, a marketing firm.

 A good first step in marketing your business is to establish a brand.  This is a way to gain recognition for the business.

The marketing plan should always include “the four Ps” of marketing, and those are:  product, price, place, and promotion.

 Promotion is the single most difficult of “the four Ps” for a business owner to tackle.  Promoting a business can be accomplished by a number of different means.

 Promotion by word-of-mouth is the easiest means of promotion.  An additional benefit is that it is free.

Web marketing allows the business to be seen by anyone with access to the internet.  This type of marketing has many drawbacks, two of which are potential for a significant financial outlay and the need to tend to it often to keep information current.

Logos and graphics can aid in branding, and could incorporate the business name and/or tag line.

 Colors, shapes, graphics, and interesting fonts arranged in a unique fashion will form an image which will aid potential customers in identifying the business.

Logos can be placed in various conspicuous areas, including websites and company stationary, to keep the brand visible.

SELLING YOUR PRODUCT – AND YOURSELF

Establishing trust is essential for selling.

 Making direct eye contact shows that a person in forthright and attentive.

Attire can be important.  To establish professional presence, it is best to dress conservatively.

The business owner should be aware of exactly what she is selling.  The physical item or service is not the only thing for sale; convenience, luxury, or peace of mind is frequently a more important selling point.

The response to a sales pitch oftentimes is, “No.”  To counteract this reply, or possibly gain insight, there are some things a business owner should do.

 Take steps to understand where the product or service is failing to meet the potential customer’s need.

Determine if price is a concern.

Inquire as to whether she has shopped elsewhere, and how that product or service compares to the business’ own offerings.

NETWORKING

Research should be done to find networking groups in the near geographic area of the business.

A local Chamber of Commerce meeting might be a way for a business owner to gain understanding of the networking process.

Before attending a meeting, some preparations should be made.

Being comfortable with, and rehearsing the “elevator pitch” is a good start.

Knowledge of current events is useful; not every conversation will be about business.

View the list of attendees of events prior to going.  Make note of those attendees that are of particular interest.

Business cards should be brought and placed somewhere easily accessible.

Set guidelines for behavior.

The business owner should attend the event having the mindset that the goal is to establish mutually rewarding relationships with other members.  Consideration and helpfulness will pay off in the long run.  These events are not necessarily the place to practice aggressive selling.

The business owner should be attentive to each individual she encounters.

After each event the business owner should follow up with the people she has met.  One way would be to send an email offering to send her company’s newsletter to her new acquaintance in the future, and ask if the other will do the same.

BUSINESS STUFF

Hire the professionals that are essential to running a prosperous business.  Getting references from trusted friends and colleagues will aid in this process.  Initial consultations are normally free.

Unless the business owner is a financial whiz, hiring a competent accountant should be the top priority.

The accountant should aid in choosing the most beneficial business structure.  There may be tax advantages to doing business as a sole proprietor instead of a corporation.

Tax laws are extremely complicated.  Without a proficient accountant tax time could be disastrous.

A reliable attorney is another great business aid.

An attorney is essential to review of contracts and other legally binding documents.

She may also assist in deciding whether a patent or trademark is in order, and secure it for you.

Some form of license or permit is required to do business.  Determine what types of these are needed to operate the business. 

Insurance is also a business necessity.  General liability is a must, and depending on the circumstances other types might also be needed.

If the business has employees, workers’ compensation is required.

Health insurance should be purchased whether or not the business has employees.

Property insurance would be beneficial also.  It is helpful in cases of theft or natural disasters.

Personal Insights

With business conditions today, what the authors wrote is true.  I feel this way because, although business conditions are ever-changing, this book addresses the basics of business start-up.  The authors wrote this book as a type of road map, using metaphors like, “If your first year of business is a journey, setting up your home office is like packing for the trip.”  Each of the eight chapters uses the metaphor, breaking the trip down into steps.  Had this book been written thirty years ago, all of the steps along the way would have been the same.  Some of the means to accomplish the steps would certainly have been different, with the less advanced technologies; however, each step would still have been very relevant.  Without knowledge of years to come, I would guess that this book could be used thirty years from now, with changes only in the technologies that are used at that time.

If I were the author of this book, I would have done these three things differently:

I would not have explained or defined simple terms, like feasibility, or the example, “I need to make $ x per scarf to reach my revenue goal (x being the amount of money you’d need to make on each scarf).”

I believe in the power of positive thought and making your own destiny, but they were a little too “new agey” for me in this area.  I would have been much less “spacey” on these topics.

Most of the examples and scenarios were well written, but in reference to the first bullet point, they over-explained simple concepts, yet lacked detail necessary to convey other, more complicated ideas.  I would have attempted to give sufficient details where needed, and not explain the self-explanatory.

Reading this book made me think differently about the topic in these ways:

The Sassy Ladies made me realize that a plan is probably not complete without an exit strategy.  When starting a business, I would not think of closing it.  When an entrepreneur sees a new opportunity, or decides that it is time to retire, having an idea of the actions necessary for that eventuality decided ahead of time is very wise.  

Naming a business did not seem like a complicated issue, so I would not have thought of having a “naming party” to decide what to call my business.  This seems like a good idea – getting trusted friends together, giving them the idea and type of business, and asking what a good name would be.  Depending on the type of business, this is probably a great way to have many creative names to choose from.

The position of manager is all-encompassing.    A manager needs to have some knowledge of every aspect of the business.  Some knowledge may be very in-depth, while a basic familiarity with other areas will suffice, as long as she has people or processes to aid in areas she is lacking.

I’ll apply what I’ve learned in this book to my career by:

Using my time more efficiently.  Looking to the coming days and weeks to plan my agenda.  I will also attempt to end my work day assessing what I have done, so I can better plan the next day.

Realizing that, “No”, and other negative feedback can be useful tools.  They will challenge me to think differently about issues, and see pitfalls in my plans and remedy things I might not have otherwise realized.

Throughout the book the authors encourage the reader to seek support and assistance when needed.  I usually do things on my own, but having someone else to share the burden, or at least give me moral support, will be to my benefit.

Here is a sampling of what others have said about the book and its authors:

When you’re thinking about starting a business, you need to know what specific things you can do RIGHT NOW that are going to set you on the straight and narrow.  The Sassy Ladies’ Toolkit for Start-up Businesses is THAT book, leading you down the path of courage, change and success.  If you’re ready to take that walk, then you simply must have this book with you. Lena L. West, CEO and chief strategist at xynoMecdia Technology, and business advice expert for Entrepreneur.com.

The Sassy Ladies’ Toolkit for Start-Up Businessesis THE book that will take you step-by-step to start your business. It’s a must-read for anyone wishing to succeed in her first year and grow for years to come. This book is refreshing and informative, and it will give you the burst of confidence you need to say, ‘I CAN DO THIS!”’ –Patti Salvucci, executive director, Business Networking International (BNI) Massachusetts

Every entrepreneur at every stage of business needs The Sassy Ladies’ Toolkit. It not only provides practical business advice, but also offers inspiring stories of women who have shaped their destinies by choosing the path of entrepreneurship. –Carol Malysz, former director, Center for Women & Enterprise, Rhode Island

This book rocks! You have a business idea and need to know what s next — The Sassy Ladies have your answer. If you want to attract the wisdom of women who have been there before, The Sassy Ladies are serial entrepreneurs. What’s better than learning and laughing at the same time? Learn the secrets of success from three women with a sense of humor and a focus on business! –Jeanna Gabellini and Eva Gregory, co-authors of Life Lessons for Mastering the Law of Attraction with Jack Canfield and Mark Victor Hansen

Bibliography

Girasole, M., Hanson, W., & Perry, M. (2009).  The Sassy Ladies’ Toolkit for Start-up Businesses.  Minneapolis:  Two Harbors Press.

Salvucci, P. (2009).  [Review of the book The sassy ladies’ toolkit for start-up business].  http://www.amazon.com/Sassy-Ladies-Toolkit-Start-Up-Businesses/dp/1935097458.

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Contact Information:  To contact the author of this “Summary and Review of The Sassy Ladies’ Toolkit for Start-up Businesses” please email jude.scaglione@selu.edu.

Biography

David C. Wyld (dwyld.kwu@gmail.com) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/. He also serves as the Director of the Reverse Auction Research Center (http://reverseauctionresearch.blogspot.com/), a hub of research and news in the expanding world of competitive bidding. Dr. Wyld also maintains compilations of works he has helped his students to turn into editorially-reviewed publications at the following sites:

Management Concepts (http://toptenmanagement.blogspot.com/)

Book Reviews (http://wyld-about-books.blogspot.com/) and

Travel and International Foods (http://wyld-about-food.blogspot.com/).                

Microsoft Goes SAASy

Flashback

Used to being the unchallenged leader during the early days of information technology, Microsoft never had it as easy since the advent of the internet. No matter the hot new internet technology, Microsoft was forever caught napping. It was never the innovator and forever a laggard in terms of success. Google trounced it at search and online advertising, Yahoo at instant messaging and consumer mail, Blogger, Wordpress and Typepad were far better at blogging software, it never even appeared on the battle ground of social networking with MySpace and Facebook ruling the roost.

But there were certain markets, especially corporate markets, in which Microsoft continued at have a strangle-hold, which kept its cash registers clinking, and at a frantic pace at that. These were the PC OS market with its Windows series, MS Office for Office suites, and its prize cash cows – MS Exchange and MS Sharepoint for enterprise messaging and collaboration.

Now, the above mentioned software are essential for every enterprise, and 5 to 10 years back, Microsoft did undoubtedly offer the most robust solutions available. In those days, since every body was eyeing the juicy big business enterprise segment, with their thousands of users implementations and IT budgets bursting at the seams, it was for that audience these software were developed. So although Exchange and Sharepoint required dedicated servers, complicated implementations and dedicated IT to man and maintain the system, nobody really minded, because these mega enterprises had the money and staff to spare.

The Present

But there was a segment which minded it, the small to medium size business (SMB), segment which had neither the staff, nor resources, nor the inclination. Since not many alternatives were available, they either had to bear the burden, or do without these technologies altogether. But in recent times, things have started to change. In the past 3 years or so, a new approach has emerged, spurred on by technology improvements and increased bandwidth – the software as a service approach. And its primary market is the small to mid sized business segment.

In a recent SaaS survey conducted by Cutter Consortium, nearly three-quarters (72%) of the people who responded reported that they are using Web-based solutions to fill unmet needs. More than a quarter of the respondents (28%) are hoping that these solutions will cut their costs by 20%-30%.

It is true that there was some initial skepticism initially about the viability of SAAS solutions, in that it involves letting go of some control and allowing the organization’s critical data lie on a third party SAAS vendor’s servers. But the benefits of this approach have been so overwhelming, and due to providers like salesforce.com and HyperOffice providing SAAS solutions effectively over the years, that organizations across the board, from small to mega enterprises, have been converted.

Microsoft Plays Catchup

With the enterprise market saturated, Microsoft has also been eyeing the relatively untapped small to mid sized business market in the past few years. Considering the success of SAAS with this segment, Microsoft has introduced offered a succession of software offered as a service in recent times, under the Microsoft Office Live banner. But the real success story with this segment was “hosted Exchange” and “hosted Sharepoint” solutions offered by independent vendors; many of them certified Microsoft partners. First, a little refresher:

What is Hosted Exchange (and how it differs from Exchange Server)?

Every company needs dedicated company email for its employees, as well as some basic productivity solutions to lubricate everyday working (task management, calendars, address books). To cater to these universal needs, Microsoft developed Exchange Server whose major features consist of electronic mail, calendaring, contacts and tasks. The front end client for Exchange through which employees access all this information is usually Outlook, but Exchange also supports mobile and web based access (called Outlook web access or OWA for short). But implementing Exchange is hardly easy, as it includes setting up a dedicated server, undertaking a complex Exchange implementation, in addition to additional anti spam and anti virus implementations for the security of the server. Also, dedicated staff needs to be hired to monitor the system and keep it running, and to manage a myriad of complexities that may arise, since Exchange is a vast solution.

Under hosted Exchange however, all aspects of implementation and maintenance of the Exchange implementation are outsourced to the servers of a specialized “hosted services” provider. Customers still get the most of the features of Exchange – dedicated email, shared calendars/contacts/tasks, and premium features like mobile and web access to information (typically at an extra cost). But unlike an in house implementation, where everybody accesses Exchange over the local network, in this case it is accessed over the internet. This approach is especially beneficial for small to medium businesses which are saved the huge costs of in house implementation and instead have to pay a reasonable monthly subscription.

What is Hosted Sharepoint (and how it differs from Sharepoint Server)?

Apart from basic email capabilities, companies also need the ability to manage the company’s information, stored in documents, and the ability for employees to work together on this information. This is what SharePoint, Microsoft’s browser-based collaboration and document management platform does. It can be used to host and create a company’s web site that includes shared workspaces and documents, as well as specialized applications like to do lists, discussion boards, wikis and blogs. But Sharepoint’s power is coupled with its complexity. It’s implementation is no less cumbersome and costly than Exchange. Moreover, it is not end user friendly. Subject matter experts cannot share their knowledge directly; they always have to either go through IT intermediaries, or undergo specialized training which consumes time and diverts attention from competencies.  Knowledge is not dispersed freely through the organization, but is choked by having to pass through the IT bottleneck.

As with hosted Exchange, under hosted Sharepoint, all aspects of a company’s Sharepoint implementation and management are outsourced to third party vendors. Customers can still access all of Sharepoint’s features over the internet, but for a reasonable monthly fee.

Microsoft Takes the Big Services Plunge

As long as the hosted market was not sizable, Microsoft was content selling Exchange and Sharepoint as software products, and let its partners and independent vendors do the hosting. But considering the bourgeoning of the SAAS market lately, and its future outlook, coupled with tough competition from “alternative” collaboration and messaging offerings like Google Apps, Gmail and HyperOffice, MS finally In Oct. 2007, Microsoft finally took the plunge when it announced hosted Sharepoint and Exchange for enterprises with more than 5,000 seats – titled Exchange Online and Sharepoint Online. In Feb 2008, it went one step further by opening these services to all organizations, irrespective of size.

The Hot News – Microsoft’s “Hosted Service Bundles”

Keeping with its recent rapid movement, on July 8, 2008, Microsoft made another announcement, introducing a novel, if not controversial strategy. In addition to offering its hosted services as single offerings, it announced that early in 2009, it would also offer them as “bundles”, a combination of services at a reduced total cost.

Microsoft has introduced two “bundles”, titled the Deskless Worker suite and Information Worker suite. The deskless worker suite is priced at just $3 per user per month, and will include Exchange Online services as well as read only access to Sharepoint Online services. This is supposedly targeted at workers who typically spend only a very small part of their day in front of the computer. The information worker suite is priced $15 per user per month and includes a full range of offerings including Exchange Online, Share Online and Live Meeting, Microsoft’s web conferencing software.

An Assessment

Great Solution?

At first view, it would seem that Microsoft has come out with a great offering. The entire range of Microsoft’s best of breed enterprise applications, rolled into one, available at a very affordable monthly fee. Exchange online for email, calendars, address books, task management and access over the web and mobile; Sharepoint Online for collaboration and customized portals for teams and partners; and LiveMeeting to conduct audio and video conferencing with multiple participants no matter where they are. All at the customers disposal, in a single offering, at an imminently reachable $15.

A good opportunity to validate the parts – as in they have the right idea messagin, project collaboration, document management, Outlook sharing, couple with online meetings.

Think Again

Whenever something seems so perfect, it always makes sense to bring ones guard up, and look closer. The first phrase to reconsider is – “rolled into one” or “all in one”. Does it mean that all of Microsoft’s great offerings have been integrated into a single, seamless solution, with all aspects communicating with each other? Or does it mean something else.

Well, it means something else. All in one refers more to “all in one pricing”. The services remain exactly as they were; only they will cost less when purchased jointly. Individually, Microsoft sells hosted Exchange Online for $10; SharePoint Online for $7.25; Office Communications Online for $2.50; and Office Live Meeting Online for $4.50. So a joint pricing of $15 means a saving of $ 9.50 per user per month.

Moreover, even the separate components of Microsoft’s new offerings are bare bones solutions, requiring implementation and configuration, before a workable solution is set up. This is effort most small to mid sized businesses are not equipped to make, nor do they want to make. Although the pricing of Microsoft’s bundles may be very tempting, a major reason companies go to “hosted service” providers in the first place is that in addition to hosting they also offer “managed services”. All aspects of configuration, integration and maintenance are their hassle. If all the components – Exchange, Sharepoint, LiveMeeting and Office Communications; are to be integrated into a single seamless solution, that will require massive implementation.

So, although Microsoft’s offering looks enticing from a distance, it is hardly the end to end, ready to use solution businesses are really looking for. Microsoft offers all pieces of the puzzle, but they remain separate pieces that don’t fit together. Even the measly priced Deskless worker suite has attracted a lot of flak. The verdict is that it caters to an imaginary class of worker who needs only read only access to company information. Although real life workers of this class don’t access the company’s information systems as much, they often interact with the system in critical ways. An example is a nurse who may need to keep the hospital’s drug stock updated.

Hosted Service Provider’s Perspective

With Microsoft jumping into the fray, and at very competitive prices at that, traditional providers (Microsoft Solution Providers) of Exchange and Sharepoint hosting are certainly feeling the heat. Setting up Microsoft infrastructure on their servers, and further selling it as a service offered them a steady and ongoing revenue stream. But Microsoft offering such services directly will certainly cut into their pockets as they can hardly hope to compete with Microsoft’s pricing.

Microsoft was well aware that the latest announcement would pinch hosted service partners bad, and not intending to cut them out of the picture completely, it made another announcement intended to keep them interested. Partners can resell Microsoft’s new hosted service offering and pocket a percentage of the ongoing revenue. Partners will receive 12 percent per user, per month, up front for a first-year contract, and 6 percent per user, per month, of the ongoing subscription fee. So in the first year, resellers of hosted services will receive 18 percent margins on the subscription value, and 6 percent for subsequent years. But in spite of this carrot, partners are still smarting, because reselling Microsoft services won’t be nearly as profitable as letting out on premise implementations. 

Some Microsoft solution providers are worried that this puts them in the feast-or-famine mode of trying to find the next project to generate consulting revenue as opposed to recurring revenue streams associated with keeping Exhange and SharePoint servers running.

There is Hope

Although hosted service providers who provide bare bones hosted Microsoft products will feel the competition from Microsoft’s new offerings, but there barely are any vendors who do just that. A vital part of what these companies do has always been adding value by offering integration, consulting and management services on top of the basic Microsoft products they host for their customers. And this need for integration, management and consulting still remains because Microsoft will merely offer basic hosting of its products, while end customers need ready to use products, without the hassle of implementing and managing the application.

So, these companies can continue to do what they’ve been doing all along and still attract customers – host Exchange and Sharepoint on their servers, and build solutions on top of that and offer them to customers as services. Alternatively they can resell Microsoft’s hosted services by adding value added services on top of that, and attract a premium price. One example could be offering support for email on iPhone and Blackberry that stripped down hosted Exchange does not. Or a company could integrate all the components of Microsoft’s bundle – Sharepoint, Exchange, LiveMeeting and Office Communications, into a single seamless solution with a centralized console.

The Search for Truly “Complete” Solutions

Although with this announcement, Microsoft didn’t quite deliver what it seemed to offer, the need it sought to address is nonetheless very pertinent. The need for a truly end to end, integrated messaging, collaboration and web conferencing solution, with each component fitting seamlessly into the whole and communicating with every other component. Solutions which don’t require any hardware, downloads or maintenance and are ready to use from day one. Solutions which come at an affordable monthly subscription.

So, do end customers have to wait for a couple of years before somebody else takes up this challenge? The answer is a resounding “certainly not!”. Although Microsoft may make it seem like it was the first to serve this compelling need (not that it really did serve the need), it was for the precise reason of pressure from rival products that Microsoft took the “bundled hosting” plunge. Google for one offers many compelling alternatives to Microsoft’s Exchange and Sharepoint with Google Apps, Google Pages, Gmail et all. But even Google’s star products are piece meal, and it hasn’t so far come up with a truly integrated end to end solution. Moreover, it doesn’t have a web conferencing solution at all, which would be vital in a totally complete solution.

But there is a another category of solution providers, who may not be as big as Google and Microsoft, or get that kind of frenzied airtime, but they have for years offered very compelling solutions to small and mid sized businesses. Many of these solutions would put the biggies to shame, and are in intimate touch with the real needs of the small to mid sized business segment. To present my case, I shall discuss the web based application HyperOffice. HyperOffice has been operating in the “Exchange and SharePoint Alternative” domain for years, and they’ve built their solution bottom up, based on experience. It would not be wrong to say, that they’ve been doing for years what Microsoft promised to do just now, and did not do even that.

Now to assess HyperOffice on the basis of the parameters we have defined for a truly end to end solution.

Exchange Features

HyperOffice includes business email, shared contact management, shared calendars and shared task management. It also includes Outlook integration and can be used to power the Outlook accounts of your employees as if Exchange were running in the background, only that its not. Users can access their accounts on their desktops using Outlook or online using any Mac or PC browser and all information is automatically kept in synch. Moreover users can also access and synch their accounts from mobile devices like iPhone, Blackberry etc.

Sharepoint Features

As an alternative to Sharepoint, HyperOffice includes a publisher tool which can be used to set up dedicated intranet and extranet workspaces for employees, departments, partners or clients. The publisher allows for deep customization of the workspaces according to user needs. Users can finely manage the appearance, layout, pages, interlinking of these workspaces. In addition they can choose from a range of collaboration tools to add to each workspace – document management, calendars, address books, to do lists, task management, forums, IM, polls etc.

HyperOffice also includes a rich online document management tool. It allows for easy online storage and organization of all file types and allows people to collaborate on documents using features like versioning, notifications, locking, overwrite protection etc.

Web Conferencing

Keeping with growing travel prices and increasing openness of companies to web conferencing as a mode of communication, HyperOffice has recently introduced HyperMeeting, its web conferencing tool. It is as robust as any web conferencing solution, with the ability to conference with upto 125 participants, file distribution, presentations, application and desktop sharing, whiteboard etc.

Integratedness

The best thing about a solution like HyperOffice is that all parts fit perfectly into the whole. This makes sense, because even in a business, all parts are forever interacting with each other, and so it should be with a collaboration solution. Consider the following scenario – A web conference needs to be set up. Since it is a meeting, invites need to be sent out to all the participants. So an automatic invitation tool will be involved. The invitation tool will need to talk to address books so that the right recipients are selected. Moreover, to ensure that participants don’t have clashing schedules, calendars will need to be compared. Before the meeting is undertaken some documents may need to be distributed to the participants, and collaborated on. So the document management tool would be involved. The conference may relate to an important milestone in a project. So the project management tool would be involved. This is only one situation in which one can envision different parts of the system having to interact with each other; there may be a myriad of other such situations. The synergies that are to be had in such a system are tremendous.

In HyperOffice, different parts of the system come together simply, logically and effectively. It’s no wonder that it’s been nominated for many awards under the “design” category. The solution allows users to set up workspaces for individuals with tools like email, personal document libraries, address books, calendars, to do lists, links, reminders etc. On the second level workspaces can be set up for groups with looks like document management and collaboration, shared calendars, shared address books, group tasks, web conferencing, forums, polls, chat etc. This is a great example of the coming together of messaging, collaboration and web conferencing features.

Moreover, HyperOffice includes a myriad of other features which can only come after years of experience working with clients. These are the ability to integrate the solution with Outlook, mobile access for devices like iPhone and Blackberry, and the ability to manage documents and drag and drop upload documents directly from the desktop.

Another great aspect from an administration point of view is the ability to manage everything from a central console. All aspects of collaboration are contained within HyperOffice and users don’t have to look in different directions and learn a myriad of software for different uses.

Tailored for SMBs

Big names like Microsoft and Google always eye the bigger customers of the range of around 5000 seats because of the juicer profits to be gotten from those clients. So both the products and the services offered around these products take shape with that segment in mind. Smaller companies like HyperOffice, however have been developed specifically for the small to mid sized business segment, and refined through years of experience. The onus is on developing ready to use products with easy “push button” functionality.

HyperOffice just needs a signup and can be set up almost instantly. It is an end-user’s tool, as just about anybody can get on the system and publish information or use the tools. No technical expertise is required to implement or use it. Moreover, they also offer free training and support services to assist companies along the way. If a customer chooses, they can easily scale down the solution, and choose only a subset of the tools offered based on its needs and comfort level, rather than the entire suite.

Conclusion

In conclusion, although Microsoft has opened its hosted solutions to all, they still remain suitable for organizations which are largish if not large. Vendors could also resell Microsoft’s bundles by throwing in integration and management services, but then they will ask for a premium price and the low price tags won’t remain. Frankly, even in their hosted avatar, Microsoft tools are still not suitable for small businesses because they never were developed for this segment, and the effect will always be of trying to squeeze a big foot in a small shoe.

Clearly, the lesson for growing organizations is that although Microsoft and other big names have rather belatedly gotten on the “Small to medium sized business” bandwagon, one has to cut through the hype, and look in all directions for the best solution. And more often than not, the most compelling solutions will come from elsewhere.

 

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