5 ms·

Just curious, what makes you think the "enterprise" market is less lucrative than it used to be?

phillmv 15y ago
No growth. Everyone who could possibly use a Windows license has a Windows license and drags their feet about upgrading. You're either busy growing or you're busy dying. As a potential shareholder, I care more about growth than straight up profitability.
- sliverstorm 15y ago
  By this logic, as soon as you saturate the market, you are dying?
  - phillmv 15y ago
    Yes. You need to find/create more markets. Look at Apple. iPod -> iPhone -> iPad. If I invest 100 dollars in you, I want to receive a percentage back after a certain while. You need to be able to give me 103 dollars back the next year just to beat inflation, i.e. for this to not have been a complete waste of my time. In real terms, this means you need to grow your business by at least 3% in order to give me that return. I'm not the right person to talk about this, as my knowledge is thin and my metaphors are poor, but even if you're the sole owner you start to lose money if you don't grow at a reliable rate.
    - tomkarlo 15y ago
      You're right in that most businesses need to grow to increase their value (generally because growth is built into their current valuation) but the narrative you're using isn't on target. It's entirely possible for a business to give investors good returns even if their business or market isn't growing. Profitability and cash returns from a business can grow as revenues decline if the company either increases operating efficiency, or reduces in investment in recognition of the declining opportunity. MBAs would call this a "cash cow" business - one that should be milked. We dont tend to see this much in tech because growth is such a fundamental part of our valuations that no company is willing to admit it's in such a position. And you'd probably lose all your engineers over time. But when you look at say, Microsoft, and strip away their non-performing businesses, that's what it looks like: a company that has some assets that produce a lot of profits, but aren't really growing any more, yet if managed properly can continue to throw off gobs of cash for years to come.
      - phillmv 15y ago
        Please correct me if I'm wrong! But: >Profitability and cash returns from a business can grow as revenues decline if the company either increases operating efficiency, or reduces in investment in recognition of the declining opportunity. Sure. When I say growth, I mean "make more money this year than you did the year before". This doesn't directly translate into "make more widgets", of course – that's just the (in an ideal world) easiest and least complicated way of achieving that. >yet if managed properly can continue to throw off gobs of cash for years to come. Until! It dies ;0.
        ricree 15y ago
        >Sure. When I say growth, I mean "make more money this year than you did the year before". If I understand tomkarlo's point correctly, he's saying that you don't have to make more money year to year in order to have a viable business. Rather, you simply need to keep expenses low enough to manage a respectable profit for your investors. That profit need not necessarily grow year to year for investors to find it worth holding. Of course, valuations will be made completely differently for such a company, but that doesn't mean they can't exist.
        rhizome 15y ago
        It's the fallacy of the excluded middle that convinces people that stability has no value.
        tomkarlo 15y ago
        It's this statement that is incorrect: "In real terms, this means you need to grow your business by at least 3% in order to give me that return." In almost any definition "growing a business" means increasing unit sales, or increasing revenues, or both. Neither is necessary to provide acceptable returns to an investor - there are great investments around in businesses that have long since peaked in terms of unit volume and revenue. Much of the private equity world focuses on these kinds of investments.
        15y ago
    - dextorious 15y ago
      """Yes. You need to find/create more markets.""" Actually you don't "need" anything. There are tons of examples of profitable companies that do one thing / product, or several things / products and do it for a century or more, with thousands of employees that do not look to expand on other markets. Even more so for companies with less employees. """If I invest 100 dollars in you, I want to receive a percentage back after a certain while. You need to be able to give me 103 dollars back the next year just to beat inflation, i.e. for this to not have been a complete waste of my time.""" Yeah, that's why the stock market promotes cancerous growth of companies.
      - phillmv 15y ago
        I don't mean to be adversarial, but could you provide examples? >Yeah, that's why the stock market promotes cancerous growth of companies. I have troubles with this sometimes. I lie awake at night and think about the little I know about finance and economics and I wonder - is this all a zero sum interaction? Abstractly, the earth is a closed system, right? Of course, value and money are also abstractions and so aren't directly pegged to any physical constants, so maybe in real terms it doesn't matter either. Anyhow, my understanding is that the narrative I used above works for stock markets and single shareholder companies. I have a fixed amount of hours/year to invest in my company/enterprise. Let's suppose it's profitable and yields oh 250k in profit/direct wages to you, the single shareholder. If your total amount of profit remains constant, you're losing money just via diminished purchasing power. Your employees will demand raises, which means you have to raise prices and/or squeeze more productivity out of your company, yadda yadda yadda. If you don't keep growing… you end up finding yourself in a position where you will begin to contract, and it's easier to go down than to go up.
        jchrisa 15y ago
        I've been reading Sacred Economics: http://www.realitysandwich.com/homepage_sacred_economics http://www.realitysandwich.com/homepage_sacred_economics It's the clearest explanation of this I've heard in a long time. However it's a bit long and deep, if you want an essay length version of the argument, it is here: http://www.realitysandwich.com/money_and_crisis_civilization http://www.realitysandwich.com/money_and_crisis_civilization
    - anamax 15y ago
      > If I invest 100 dollars in you, I want to receive a percentage back after a certain while. You need to be able to give me 103 dollars back the next year just to beat inflation, i.e. for this to not have been a complete waste of my time. Yes. > In real terms, this means you need to grow your business by at least 3% in order to give me that return. No. Suppose you want 3%. You give me $100 and I buy $100 worth of goods which I then sell for $106. I give you $3 (there's your 3%), keep $3. That leave me with $100 to buy goods to do it all again. Note that this biz doesn't grow at all but it can throw off 3% as long as I can keep buying at $100 and selling at $106. What about inflation you say? Multiply all the numbers after the initial $100 by your inflation factor the first year and use the updated numbers (and your inflation factor) each subsequent year.
    - deleted 15y ago
      [deleted]
    - sliverstorm 15y ago
      It shows just how isolated the startup community can be from traditional business. Stable businesses can make plenty of money; growth is simply the way you increase your profits even more. Really, your sentiment is reminiscent of the dot-com refrain of 'get big or go home'. Those were the true champions of growth-as-profit (and it sure turned out well for them)
    - deleted 15y ago
      [deleted]
    - GoodIntentions 15y ago
      >> Yes. You need to find/create more markets. xbox. It isn't the only "other" interest, but prolly the best example. MSFT isn't just enterprise oriented.
- maigret 15y ago
  "Entreprise" is not limited to Windows. Far, far, far from that. I don't know your background, but in software development (let us exclude plain Website just publishing information), most of it is written for enterprise customers, not private consumers. Excel had around 10 developers years long. I understand cloud is making the difference more blury, but there are just so different needs across different countries, industries, etc - work is in the enterprise. Consumer tools scale, you don't need much people to maintain and develop these.
- ArbitraryLimits 15y ago
  OK, I interpreted your original comment as saying that big corporations in the aggregate spend less money on software and its associated services than they used to, and I couldn't imagine how that could be true.
- rhizome 15y ago
  You're either busy growing or you're busy dying. This is extremely simplistic MBA talk.
veidr 15y ago
Well, it's still pretty lucrative, but for Microsoft, it doesn't go anywhere anymore. I am persuaded by some of the recent arguments (John Siracusa's maybe?) that both the innovation and the money in general-purpose computing industry have moved over to the consumer side of the equation, and that this change has put MS in a worse position than they've traditionally been in. Dominating corporate computing (for soooo fucking loooong) made MS billions and billions, but it also held back their two products, Windows and Office. They couldn't ditch compatibility, they couldn't make disruptive moves, they needed to pre-announce their roadmap... and also, I'd guess that they probably just didn't see the business-to-consumer weight shift coming, just as they didn't see the Internet coming until it ran them over. (Neither did any of their peers, though -- Apple still had their own branded AOL-clone at a late stage, what was it, eWorld? The Internet ran over everybody as the 80s turned into the 90s. And MS is itself one of those hidebound big corporations; it's natural for those organisms to be slow.) Anyway my point is that megacorps actually want a pretty limited computing product, compared to consumers. Barring esoteric business needs, they don't need, or even want, their employees to be able to, say, shoot HD video, make unlimited anonymous video calls to anybody in the world, track themselves jogging with accelerometers and GPS, play Angry Birds, and so forth. In general, megacorps want cheap, reliable, slow-moving tools that match their slow-moving planning and frankly limited needs. And did I mention cheap. Cheap. Back when a PC cost as much as a used car, business purchasing drove the industry. But the human spirit and Moore's law went marching on, and in recent years we have a variety of desktop, laptop,and pocket phone/computers that not only outperform those used-car PCs of yesteryear, but may also feature wireless and nationwide magical Internet connections, ones much faster than the 128K ISDN-line that cost me 40,000 yen per month in the 90s. So now you can buy a pretty kickass computer--one that fits in your pocket, or handbag, or backpack, whatever you prefer--for the price of like, two steak dinners with a date. (Maybe three or four for the macbook air.) Cost-conscious companies with big headcounts don't need any of that good shit. So they end up with, say, a fleet of Dell Vostro 620S desktop PCs with 4GB RAM, archaic spinning-platter HDDs, and Windows 7 Pro (or XP still, if they are on a volume license (which they totally are)). So we're talking about $700 with a shitty Dell monitor. 3-4 year deployment life. MS'll make whatever percentage of that, plus a bit on the Office they'll probably use, but that's it for that duration. Meanwhile, a guy and his wife will drop eight times that on smartphones over the same duration. iPhone, Nexus, Galaxy, whatever. (But yeah, mostly iPhone.) Or a tablet of some kind. Because they want all that good new shit, and it's no longer so expensive that they can't have it. So consumers, wow what a shitty word, okay I mean 'people doing their own things and living their lives' -- let's call them PEOPLE for short -- can now afford computers. Waitresses, stadium hot-dog boys, tax drivers, high-school students. That was not so much the case when MS started to achieve hegemony. Back then, not only could PEOPLE much less frequently afford computers, but also computers weren't nearly as capable of doing the cool shit that PEOPLE are actually interested in. PEOPLE want to do cool shit, not just do some boring-ass work. Video mashups, GPS flash mobs, music buying, music bootlegging, angry birds, porn, cold fusion, etc. Therefore, the companies aimed at PEOPLE are the ones who are, and have been for a while, making the more ground-breaking and innovative products. Lighter, simpler, more sensors, more stable, brand new re-architected OS software. The PEOPLE are the ones recently pushing the limits in computing. Demanding new, ground-breaking products. Rewarding innovation. Computers were prohibitively expensive. But now they're not. Computers used to not be able to do cool shit. Now they can. So even if the ENTERPRISE market is still bigger overall in terms of units, ENTERPRISE wants shittier products, updated less frequently, for less money. That's what MS has provided over the past decade (with the exception of the less money part, har har). Microsoft's products met those needs, but at the cost of tying MS to that legacy, and thwarting their ability to compete for the faster-evolving PEOPLE market, arguably now more important. They are now trying to reinvent themselves. With Windows Phone surely, and it seems they are trying to make a break with the past even with Windows 8, though they are understandably halting in their efforts, loathe to disturb the waning cash cow. But serving the PEOPLE and serving the ENTERPRISE increasingly seem to be mutually exclusive. PEOPLE want new, awesome, fast, again! ENTERPRISE has different priorities. So MS has its internal schizophrenia. And no success on that front so far. I didn't mean that the enterprise market was becoming less lucrative for everybody, although relative to the consumer market, it probably is. I meant that for Microsoft specifically their dominance of the enterprise over the past 15+ years has been milked for everything it is worth and has now become a hindrance to them, keeping them stuck in a narrowing rut.

No growth. Everyone who could possibly use a Windows license has a Windows license and drags their feet about upgrading. You're either busy growing or you're busy dying. As a potential shareholder, I care more about growth than straight up profitability.

sliverstorm 15y ago
By this logic, as soon as you saturate the market, you are dying?
- phillmv 15y ago
  Yes. You need to find/create more markets. Look at Apple. iPod -> iPhone -> iPad. If I invest 100 dollars in you, I want to receive a percentage back after a certain while. You need to be able to give me 103 dollars back the next year just to beat inflation, i.e. for this to not have been a complete waste of my time. In real terms, this means you need to grow your business by at least 3% in order to give me that return. I'm not the right person to talk about this, as my knowledge is thin and my metaphors are poor, but even if you're the sole owner you start to lose money if you don't grow at a reliable rate.
  - tomkarlo 15y ago
    You're right in that most businesses need to grow to increase their value (generally because growth is built into their current valuation) but the narrative you're using isn't on target. It's entirely possible for a business to give investors good returns even if their business or market isn't growing. Profitability and cash returns from a business can grow as revenues decline if the company either increases operating efficiency, or reduces in investment in recognition of the declining opportunity. MBAs would call this a "cash cow" business - one that should be milked. We dont tend to see this much in tech because growth is such a fundamental part of our valuations that no company is willing to admit it's in such a position. And you'd probably lose all your engineers over time. But when you look at say, Microsoft, and strip away their non-performing businesses, that's what it looks like: a company that has some assets that produce a lot of profits, but aren't really growing any more, yet if managed properly can continue to throw off gobs of cash for years to come.
    - phillmv 15y ago
      Please correct me if I'm wrong! But: >Profitability and cash returns from a business can grow as revenues decline if the company either increases operating efficiency, or reduces in investment in recognition of the declining opportunity. Sure. When I say growth, I mean "make more money this year than you did the year before". This doesn't directly translate into "make more widgets", of course – that's just the (in an ideal world) easiest and least complicated way of achieving that. >yet if managed properly can continue to throw off gobs of cash for years to come. Until! It dies ;0.
      - ricree 15y ago
        >Sure. When I say growth, I mean "make more money this year than you did the year before". If I understand tomkarlo's point correctly, he's saying that you don't have to make more money year to year in order to have a viable business. Rather, you simply need to keep expenses low enough to manage a respectable profit for your investors. That profit need not necessarily grow year to year for investors to find it worth holding. Of course, valuations will be made completely differently for such a company, but that doesn't mean they can't exist.
        rhizome 15y ago
        It's the fallacy of the excluded middle that convinces people that stability has no value.
      - tomkarlo 15y ago
        It's this statement that is incorrect: "In real terms, this means you need to grow your business by at least 3% in order to give me that return." In almost any definition "growing a business" means increasing unit sales, or increasing revenues, or both. Neither is necessary to provide acceptable returns to an investor - there are great investments around in businesses that have long since peaked in terms of unit volume and revenue. Much of the private equity world focuses on these kinds of investments.
        15y ago
  - dextorious 15y ago
    """Yes. You need to find/create more markets.""" Actually you don't "need" anything. There are tons of examples of profitable companies that do one thing / product, or several things / products and do it for a century or more, with thousands of employees that do not look to expand on other markets. Even more so for companies with less employees. """If I invest 100 dollars in you, I want to receive a percentage back after a certain while. You need to be able to give me 103 dollars back the next year just to beat inflation, i.e. for this to not have been a complete waste of my time.""" Yeah, that's why the stock market promotes cancerous growth of companies.
    - phillmv 15y ago
      I don't mean to be adversarial, but could you provide examples? >Yeah, that's why the stock market promotes cancerous growth of companies. I have troubles with this sometimes. I lie awake at night and think about the little I know about finance and economics and I wonder - is this all a zero sum interaction? Abstractly, the earth is a closed system, right? Of course, value and money are also abstractions and so aren't directly pegged to any physical constants, so maybe in real terms it doesn't matter either. Anyhow, my understanding is that the narrative I used above works for stock markets and single shareholder companies. I have a fixed amount of hours/year to invest in my company/enterprise. Let's suppose it's profitable and yields oh 250k in profit/direct wages to you, the single shareholder. If your total amount of profit remains constant, you're losing money just via diminished purchasing power. Your employees will demand raises, which means you have to raise prices and/or squeeze more productivity out of your company, yadda yadda yadda. If you don't keep growing… you end up finding yourself in a position where you will begin to contract, and it's easier to go down than to go up.
      - jchrisa 15y ago
        I've been reading Sacred Economics: http://www.realitysandwich.com/homepage_sacred_economics http://www.realitysandwich.com/homepage_sacred_economics It's the clearest explanation of this I've heard in a long time. However it's a bit long and deep, if you want an essay length version of the argument, it is here: http://www.realitysandwich.com/money_and_crisis_civilization http://www.realitysandwich.com/money_and_crisis_civilization
  - anamax 15y ago
    > If I invest 100 dollars in you, I want to receive a percentage back after a certain while. You need to be able to give me 103 dollars back the next year just to beat inflation, i.e. for this to not have been a complete waste of my time. Yes. > In real terms, this means you need to grow your business by at least 3% in order to give me that return. No. Suppose you want 3%. You give me $100 and I buy $100 worth of goods which I then sell for $106. I give you $3 (there's your 3%), keep $3. That leave me with $100 to buy goods to do it all again. Note that this biz doesn't grow at all but it can throw off 3% as long as I can keep buying at $100 and selling at $106. What about inflation you say? Multiply all the numbers after the initial $100 by your inflation factor the first year and use the updated numbers (and your inflation factor) each subsequent year.
  - deleted 15y ago
    [deleted]
  - sliverstorm 15y ago
    It shows just how isolated the startup community can be from traditional business. Stable businesses can make plenty of money; growth is simply the way you increase your profits even more. Really, your sentiment is reminiscent of the dot-com refrain of 'get big or go home'. Those were the true champions of growth-as-profit (and it sure turned out well for them)
  - deleted 15y ago
    [deleted]
  - GoodIntentions 15y ago
    >> Yes. You need to find/create more markets. xbox. It isn't the only "other" interest, but prolly the best example. MSFT isn't just enterprise oriented.
maigret 15y ago
"Entreprise" is not limited to Windows. Far, far, far from that. I don't know your background, but in software development (let us exclude plain Website just publishing information), most of it is written for enterprise customers, not private consumers. Excel had around 10 developers years long. I understand cloud is making the difference more blury, but there are just so different needs across different countries, industries, etc - work is in the enterprise. Consumer tools scale, you don't need much people to maintain and develop these.
ArbitraryLimits 15y ago
OK, I interpreted your original comment as saying that big corporations in the aggregate spend less money on software and its associated services than they used to, and I couldn't imagine how that could be true.
rhizome 15y ago
You're either busy growing or you're busy dying. This is extremely simplistic MBA talk.

veidr 15y ago

Well, it's still pretty lucrative, but for Microsoft, it doesn't go anywhere anymore. I am persuaded by some of the recent arguments (John Siracusa's maybe?) that both the innovation and the money in general-purpose computing industry have moved over to the consumer side of the equation, and that this change has put MS in a worse position than they've traditionally been in. Dominating corporate computing (for soooo fucking loooong) made MS billions and billions, but it also held back their two products, Windows and Office. They couldn't ditch compatibility, they couldn't make disruptive moves, they needed to pre-announce their roadmap... and also, I'd guess that they probably just didn't see the business-to-consumer weight shift coming, just as they didn't see the Internet coming until it ran them over. (Neither did any of their peers, though -- Apple still had their own branded AOL-clone at a late stage, what was it, eWorld? The Internet ran over everybody as the 80s turned into the 90s. And MS is itself one of those hidebound big corporations; it's natural for those organisms to be slow.) Anyway my point is that megacorps actually want a pretty limited computing product, compared to consumers. Barring esoteric business needs, they don't need, or even want, their employees to be able to, say, shoot HD video, make unlimited anonymous video calls to anybody in the world, track themselves jogging with accelerometers and GPS, play Angry Birds, and so forth. In general, megacorps want cheap, reliable, slow-moving tools that match their slow-moving planning and frankly limited needs. And did I mention cheap. Cheap. Back when a PC cost as much as a used car, business purchasing drove the industry. But the human spirit and Moore's law went marching on, and in recent years we have a variety of desktop, laptop,and pocket phone/computers that not only outperform those used-car PCs of yesteryear, but may also feature wireless and nationwide magical Internet connections, ones much faster than the 128K ISDN-line that cost me 40,000 yen per month in the 90s. So now you can buy a pretty kickass computer--one that fits in your pocket, or handbag, or backpack, whatever you prefer--for the price of like, two steak dinners with a date. (Maybe three or four for the macbook air.) Cost-conscious companies with big headcounts don't need any of that good shit. So they end up with, say, a fleet of Dell Vostro 620S desktop PCs with 4GB RAM, archaic spinning-platter HDDs, and Windows 7 Pro (or XP still, if they are on a volume license (which they totally are)). So we're talking about $700 with a shitty Dell monitor. 3-4 year deployment life. MS'll make whatever percentage of that, plus a bit on the Office they'll probably use, but that's it for that duration. Meanwhile, a guy and his wife will drop eight times that on smartphones over the same duration. iPhone, Nexus, Galaxy, whatever. (But yeah, mostly iPhone.) Or a tablet of some kind. Because they want all that good new shit, and it's no longer so expensive that they can't have it. So consumers, wow what a shitty word, okay I mean 'people doing their own things and living their lives' -- let's call them PEOPLE for short -- can now afford computers. Waitresses, stadium hot-dog boys, tax drivers, high-school students. That was not so much the case when MS started to achieve hegemony. Back then, not only could PEOPLE much less frequently afford computers, but also computers weren't nearly as capable of doing the cool shit that PEOPLE are actually interested in. PEOPLE want to do cool shit, not just do some boring-ass work. Video mashups, GPS flash mobs, music buying, music bootlegging, angry birds, porn, cold fusion, etc. Therefore, the companies aimed at PEOPLE are the ones who are, and have been for a while, making the more ground-breaking and innovative products. Lighter, simpler, more sensors, more stable, brand new re-architected OS software. The PEOPLE are the ones recently pushing the limits in computing. Demanding new, ground-breaking products. Rewarding innovation. Computers were prohibitively expensive. But now they're not. Computers used to not be able to do cool shit. Now they can. So even if the ENTERPRISE market is still bigger overall in terms of units, ENTERPRISE wants shittier products, updated less frequently, for less money. That's what MS has provided over the past decade (with the exception of the less money part, har har). Microsoft's products met those needs, but at the cost of tying MS to that legacy, and thwarting their ability to compete for the faster-evolving PEOPLE market, arguably now more important. They are now trying to reinvent themselves. With Windows Phone surely, and it seems they are trying to make a break with the past even with Windows 8, though they are understandably halting in their efforts, loathe to disturb the waning cash cow. But serving the PEOPLE and serving the ENTERPRISE increasingly seem to be mutually exclusive. PEOPLE want new, awesome, fast, again! ENTERPRISE has different priorities. So MS has its internal schizophrenia. And no success on that front so far. I didn't mean that the enterprise market was becoming less lucrative for everybody, although relative to the consumer market, it probably is. I meant that for Microsoft specifically their dominance of the enterprise over the past 15+ years has been milked for everything it is worth and has now become a hindrance to them, keeping them stuck in a narrowing rut.