Saturday, October 10, 2009

IBM On-Demand Sevices

1. The Business World is on Fire.
Small businesses’ partners and customers expect quick and easy transactions. Their competitors continually erase profit margins. Information management systems must be part of the solution, not millstones around their necks. At last, the world can be their computer, thanks to IBM On-Demand Services.

Wouldn’t it be nice if an IT solution were like their electric utility? Flip a switch to use it. Flip back when done. They only pay for when they use it. Oh, and by the way, they can connect to the world’s dataspace seamlessly. An impossible dream? For over a century, IBM has made impossible dreams come true for small businesses.

2. Who are the customers and what do they want?
IBM (2009e, p 1) says the world is “Instrumented. Interconnected. Intelligent.” and that these on demand services are “Inevitable.” They report that there are now 1 billion transistors per human. Over a trillion things are networked. All those things have intelligent devices in them. “The time is right now. “

Small Businesses are the target market according to Vanides (2009, p. 1). They want effective support of their operations. They cannot afford the IT staff and glass house expense for the sophisticated information services used by larger competitors. They also need to reduce costs including whatever IT costs they already incur. What is more, with the new Waxman and Markey HR 2454 Bill (2009, pp 652-672) also known as the Cap and Trade Bill, all business including small business will need to reduce carbon footprint. Penalties will be assessed on those who don’t. Those who do will be able to sell their carbon allowance credits on the open market.

Small business managers in the business units want efficient automation of their operations. It would be nice to have access from anywhere rather than the currently constrained in-the-building format. Small business workers want ease of use. Existing partners want an easy way to perform transactions with the small business.

Existing computer suppliers and software vendors would be opposed to a move to On-Demand services. They have a concerned interest in the sale of expensive solutions and services to these businesses.

3. Market Analysis
3.1 Competitive Actions
Leong and Chamberlain (2009, pp 1-2) report that this market is rapidly growing. It is considered the future of computing by the most of the major players. The new Microsoft Chief Technology Officer, Ray Ozzie is not blind to the market change. Microsoft completely missed virtualization but they have a belated start here. Online services are becoming an important market segment for them, according to Mackey. A Microsoft on-demand services initiative is code-named Azure (see Mackey, 2008, p 1). Google and Amazon are also in this developing market as well. The players in on-demand services will soon have good-enough offerings, or so says Gartner (see Smith and Austin, 2007, p 1).

Wainwright (2009, p. 1) highlights Microsoft’s weakness in this area, which is its Software plus Services model rather than on-demand services model. Wainwright gives as an example:
"A Microsoft spokesperson told me that customers will need to buy a SharePoint server, which ranges from $4,400 plus CALs, or $41,000 all CALs included, if they want to share documents using the online version of Office 2010."

$41,000 to get what Google offers for free with Google Docs, not to mention the pounding the prospects will take in buying Office. Wainwright concludes that Azure is not a competitive threat to the other players but a defensive play to give existing Microsoft customers, who already paid for the software, a .NET friendly cloud. This is Microsoft’s competitive weakness.

What about Google or Amazon? Neither of them have the history of supporting small business that IBM does. Neither has the business expertise that IBM consulting marshals. According to a Gartner Press Release (see Gartner, 2009, p 1), Google is a leader in offering advertising services. However, Leong and Chamberlain (2009, p 2), in their Gartner study, do not rate Google or Microsoft as even niche players for on-demand business operation services. They do rate Amazon as a visionary but without the ability to execute that vision. For On-Demand Services, they rate IBM in the highest category – a leader with the vision and ability to execute.
Their main competition is AT&T, another venerable institution, and my former employer. What are AT&T’s weaknesses? They tell us. Poor customer service! How long would a small business last if they gave their customers poor service? AT&T is inflexible. AT&T’s process is difficult, complex, and slow.

3.2 Marketing Issues
Like the PC in the early 1980s, On-Demand services is a leap into the unknown by most small businesses. This is because it is a new technical approach to business operations. In such a case, a trusted institution like IBM is a strong marketing positive. It was that way with PCs, which did not take off until IBM backed them. There were microcomputers before the IBM PC. When it introduced the PC, Jackson, et al (2002), say that IBM was “responsible for unleashing the upheaval that would lead to … the complete restructuring of the IT industry.” So it was with each new automation era in business processing.

There are no success stories for On-Demand services, it is such a new concept. There are no references. IBM is eating its own dog-food, so it can report on its own experience, but that is it. To counter this, there is little marginal cost in offering a free starter service and consulting to reduce risk for the small businesses.

Another marketing issue is that no one has a complete toolset at this time. To counter this, there are positive returns for the small business from the implementation of even one of the tools. Furthermore, according to Gartner only IBM and AT&T have the comprehensive vision for the toolset and the ability to execute that vision. The lack of a complete toolset by anyone can actually be an advantage to IBM.

Additionally, there are issues and cautions for email marketing. Vanides (2009a, p. 2) says that this is even truer for B-to-B: messages. B-toB email must be relevant and have substance. Vanides (pp 7-8) provides advice on the form and style of our emails. First make a compelling offer and tell a story that “engages the reader’s imagination.” Stay focused, an email should cover one product or service. Give assurances to the forces of nature with money-back guarantees. Keep the paragraphs short and the tone appropriate to the audience. You may want to have a P.S. Finally, have multiple calls to action.

Momentum is another aspect of email marketing. Quris (p. 10) says that measurement of past behavior lets us gauge email engagement momentum. This gives us the recipient motivation and interest before we send our emails.

4. Constraints
The Direct Marketing of IBM On-Demand services is constrained first by an incomplete toolset. Another constraint is the radical newness of this technology; we are not completely sure how customers will use the various services. There is a further lack of references and no real life feasibility studies with existing implementations. Accomplishing the objectives of this Direct Marketing campaign will remove many of these constraints.

5. Decision Options: Objectives, Strategies and Tactics
Leslie and Holloway (2006, p. 116) stress the importance of education when marketing new technology. This is a two-edged sword, especially while the services are being fully defined. The customer needs to be educated on the value and benefit of the service but at the same time IBM will need feedback from the customer on how they think they can employ the service and any changes that would make this easier. This two-way education is a common thread amongst our objectives, strategies and tactics.

There is risk in changing technology, and free trial is a way we can reduce that risk. This will be a second common thread throughout our objectives, strategies and tactics. In our readings, Carlson Marketing (2007, p 2) reported that one On-Demand service that has already proven successful is Customer Relationship Marketing.

CRM will be the free service offering in our IBM campaign – all businesses need it and small businesses may consider it a luxury because of the cost and difficulty of a traditional implementation (see Doyle and Martin, 2003, p. 1). Additionally, it is something that we can offer as a plain vanilla basic package to give them immediate benefit with low marginal cost to IBM. Then we follow-up with paid consulting engagements to customize it according to more specific ways they do business.

Finally, the Waxman and Markey Cap and Trade Bill may make On-Demand services pay for itself at small businesses. Waxman and Markey's bill (2009, pp 652-672) puts a cap on carbon footprint and will dictate an allowance to each business. All companies will be required to purchase an "Emissions Permit" and over time this allowance will be reduced to squeeze companies to further drive down carbon footprint.

The trade aspect enables “green” companies with an allowance greater than their footprint to sell credits to “dirty” companies at whatever the market will bear. On-Demand services reduces server and glass-house carbon footprint. We can take it a step further as well. With On-Demand services, you really may not need an office building: they are just big filing cabinets. People can access On-Demand services from anywhere they have Internet access.

So On-Demand services can help companies with a quick reduction in glass-house carbon and later with smaller buildings for enormous carbon savings. Teleworking becomes a more feasible option with On-Demand Services.

5.1 Objectives
Spiller and Baier (2005, p 210) find that roughly 80% of people respond to email compared with less than 2% click through on banner ads (p 214). This established the order of magnitude for our expectations in this Email Direct Marketing campaign. Here are our objectives. As noted before, with a radical new technology, an education process is the appropriate first step.

  • 90% of IBM small business customers are aware of benefits from On-Demand Services

  • 50% of recipients accept an invitation to a free online seminar with the promise of free consulting services after completion of seminar, and completion of a questionnaire at the end of the seminar.

  • 5% agree to the deployment of On-Demand basic CRM services with free consulting services. A free trial period of use will be followed by discount rates per hour of usage for these innovators, an influential group.

These objectives will guide the education of the market about the benefits of IBM On-Demand Services. In addition, IBM will learn how customers actually use this radical new technology. This will give IBM both references for future sales, as well as guidance to product development on what real customers look for in such services.

5.2 Strategies
Spiller and Baier (2005, pp 210-11) disclose that the grand strategy for email marketing is to target promotions to specific customers and that such an approach should be database-driven and customized to match the specific needs of the recipient. This type of customer-centric marketing is at the heart of customer relationship management. Thompson (2007, p 2) says we need to become customer-centric by understanding our customers and giving them "what they want." Our grand strategy is to integrate our email campaigns now and in future with the customer databases at our disposal.

Our second strategy is to offer free consulting services in an exclusive offer. Spiller and Baier (p 89) suggest that when products are new to the market, and so are in limited supply or not yet generally available, in such cases an effective approach is to offer an exclusive. The Email offer will use this strategy and the chance for Free consulting services. Spiller and Baier (2005, pp 102-103) list nine strategies and (p 104) 99 specific tactics for direct marking offers. The first strategy is a free offer.

Of course we must avoid the appearance of being Greeks bearing gifts, the all pervasive strategy of Western civilization, but that said, I think gifts as in "we're here to help" are a way to get the doors open for IBM On-Demand Services with its small business services. In this email campaign, prospects will have the opportunity for Free consulting services to set-up a very basic customer relationship management system. Once IBM has that the basic foudnation setup then we can spin-sell off of it. Additionally, IBM have references for early majority and late majority customers.

The marginal cost of the service is nil, the opportunity cost is low because it is only the basics, and the engineering time is an investment. The establishment of the basic foundation gives IBM sales teams opportunity for spin-selling to get follow-up work. The benefit for the customer is reduced risk.

5.3 Tactics
This is a high involvement product. Customers will need to engage in detailed descriptions of benefits and attend a learning seminar. The email will not attempt this education since a seminar is a better forum. The email body copy will emphasize benefits, however.

  • Better your own business through access to services previously available only to large organizations

  • Reduce IT costs

  • Free consulting

  • A time limit offer – we are starting now and value your expertise.

We will say that because we want timely feedback for product development and later marketing campaigns, this is a time-limit offer. Time limit offers are a standard tactic in direct marketing.
We will use the IBM CRM database (see Spiller and Baier, 2005, p 121) to personalize aspects of the materials. We will include the compelling promotional phrase “At last” to start our text. Spiller and Baier (p 111, 126) make the case that the phrase “At last” is attention grabbing. At last, the world is your computer.

Bob Stones Seven-Step formula in Spiller and Baier (2005, p 117). First a benefit is promised: “At last, the world is your computer.” Next the most important benefit is enlarged: Wouldn’t it be nice if your IT solution were like your electric utility? Flip a switch to use it. Flip back when done. You only pay for when you use it. Oh, and by the way, you can connect to the world’s dataspace seamlessly.

Back up what you say: “We’ve Defined Each New Era In Business Processing for Over a Century.” Tell them what they lose by not acting: “”Free implementation of an online service.” Incite action now: An impossible dream? Call us now. For over a century, we’ve made impossible dreams come true for small businesses. IBM On-Demand Services. P.S. We’ll throw in free consulting to get you started. Call today.

Vanides (2009a, pp 7-8) provides life-giving advice on the form and style of our emails. First make a compelling offer and tell a story that “engages the reader’s imagination.” Stay focused, an email should cover one product or service. Give assurances to the forces of nature with money-back guarantees. Keep the paragraphs short and the tone appropriate to the audience. you may want to have a P.S. Finally, have multiple calls to action.

6. Implications/Recommendation/Conclusion
IBM has a leadership role in the industry for this important new direction. Gartner (see Leong and Chamberlain, 2009, pp 1-2) rates it as having the comprehensive vision for the future of On-Demand services and the ability to execute. AT&T is so rated as well.

This is a radical new direction for an industry noted for radical changes. IBM must learn how the customer will use the new services and as Leslie and Holloway (2006, p. 116) observe, this is true for all new technologies. This campaign is only the first step. The results and feedback from it will lay the foundation for next steps. We are ready to work with IBM on those steps and welcome the opportunity to discuss with you our ideas.


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