So, in the week of the Facebook IPO, surely there is nothing to add to the mountain of analysis already produced about the big event and the trading weakness in the stock over the last couple days.

Perhaps, two charts straight from Google Finance, to provide an interesting contrast.  

First, Facebook compared to Apple, Google, IBM and Hewlett Packard.

• Facebook is the smallest business in absolute terms on the list with the exception of beleaguered Hewlett-Packard.
• Facebook trades at the highest relative valuations - P/E and Price-to-Sales - of any company on the list.  Even Apple only trades at 13.6x P/E while Facebook is at 99.6x.
• Perhaps unexpectedly, IBM trades at nearly the same relative metrics as Apple and Google.

Overwhelmingly, that chart makes Facebook look overvalued but here is another chart:

This chart compares Facebook to probably its closest publicly traded rival, Linkedin. The most striking aspect of the chart is how close the price-to-sales ratios are for the two businesses despite their dramatically different market capitalizations.  Given that social media should still be in growth stock as opposed to mature business territory, revenue might be the statistic most scruntized by investors.  

If so, perhaps there is some method to madness of the last few days afterall.

So, last week, Progress Software announced a retreat of sorts from the the BPM market.

Having purchased Savvion BPM and a clutch of other products to make Responsive Process Management (RPM), they have now announced the divestitures of Savvion BPM, the Sonic ESB and 8 other ‘non-core businesses’.

The analyst coverage has already dissected the transaction. If you are interested, I would recommend Neil Ward-Dutton’s post and the Forrester post written jointly by three of their analysts.

Both view the strategy as risky.

Here is a substantial section of the Forrester post that tells the story:

Progress isn’t falling apart; rather, the company is making a second attempt to grow into an integrated enterprise vendor — this time with less baggage. In its first 25 years, Progress was a portfolio company selling technical components to other vendors. There was no “whole greater than the sum of the parts” for the company. The first attempt to weave Progress’ portfolio of products into a set of high-value enterprise solutions collapsed under the weight of all of those products, many of which were commoditized and not growing. Now Progress will focus on just three areas.

The transformation strategy is the same: Use products that generate strong revenue and profits but grow slowly (Open Edge) to fund investment in products with strong growth potential for the future (Apama with Corticon, DataDirect). The focus is just tighter this time.

via Forrester Research

I’m not so sure that this is a plan to build anything. To me, it feels to me more like an exit strategy.

A Plan for a Sale

The problem with portfolio businesses like Progress is that they are unattractive acquisition targets unless:

1. You want to own the whole portfolio which is unusual.
2. The value of 1 asset in the portfolio is so great it justifies the hassle of dealing with the rest of the portfolio, in which case its not really a portfolio company at all.
3. The strategic value of some part of the business justifies buying everything and getting rid of the businesses that you don’t want. This is similar to the second point but is more driven by the synergeries with your existing business.

Progress probably would have struggled to fit into any of these categories. The core business delivered $361 million of revenue in FY2011 but the 10 non-core products delivered $172 million. – meaning that no single business dominated the portfolio and there is a lot of businesses in the mix.

Forrester continues:

The catalyst for Progress’ shift: activist investor Starboard Value LLP. Starboard’s public letter to new Progress CEO Jay Bhat laid out the ugly financial picture the company had become. PRGS rose substantially after the announced strategy shift, as you’d expect from the promise of a cleaned-up balance sheet. But the hard challenges of future growth remain. [… The Open Edge Product] remains primarily interesting to long-time Progress ISVs, not the broader market. Persuading the wide world of developers to even consider OpenEdge will be an immense task.

via Forrester Research (Emphasis added)

This makes sense — It’s difficult for the business to unlock value through a trade sale so it has undergone a second strategic restructuring under pressure from an activist shareholder group.

What is less certain is the endgame.

The analysts have assumed Progress have made some bold and risky decisions to reposition themselves in the market. I might agree but for a different market.

After the announcement, the core Open Edge product group has a clear value proposition for a strategic buyer – You would be buying an aging but cash generative business.

Similarly, the non-core businesses often have highly regarded technology and growth potential. Others are niche products but profitable.

Suddenly, every part of the business has more obvious potential buyers.

So, here is the prediction:

The non-core businesses will get sold and spun-out over the next 12 months to clean up the balance sheet and Progress itself will get acquired in 2013.

At a Bonitasoft seminar today, the presenter made a great statement about their approach to the portal in their product.  

Paraphrasing from my notes, it ran something like:

The portal called the user experience is ugly - why?

100% of customers change the portal so we spend the time making it configurable, not pretty, since we are sure that you will change it anyways.

Great plan - I don't how configurable Bonitasoft actually is but I like the honesty around the product development.

The logic is also completely true.  I don't know any customer that wants your vendor-branding on their BPM solution and more vendors should work on giving customers the tools to create great user experiences.  

Afterall, the portal is usually the first sight the end users will have of the system and where they will spend most of their time.  Making that first impression a great one makes everything else easier.

Over the last week, I have managed to spend a couple interesting hours with Bonitasoft, the opensource BPMS.  

What follows is not a full blown review.  It is more of a couple of random observations and perhaps an insight into what aspects of product development will be increasing important to enterprise software in the future.

Who am I to have an o pinion?

The time I spent with Bonitasoft was completely motivated by my desire to see something new.

It was not part of a formal vendor evaluation for either my employer or a client.  I think this is important to understand.  I was following my curiosity, not looking at it to solve a specific problem.

I had a productive afternoon with it.  

In about three hours, I managed to get it installed on my laptop, build a small process and integrate it with Twitter using an pre-built connector. 

I, also, encountered some problems. To start, here are the good points:

• The installation was easy on my Win7 laptop and its obvious that some thought went into making the application fit on a normal laptop and install elegantly.
• I was impressed by what installed:  Not only did I get the development studio but a runtime environment (jetty and solr, I think) also installed so I could run my processes as I built them.
• The 'getting started' tutorial was very useful - although I only skimmed it then started doing my own thing.  I did refer back to it a couple of times and always found it useful.  A great endorsement for the product is that I usually needed to go back to the document for fairly specific items (how to set up a variable).
• The out-of-the-box portal looks like it was styled by Darth Vader in red and black but worked well to let me see my process working quickly.
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  Click here to download:

  an-afternoon-with-bonitasoft-and-the-business-buyer-BzhuiAdgJqvrrroJukCE.zip (129 KB)
  
• I liked that running a case from the portal (called the User Experience in Bonitasoft) would run the human interaction in the portal but that the same code could also run in a separate window (see the gallery above).
• I felt confident that integration points (called connectors) could be built by developers but reused by business users since I used an out-of-the-box one to send messages via Twitter.  Here's the test account I used if you are interested.
• As you would expect, some things were not where I would expect them.  For example, the conditions coming out of a decision gateway are added to transitions, not to the gateway itself. I would prefer that logic all in one place - complex gateways must be a nightmare to check but even in these circumstances it was relatively straight-forward to understand what to do.

Overall, I managed to install and get the product working for me in a couple of hours without needing to talk to a salesguy.  A very positive experience.  Obviously, I wasn't developing custom integrations or deploying code to a production system.  I didn't it set it up for a team to collaborate on a project but it was fun to get started.

Unfortunately, I had a less positive experience when I opened Bontia Studio a few days later to show a coworker my little experiment.  The studio worked fine but runtime environments simply crashed and would not reset from inside Bonita Studio.  Eventually, I found a forum article telling me to manually delete certain directories on the file system and restart Studio which worked fine.

From the forum, it was obvious that others were having the same problem.  Its the kind of problem that the open source community is brillant at resolving so I'm sure the next release will take care of it.  But, it is also the kind of problem that the open source development community is tolerant of and the business user community less so.  Business users just expect stuff to work and work well.

Bonitasoft is still installed on my laptop which is probably the highest praise I can give it but it, like the rest of BPM, is not quite ready for a pure business audience.

Last Thursday, I managed to catch the last 30 minutes of the AIIM's Infochat on the topic of 'How are Social, Local and Mobile Tools Revolutionize Business Processes'.

I'm a not a regular in then AIIM community but I'm glad I made time for the topic and chat.  It was a great exchange with some highlights worth repeating.

Find your problem then pick your tool

During the tweet jam, Bryant Duhon asked for a list of processes that could be improved with social media tools.

Generally, a wide gamut of cases management use cases were offered but here was an exchange on the tweetchat which I think got the dynamic exactly right:

in this context, that's closest, but really, #socbiz gamut RT @dajb2 what is the def of Socmed being used here? Any collab tool?#infochat

— Bryant Duhon (@bduhon) April 12, 2012

@dajb2 @bduhon Backwards. What #socmed tools are good in patient care?#infochat

— Christian Walker (@chris_p_walker) April 12, 2012

Get a tool to solve a problem rather than get a tool then find a problem.

The Value of Automation

The last question of the tweetjam was on the role of automation in 'the collaborative business processes of knowledge workers'.  I love this question because increasingly conventional wisdom holds that knowledge workers are an elite brigade that work in an unstructured and nonrepeatable way -- That their value is their expertise and there is little place for automation in their life.

This view is completely wrong.  Automation of the right types of work at the right time can help everyone and knowledge workers are no exception.  

Here's the example I gave on twitter yesterday:

For example, if someone as to rekey the same mortgage application into 4 systems.Automate the rekeying, not underwriting. #infochat

— David Brakoniecki (@dajb2) April 12, 2012

I think that this is a fairly typical situation with knowledge workers.  They might need technology to help them collaborate on difficult problems but they definitely would like technology to rid them of tedious and repetitive tasks so they can spend more time on the challenging parts of their job.

How much of a doctor's time is wasted on insurance paperwork and not patient care?  Or, further medical training?

Automating the tedious to make time for the important is usually a good first step in any process-centric project.  It, also, tends to be popular which generates buy-in and adoption and long term success.

So, Mobile BPM is a hot topic this week with Scott Francis publishing a lengthy blog post over at BP-3 and a mobile BPM question over at ebizQ.

Two element of Scott’s blog post from earlier in the week really resonate with me.

It might not be your knowledge workers …

Scott starts:

It turns out there are all kinds of people out there with purpose-built devices, and sub-par software experiences even today. Think of the delivery man coming to your door with a portable device for you to sign for a package. You can’t even read your own signature. And the hardware is expensive. Now imagine that same deliveryman with an iPad.

via Scott Francis

Generally, I think that mobile BPM is about the context. Is a mobile application helpful and intregral to the process or just cool? Scott’s example a perfect place where a great mobile experience would improve both the customer and the employee experience.

Too many proponents of mobile BPM focus on the desk-based office workers who are increasingly bringing mobile devices into the work on BYOD schemes. There are a multitude of good mobile first use cases around these workers but equally there are lots of bad use cases.

If your office workers work predominantly in front of a computer, the value proposition of great mobile experience when they will mostly be interacting with your process on their desktop is probably little more than technical debt.

It’s all about the context ….

He also writes:

And do we really want our HR processes intermingled with our sales processes and our claims processes? I’m not convinced that we do. A fictional ACME corp doesn’t need a single BPM mobile app – ACME needs mobile apps that make sense for each of its critical processes – distributed to the users that make sense for those processes. And the apps should be tailored for the processes they interact with. Of course the processes should understand what can be done from mobile devices (potentially everything – but potentially not).

via Scott Francis

Again, context is king when deciding to go mobile.

I was recently involved in a process where we implemented a mobile-only user experience for one particular role in the process. Most of the process participants needed to work for long periods of time and at their desks to complete their tasks but the senior management wanted to review and approve tasks on their Blackberries. The interesting part of the process design was that the senior managers were unlikely to ever log directly into the system from their computer but were more than happy to review things on their smartphones. Everyone else, needed a keyboard and access to other information on their computers to be productive.

So, the appropriate use of a mobile can be different for different people even inside of the same process. One-size fits all implementations let vendors check the mobile box on the Gartner or Forrester vendor evaluations but don’t necessarily fill the needs of real customers.

So, Facebook came of age yesterday. No longer content with tactical acquisitions for technology or teams, it bought a potential competitor, Instagram, for a $1 billion.

Several of aspects the deal are interesting: The timing (so soon after a round of funding and the launch of Instagram’s Android app), the valuation (eye-watering) and the deal logic (why did Facebook do it?).

Commentators all over Twitter and the web are offering a wide range of opinions on all of these topics but there is one that I think they consistently misunderstand: the logic of mobile first.

As usual, Om Malik provides some astute analysis of the deal and Facebook’s motivations:

Facebook was scared shitless and knew that for first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects. Why? Because Facebook is essentially about photos, and Instagram had found and attacked Facebook’s achilles heel — mobile photo sharing.

and, again further on:

In other words, if there was any competitor that could give Zuckerberg heartburn, it was Systrom’s posse. They are growing like mad on mobile, and Facebook’s mobile platform (including its app) is mediocre at best. Why? Facebook is not a mobile-first company and they don’t think from the mobile-first perspective. Facebook’s internal ideology is that of a desktop-centric Internet company.

via Gigaom

I suspect that Om gets the deal logic right but I’m less convinced by the overwhelming importance of being a mobile-first business.

A Problem of Cause and Effect

Instagram was getting traction (if not revenue yet) with a mobile first solution because it was solving a different problem than many people might think.

The problem with photo uploading for every site on the internet has always been the hassle of getting your photos from your digital camera to the cloud. Here is a pretty standard running order of events from 5 years ago or less:

1. Take photos on your digital camera
2. Transfer photos to your computer
3. Edit or process photos as required
4. Upload the photos to the cloud
5. Tag and release them for public consumption

It’s a lot of steps and a fairly big hassle to actually get photos from your digital camera to a website to share them. Interestingly, most websites can do very little to reduce this hassle because they only control a couple of steps in the process.

The basic outline above is true for Flickr when it sold in 2005 and Facebook today. Even photo specialist sites like Smugmug pretty much follow the same flow.

Collectively, they have tried various gimmicks to make it better like creating bulk uploaders and embedding photo editing tools into the site to allow the user to avoid off-line editing.

Here’s the thing: The main source of hassle is transferring your photos twice (camera >> computer >> cloud) was unaddressed until now.

Instagram was cunning and correct in being mobile first, not because mobile first is always the right answer, but becasue it was solving a problem that was only possible with the rise of smart phones. A smart phone lets you take pictures, edit them and upload them without switching devices at all.

Obviously, other businesses are also looking to take advantage of this development as well but for whatever reason Instagram got traction. 30 million users worth of traction. Interestingly, 30 million people thought that the utility of Instagram sufficient to outweigh the network effects of just using Facebook.

Could facebook have built the same functionality? Of course but it never occurred to them as important or being a problem they needed to solve until 30 million people demonstrated it. This is the advantage of being a focussed start-up trying to solve one problem really well rather than a social networking monolith. In fact, I would argue that to be successful Instagram needed to be more than mobile first — It needed to be mobile only.

This is the nature of the problem they were solving. Think of a different problem. Sharing files between devices. Dropbox, Box and other have similarly revolutionized that market but mobile first would have never worked for them. They needed to do mobile and desktop at the same time because the files you want to share are on your desktop.

Start with the problem. Then, worry about the solution. Cause and effect. Of course, the prevalence of smartphones make mobile the answer more often than ever before.

VCs and Entrepreneurs: what is good for the goose …

If mobile first isn’t always the answer, why do smart and prominent commentators and VCs like to talk about it?

Simply because the trends are driving new opportunities to analyze and invest in. These mobile technology markets are less settled and will probably provide a disproportionate number of VC winners over the next several years.

If you are looking for technology trends to invest in, mobile first is a great bet but you have the luxury of a portfolio approach. You can play the numbers.

If you are an entreprenuer, you have one shot so, before you decide that all you need is an iphone app and a holding page on the web, best think long and hard about the actual problem you are trying to solve.

There are the people who will use the system everyday as part of their job and then there are the people who are paying for it.

Quite often, this dynamic and how you manage it is the difference between success and failure in a project.

In a columns in Forbes, Forrester Research puts out a barrier to cloud adoption and IT flexibility that I haven't heard before:

This CIO started our conversation by saying, “Matt, all you market analysts suggest the biggest cost benefit of cloud computing services is reducing headcount associated with administering commodity IT services – what you fail to understand is it often costs us more to make jobs redundant in my company than it does to keep people.” Yes, many of our clients are very direct with us – and she said it with a great accent, which stings even more. For this client, the inflexibility of labor laws and the power of labor unions is a far bigger constraint to her IT agility than is the complexity of IT systems or internal processes. Clearly, if you can’t recognize the benefits of an IT investment in a reasonable time period due to factors that exist beyond IT’s control, it’s not a strategy.

Looking through some recent investor materials from Pega produced this slide which I thought was a fascinating view of the BPM market size and definition.

Without the accompanying commentary, its hard to evaluate the accuracy of the numbers but a few dynamics are clear:

1. The market categories are self-serving - They are an extrapolation of Pega's architectural strengths onto the market but interestingly they see more opportunity attacking the CRM and document management (case management in the chart) parts of market.  

2. Pega views the market all about execution technology.  Their 'market' does not include analysis or modelling revenue.
3. Despite their history, there is no stand-alone business rules market in their marketview.