Microsoft and Cloud Customer Care

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This post is in part a continuation of my previous blog on Microsoft and its Office 365 customer care services. Just to recap, I cancelled my Office 365 annual subscription within a couple of hours of buying it as Outlook didn’t work on my Mac. After nearly a 2-hour struggle with MSFT tech support, I gave up and said I wanted to cancel. The call was duly escalated to Billing (by now I should have gotten used to the ‘escalation’ process which basically means you go from one clueless support person to another to whom you should recount your story for the fifth time). After a lengthy explanation of the difficulties in installing the software, I said “as it is not installing on my laptop, could I cancel the service?” Of course I could, she said, apologizing profusely that it didn’t work out for me as expected.

I was relieved to say the least. However, at that point of time I did not realize that nothing was said about refunding the $105.99 subscription fee. I will admit it. I am throughly spoilt by the likes of Amazon and Apple who do refunds if you are not happy with their products, especially cloud services, without question. Most retail chains in the US have similar refund policies. The most I had encountered when requesting for a refund was a polite, “was there something wrong with the product, madam?”

A couple of days later, I checked my credit card account. No trace of a refund. I called Billing again, but this time a different person. I regaled him once again with my failed attempt at installing Office 365 and asked him when I could expect a refund. In a booming voice he assured me, “5 to 7 working days.” Alright then, I would wait.

When I remembered the refund again, it was well past the 7 days. I checked my credit card account, still no trace of a refund. Relentless, I called again. This time, another polite lady from somewhere across the world answered. By now, I had become rather proficient at reciting my story and a little wary of very polite people on the phone. After hearing me out, she says “sorry ma’am. But Microsoft has a non-refund policy for monthly subscription services.” But then, I didn’t use the service, I struggled for more than two hours to make it work and so did your technician, I argued. Nope, policy is policy, she said. You signed the terms and conditions.

Yes, I did sign it after just glancing through it. But the service didn’t work. How can you charge me for something that never worked and was never used? After going back and forth for a few minutes, she agreed to escalate (!!) this again. A couple of days later, I get a mail from Microsoft. It said: “I have taken ownership of your request from my colleague (great, my request is progressing up the value-chain).

I understand that you wish to receive a full refund for your Office 365 subscription. My colleague made you aware of the Microsoft Service Agreement which states that all monthly subscriptions are not refundable (Not true. This was not told to me at the time of signing up but later when I asked for a refund). You agreed to the Microsoft Service Agreement during the installation of your software.

If there is anything that I can consider in your favor I would like to ask you to provide proof in form of emails sent to Microsoft, Chat transcripts, and reference numbers or similar (Really! I thought you recorded the calls and saved chat sessions. You want your customers to do it?) I am happy to consider anything that you may have that proofs (proves?) that you tried to contact us before. Without any such proof, I am not able to give you any refunds outside of the applicable terms and conditions.

The only reference of your attempt to cancel your subscription was the reference number 1250534697 from last week, but based on this I cannot refund any charges.”

I was now determined to get my money back. I did two things. I disputed the charge to my credit card with my bank and wrote a reply to Microsoft, highlighting the fact that I did reach out to tech support and apparently Microsoft had no record of those conversations. The long and short of the story was they came back to me after two days and said that I seemed to be right and I would be entitled to a refund. But by then, my bank had already withdrawn the charge to my credit card and my interactions with Microsoft support had left an indelible scar.

I was just thinking about the story in light of an article that I read on CNN today on how Microsoft intends to transform itself from a software company to one focused on mobility and cloud services such as the Office 365. I think what Microsoft needs is a fundamental shift in its thinking. It thinks and behaves like a traditional software license vendor. The cloud business demands an exceptional framework to attract, monetize and retain customers. To build that kind of business and customer care will be the first of Microsoft’s many challenges.

Dear Microsoft, the Cloud is all about Self-service

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I am now a bit skeptical about Microsoft’s cloud service, Office 365. Touted as the “Future of Productivity,” the company promises to deliver the cloud “on your terms.” By ‘your’, I am hoping Microsoft is also referring to me, the humble home Office user. The recent price reduction of the Office suite in the cloud to just $9.99 a month for up to 5 devices had me eyeing the service for sometime. If you pay one-year subscription upfront, you get an additional 16% discount, so that you end up spending just $99 plus taxes.

The key motive behind me subscribing to the service was that I would be able to access my company email, which is Outlook, on my MacBook Pro as well as my iPad. I went ahead and bought the online subscription with a credit card on a particularly idle Friday evening. Here is an account of what ensued:

7.30 PM: The download goes smoothly and I am already calculating the number of hours I would save by having my office email on the personal laptop so that I did not have to switch back and forth between the work PC and my Mac. No such luck. Every time, I try to configure Outlook, it stalls. I force quit the application several times, then reboot my Mac and try again. Outlook is stubbornly inactive.

8.00 PM: After an initial struggle, I give up and call Microsoft tech support. After navigating the elaborate menu and the automated voice that cautions you to listen carefully to  the menu options “as they have changed recently,” I manage to reach an operator on the distant shores of (I am guessing here) The Philippines. The connection sounds as if the tech support person is in the middle of a particularly intense Mardi Gras parade.

8.30 PM: Tech support establishes a remote session on my Mac and proceeds to troubleshoot while explaining to me elaborately what he is doing. After 10 attempts of trying to awaken Outlook, he uninstalls the application and begins the download all over again. Great, just another 20 minutes.

9.00 PM: Outlook downloads successfully or that is what I am told. To my dismay, it is DOA and wouldn’t budge.

9.20 PM: Tech support says he is going to escalate this to the enterprise team and they should be able to help me. After a long goodbye message punctuated by several polite apologies, I am left in the safe hands of Mr Ferdinand.

9.40 PM: I have by now explained the problem to Mr Ferdinand who now tells me that the ticket was escalated to him by mistake and he is now routing me to the ‘absolutely correct’ department.

9.50 PM: I am now handed over to another, this time a woman, who asks me for my name, ticket number and a description of the issue. By now, I am done. Productivity or no productivity, I didn’t want to go through this any longer. Could I cancel the order?

10.00 PM: I am still on the phone explaining to the person that I am not unhappy or angry but just tired after a long day at work and couldn’t spend any more time on the phone with Microsoft, though I would love to. I am handed over to Billing.

10.15 PM: Another 10 minutes of profuse apologizing. Sorry this didn’t work out for you madam. Surely we could fix up some time in the morning to continue where we left? The prospect of rebooting my computer and entering my password a dozen times didn’t seem to be the ideal way to spend a Saturday morning. I politely decline the offer.

10.30 PM: I am finally let off the hook but not before a flurry of emails hit my inbox. Thank you for contacting Microsoft and here is your ticket number. Here is another, confirming your cancellation. Another with the transaction confirmation code and a fourth with a customer satisfaction survey.

I would like to think that I am just an exception to the rule. I just hope that Microsoft is not spending all this time on the phone with customers who are bringing in revenues of about $100 a year. I think even with the lower salaries in the Philippines, this may not be a very profitable cloud model.

P.S.: Today I got a call from Vonage urging me to activate my second extension on a mobile device. They apparently didn’t want to make it too obvious that they were selling me something. So the call center person (this time from somewhere closer across the border) proceeds to extol my virtues as a valued customer and says that in appreciation, Vonage would like to offer me a second extension. The service costs just 17 cents a day and $4.99 a month. Because I am such a valued customer, my first day of the service would be offered free. I was sure I didn’t hear that right. Naively, I ask “so are you offering the service free?” The caller responds enthusiastically, “As a valued customer, the first day of use is offered free.” So, in the Vonage world, a good customer is valued 17 cents!

 

 

Why Cisco’s Revenue & Profitability will Continue to Decline

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Cisco reported its Q3 financials today and Wall Street celebrated the fact that the networking vendor managed to post less-than-expected decline in revenues. Cisco’s revenues for this quarter were at $11.5 billion, a 5.5% decline year-on-year from $12.2 billion in Q3 2013. Analysts expected Cisco to see lower revenues at $11.36 billion. Profitability declined 12% for the quarter to $2.2 billion from $2.5 billion in Q3 2013. Collaboration revenues, which declined by 16% between Q1 and Q2, saw a small rebound at 1.2% growth between Q2 and Q3. John Chambers remarked that he was pleased with Cisco’s “clear progress on returning to growth”. Returning to growth? I beg to differ. Remember that in Q2 Cisco was citing macro-economic conditions for its poor performance. Now, we are talking about another poor quarter when the economy is showing signs of a rebound.

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Cisco will continue to see declining revenues and profitability because there are fundamental changes happening in the enterprise communications and collaboration market.

The Cloud

Cisco’s product composition in the last 10 years has changed from 100% on-premises to a mix of cloud and on-premises. Much of the collaboration business of Cisco, which accounts for 8% of total revenues is delivered as a service, with WebEx being a key contributor to this mix. Cisco’s margins from its on-premises products is on an average 65% – 70%. However, the WebEx cloud business had operating margins of 24% before it was acquired by Cisco in early 2007. I assume that this would have declined further after the acquisition as Cisco’s cost models would have been only higher. Another of Cisco’s cloud service, Cisco Hosted Collaboration Service or HCS has been a non-starter, right from the times of its earlier avatar, HUCS.

Cloud services will threaten Cisco’s privileged position in terms of profitability and top-line growth if the company fails achieve scales comparable to cloud competitors such as Amazon, Google and Salesforce.

The Video Challenge

Cisco’s big vision for video, selling expensive telepresence rooms and bundling those with intelligent networks, seems to have met with several roadblocks. This is largely because low-cost competitors with equally good, if not better, technologies have arrived in the market (Ex.: Vidyo with pioneering work in scalable video coding). Room systems were never destined to see the scale of desktop video. Cisco’s ambitions of selling desktop video systems at $3,000+ per endpoint is clearly not going down well with enterprise users. Though Cisco does not break out its video revenues from total collaboration sales, I do have reasons to believe that this is on the decline as well from what it was a couple of years back.

Path Forward

Cisco’s legacy businesses of switching, routing and security are suffering from the classic symptoms of markets nearing maturity and saturation and also face intense competition from alternative delivery mechanisms. Cisco plans to invest $1 billion in Cisco Cloud Services to create global inter-clouds using the OpenStack platform by forging alliances with service providers across the world. It is expected to use this service to drive its Internet of Things ambitions, with its grand design of tying in data, processes, and people.

Cisco says that it has already got Telstra on board for its Cloud Services project. However, given Cisco’s track record with service provider offerings such as HCS, HUCS and telepresence exchanges, I am highly skeptical. Add to this the fact that it is up against large competitors such as Amazon with its EC2 (Elastic Compute Cloud) and S3 (Simple Storage Service) offering these services at prices that Cisco’s business model could never afford to support. Even if Cisco succeeds in this business against strong odds, it will take at least a few years before this cloud initiative becomes profitable. Until then, its sales expenses will escalate, profitability will be elusive and revenues will see a possible ramp-up over a number of years.

Under these circumstances, Chambers’ “clear progress on returning to growth” will remain elusive.

Cisco WebEx Social is Out, Welcome Jive!

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Today, Cisco announced a partnership with Jive to integrate the latter’s social collaboration platform with Jabber and WebEx. The partnership has set the Jive stock on fire, which soared by 9% shortly after the announcement. The partnership will see deep integration between the Jive Social Business Portal and Cisco’s communications and collaboration applications that will allow users to initiate voice and video calls, see presence status and do instant messaging at the click of a button. The announcement ends Jive’s prolonged quest to partner with leading communications vendors to kickstart sales and really boost market sentiments. For customers, they can engage in persistent, real-time conversations without having to switch between multiple platforms and interfaces.

First Quad, Now WebEx Social

Buried somewhere deep under the announcement was a by-the-way-we-are-dumping-WebExSocial statement from Cisco. By abandoning WebEx Social, Cisco is acknowledging that its social collaboration efforts have failed to impress markets and customers. WebEx Social’s earlier avatar was Quad, Cisco’s on-premises version that never progressed beyond pilot implementations among its customers. The platform was too complex and closed (and probably expensive) to really become a competitive force in the market. Cisco’s efforts to move it to the cloud was an attempt to piggyback on its more popular cloud-based collaboration platform, WebEx, and probably spur adoption through some intelligent bundling.

Jive’s Window of Opportunity

Jive has a reason to celebrate. With the Cisco brand name, marketing muscle, and sales prowess, it is easier to get a foothold in large enterprise accounts. However, I believe this is going to be just a short-term window of opportunity, until Cisco finds an alternative, either via an acquisition or in-house development of capabilities. I cannot but help compare this partnership with the earlier Cisco-Radvision deal.   In the early days, Cisco did not have any video products outside of its TelePresence suite.  Multi-point control units or MCUs were outsourced from Radvision under an OEM agreement. Cisco had the TelePresence Multipoint Switch, a vastly different architecture from the Radvision SCOPIA MCUs, which were standards-based and could interwork with MCUs from other vendors.  When Cisco opted for the M&A route to fill portfolio gaps, Radvision had close to $44 million at stake, which accounted for about 42% of its total revenues. The Cisco pull-out from the partnership subsequent to its Tandberg acquisition had dire consequences for Radvision, which lasted until the very end, before it was sold to Avaya.

The Jive management should carefully evaluate how much they bet on this relationship with Cisco, given that its former competitor could at any given point of time go back to being just that, a competitor.

 

 

Will Twitter Ever Reach Facebook’s Scale?

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At little past 5 PM Eastern Time today, Twitter stocks fell by 14% from its initial IPO opening price of $45.10, apparently on poor market sentiments triggered by its less-than-expected growth in user base. In fact, the markets seem less anxious about the net loss of $132 million than the slow user growth. Timeline views by monthly active users declined 8% year-on-year. Analysts are fervently comparing what they deem as a ‘lackluster’ performance by Twitter with the great results of Facebook a week ago. I guess this was inevitable given that Twitter’s newly launched profile page mimics Facebook’s so closely. However, as there are some fundamental differences between the two social media networks in terms of user engagement and content lifespan, I think the comparisons are less than fair.

Expectations versus Performance

After a great year in 2013, when Twitter beat Wall Street estimates in terms of both earnings and user additions, the 5.8% growth in monthly active users this quarter was not enough to boost sentiments. I think the low user additions, much below Facebook and LinkedIn averages, is triggered by poor user experiences. Though Twitter has been tweaking its UI in order to bring in more visual experience to its audience over the years, it still feels like it has a long way to go. The company also has challenges when it comes to user engagement, partly because of the very nature of Twitter and partly because of the poor user experience.

Twitter’s sub-par user growth is also because of the significant downtimes it has witnessed over the years. How many times have you been turned away by the “Oops, something seems to be wrong” or the fail whale banner when you had rushed in to post a tweet? To be fair, some of these downtimes were because of unforeseen network overload when some big news or event breaks over the Internet. Twitter seems to have learnt from its past mistakes though as it has been investing in infrastructure and network failover mechanisms over the last several months.

The Future

The biggest challenge for Twitter is that its growth is slowing even when it has enough headroom to grow. Unlike Facebook, it is not nearing market saturation even in mature markets such as the US, let alone globally. While Facebook’s slower growth in user base is more or less anticipated, Twitter should be sprinting along at a considerably faster rate, which is not happening right now. The growing popularity of competitors such as Pinterest, Snapchat and Instagram can be attributed to the fact that these are more appealing visually and hence sustain user engagement. Even relative newcomers such as WhatsApp, which has about 55 employees, had a daily active user (DAU) count of 353 million compared to Twitter’s 120 odd million DAU in early 2014. However, WhatsApp’s use case as a messaging application is different from Facebook or Twitter, which are both pure-play social networks.

Twitter CEO Dick Costolo admits that the platform has to become more user-friendly in order to grow and retain registered users. However, I am not entirely convinced that copying a Facebook-style profile page is a step in the right direction. Twitter has to leapfrog competition in terms of both user interface and experience in order to overcome some of its growth challenges. Also, for a company that bets most of its future growth in international business, it has not been consistent in rolling out new products for the non-US markets, contributing to the growth slowdown.

Growth in the most prospective Asian markets has been slowing for sometime now. Especially in Japan and South Korea, where the percentage of mobile users is very high, due to a larger market movement towards private social networks rather than more open platforms such as Twitter. In Korea, only one in seven of Twitter users are said to be even moderately active on the social network. Dick Costolo rejects any claims that the fundamental nature of Twitter could be inhibiting adoption. While this may be true, it should also be acknowledged that despite the fact that a majority of its users are not from the US, international revenues contribute just 27% of total sales.

Will the recent improvements in the interface be enough to overcome what seems to be a mounting number of issues? I am skeptical.

 

 

Apple in Search of the Next Big Innovation

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Today Apple released its Q2 2014 financials (the webcast quality was awful on apple.com. I could hear only every fourth word on my super high-speed Internet connection). Predictably, all the doomsayers are out in full swing. For weeks, why even months, we have analysts coming out with dire predictions on Apple’s declining iPad, iPhone sales and profitability. When the iPhone 5 was launched, critics said it marked the end of Apple’s innovation. Today’s results show that things are not as bad with Apple posting a quarterly revenue of $45.6 billion ($43.6 billion in Q2 2013) and quarterly net profit of $10.2 billion ($9.5 billion). iPhone sales were at 43.7 million, beating market estimates of 37.7 million for the quarter.

The guidance for Q3 does not seem so positive though. I do believe that Apple got away with no new product innovations this quarter and the analyst claims are not entirely unsubstantiated. However, exactly when we would see a visible decline in growth if Apple maintains the same pace of innovation is debatable.

Keeping revenues and profitability aside, the real question here is, can a company continue to sustain being an innovator? Apple was no ordinary innovator, but was very disruptive in each of its new markets, whether it was the phone, the tablet, music player or digital music distribution. The rules of play for each of these industries changed after Apple’s entry. The closest comparison I could think of is what Google did to search, email and to some extent the mobile OS market.

Apple’s Shifting Customer Base

I want to cite an example from a workshop that I attended a long time back, on what kind of customers that innovative companies typically want to go after:

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Picture Courtesy: IDEO
The bell curve is where the extreme users are. However, the classic problem Apple faces today is that this bell curve is not a constant. It is dynamic, it shifts. Customers change and so do their choices. Understanding the pace of shift and addressing it is easier said than done. Jobs was a master of that art.
I have heard arguments that people have had ‘too much of Apple’ products. I don’t think that is true. They have had too much of the ‘same’ Apple products. Innovation on the iPhone slowed down after the 4S. It declined dramatically with the 5C where Apple’s value proposition was the different color themes of the plastic casing. The novelty of the iPad is wearing off as larger-screen smartphones are invading its space. Different form factors and retina display may no longer be enough to save a quarter.
Samsung and the Culture of Commoditization
The Samsung price-value differentiation is resonating among younger customers even in developed countries such as the US where Apple has more than 40% share of the smartphone market. Samsung is seeing a high growth trajectory among the more price-sensitive emerging markets such as India, the second largest for smartphones after China, commanding ~45% market share while Apple gets bundled in the ‘Others’ category. In China, Apple’s iPhone sales have not been too encouraging and its huge subsidies are impacting the carrier, China Mobile, according to Bloomberg. Apple’s answer to Samsung’s commoditization of the market was the 5C, which did not resonate well with people like me who believe that Apple is sacrificing its uniqueness and brand value for market share at the lower end of the value chain.
What Next for Apple?
Where would the company go from here? Is it going to be the thinner, larger-screen iPhones that will bring new growth? Would product extensions be enough to avoid the imminent plateauing of growth in sales and profitability? I don’t think so. 
Will it be the elusive iWatch?   The company needs to come out with something that is disruptively innovative and neither of these two impress me as even innovative. There have been few speculations on what else it could be, Apple entering the health & fitness market and the world of television. I am still skeptical. If people like us could second-guess it, it wouldn’t really be ground-breaking and disruptive, would it?
These are the moments when I, and I bet Apple too, miss Jobs the most.

 

Have UC Vendors Given Up On Innovation?

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When was the last time an iPhone-like innovation happened in the Unified Communications (UC) space? Or for that matter, in the larger, more encompassing enterprise communications? The answer is, probably never. I am not just referring to user experience, but across the entire spectrum of technological innovation in this market. From my tracking of the UC industry over the last 10+ years, new product launches are never radical breakthroughs but rather product extensions camouflaged as innovations.

Have you ever wondered why innovation happens so fast in the consumer world compared to enterprises? Not that consumers are any more discerning than enterprise CIOs. I think it is because they have the freedom to switch. Even if I am tied down to a mobile plan, my window of loyalty is about 14 months. For vendors in the consumer market, innovation has a direct correlation with customer churn and profitability.

I thought it is worthwhile to spend some time on why there is such shortage of innovation in the UC industry.

Reason 1: Innovation is a culture

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Not many UC vendors nurture innovation or out-of-the-box thinking. I have worked with many of them as employee, analyst and consultant. The one common characteristic that I see across all these organizations are that they are large, monolithic and steeped in the old way of doing business. A good percentage of their employees have been with them for an average 15+ years. Some start and end their careers with the company. While this may be a good thing in some aspects, in many ways this stifles new thinking. The general attitude is, “we have done it this way for many years and will continue down the same trodden path in future.”

I see some encouraging signs though. Some UC vendors are hiring new grads in an effort to get the perspective of Gen Y users. Others are taking R&D out of their labs and doing extensive usability testing on ‘real’ users. But these are just instances of best practices, far from becoming a culture.

Reason 2: Vendors can get away with little innovation

If you are a frequent attendee of industry conferences, you would agree with me. Year after year, the themes seldom change. Many of the vendors have their enterprise customers locked down in their environments. The cost of switching is too steep. Managing change is nightmarish. And, the solutions from one vendor to another are not vastly different in order to warrant a switch based on functionality. Under these circumstances, why go overboard innovating? The business still runs, profitability is good though it can be better, and more importantly, there is no reason to believe that innovation can bring dramatic changes to my top-line or bottom-line. It can, if we are radical enough, get it right, and continue to innovate, because what is radical today could be ordinary tomorrow.

Reason 3: The perception of innovation is vastly different

The way customers view innovation is vastly different from how UC vendors see it. In 2011, Cisco and Avaya decided that there was great, untapped potential in ‘enterprise-grade’ tablets. Their argument was that the iPads of the world were more consumer devices and did not offer enterprise-grade features for secure, reliable access to resources, tools and infrastructure. Their enterprise-grade tablets were at least three times as expensive as their consumer counterparts, needed docking stations that were priced between $300 – $1,000 and integration with backend infrastructure that could run to tens of thousands of dollars. The devices flopped as neither were they user-friendly nor did they justify the cost.

There was the belated realization that these enterprise users were happy to carry their personal devices to the workplace and be more productive. All it needed was ensure proper administration and security for these devices. In other words, a BYOD strategy.

Reason 4: Vendors think in terms of sales, market share. They seldom think as users.

The most that companies do to ‘capture’ user feedback is conduct focus groups. How many of us are capable of expressing what exactly we need and how we are going to use it in focus groups without any embellishments or omissions? I have been in focus groups where the moderator, ever so gently, steers the participants towards the answer that his/her client wants to hear. Now, if we are going to rely on such formats to get customer feedback, how will this impact product development?

Reason 5: Vendors seldom walk the talk

I recently read a post by fellow blogger Luis Ramos titled Can Lync Fly? The idea was to see if Lync video would work on a plane. The grand conclusion of the article was that it was very difficult and he could do it partially after several compromises. Now, contrast this with a Facetime call on an airplane using an iPhone 4. Now why didn’t Microsoft think of making Lync work on an airplane? Isn’t the phrase ‘anytime, anywhere access’ flogged to death by UC and mobility vendors?

It is not all gloom and doom for the industry. Smaller startups innovate in order to survive. Unfortunately, only a handful of them survive and sustain. Acquiring small innovative startups has become fashionable in the UC industry. But once acquired, their innovation gets smothered by old-school mismanagement. Like a Zimbra or a DimDim… or a Skype.