Who will provide the "Value Innovation" this industry needs?

Written on May 27 2008 Filed under: The Future 2,346 views, 3 comments

by Michael Keen

There have been numerous stories bouncing around in the last couple of days concerning pricing of virtualization products along with technological differentiation discussions; who has what? Who is doing what? etc with regards to both Citrix and VMware among others.  I’m sure that you all will agree with me that this industry if full of competitors, each one out there working to beat their respective competition.  We hear every day about how VMware says this isn’t true about XenDesktop/XenServer and Citrix saying that they can do this and they can do that vs. VMware/VDI, etc.

This got me to thinking hard about how the companies in this industry can do things differently.  By that I mean that there has been no one breaking into new territory from a ‘customer value’ perspective to create new demand for their products.  But instead they focus on “bundling” products and giving the impression that the customer is getting something for nothing.  Remember the old adage people, “there is no free lunch”.  This rings true today.  There will always be a catch somewhere.  But if the companies in this industry are serious about breaking away from the pack, then they will have to rethink their corporate and “go-to-market” strategies.

Brian has highlighted the pricing questions around the latest “bundling” of the XenApp and XenDesktop products; there was a great survey just released on the spending on virtualization products is increasing when other software sales are slumping.  I just saw an interesting question posted by Tarry Singh that asks some pretty interesting questions on this subject.

I see this as the perfect storm to have Citrix, VMware, or, for that matter, Microsoft create a whole new marketspace by reducing costs and driving up value for the customer.  Let’s face it, the technology (virtualization and application delivery) is proven so I don’t foresee any really groundbreaking innovations there in the near future.  “The only way to beat the competition is to stop trying to beat the competition”.  But how do they do that?  They need to concentrate on value innovation.

Ok, now I know you are dying to know, “what the hell is Value Innovation?”  Value innovation is the strategy of making your competition irrelevant by not focusing on beating them, but by creating a leap in value for buyers and for your respective companies.  Once companies do this, they will open up new and uncontested marketspaces.  This is a major shift in strategy for any of the companies in this industry, but the water is so choppy from all the competition that someone needs to find “calm seas”.   By pursuing differentiation along with low cost, these “calm seas” can be found.  These “calm seas” represent that new, uncontested marketspaces.

So what would this look like from a Citrix perspective?  Imagine XenApp Platinum with all the features integrated in (XenDesktop, XenServer, Provisioning Server, EdgeSight, EasyCall, SmartAuditor, WANScaler client, etc) and you could serve up applications, content, OS’s to any VM (either XenServer or VMware) all for one price.  Now that opens up a lot of questions, like “what would you charge for that?”  I don’t know, but look at the bigger picture here, what a leap in value for the customer and for Citrix (or VMware or Microsoft, or Ericom, whomever).

So what would it take Citrix? VMware? Microsoft?  Think about the value to the customer and to own a huge uncontested marketspace.

Maybe I’m crazy, but just think about it.

Comments

Kevin Kaminski wrote I completely agree.

on 05-28-2008 12:23 PM

I think the market has lost sight of the customer in most cases and it's all about claiming market share through brute force marketing. I don't think virtualization won't mature at a proper rate until vendors put down their rifles and focus on customer satisfaction though better pricing and a more complete feature set. As much as I love virtualization these products are still a little rough around the edges and that will slow adoption for the more conservative or mainstream customer.

Guest wrote You're right - it is a bloody red ocean

on 06-02-2008 10:16 AM

Michael, the situation you describe in this segment, and referenced by Terry Singh, are classic signs of an ultra-competitve red ocean market.  Existing players are competing feature for feature to win an identified group of prospects.  In an effort to compete, the suppliers are simply bundling more and more product and making it more complex for customers.

Like many companies in the software space, it is really hard to play any other way because competing hard and fast is what got you the success you have had - so far.  Marketing invests in predictable ways to get "their side of the story" into the mix.

The eventual value innovator in this space - whether VMWare, Citrix, Microsoft or a new entrant, has a huge opportunity to reshape the assumptions around form, function, customer experience and more.  Who are the non-customers that are not even being considered by any of the existing players?  Who among the buyers, users and influencers are being ignored?  What do customers love and hate about doing business with this industry that the industry takes for granted? 

The answer may not be more value for a lower price.  The question is what would a new business model look like that would create a leap in value for customers while creating more profit for the suppliers?

Greg Krauska www.changeagentgroup.com

Guest wrote Re: You're right - it is a bloody red ocean

on 06-02-2008 5:57 PM

Greg

Someone who understands Blue Ocean Strategy.  You are right.  I think I can safely say that "the companies" in this industry haven't paid one bit of attention who the non-customers are or have addressed any of the other questions you raise.

I agree that the company that does pay attention to this factors and follow the framework will have a chance to reshape this industry and bring more customers then they could even imagine.

Thanks for the response.

Cheers
Michael

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