I’m often asked about Citrix’s position in the market, the future of their products, and their relationship with Microsoft. Recently I’ve started using an analogy comparing the server-based computing industry to the automobile industry.
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Let’s imagine that Microsoft is an auto manufacturer. Windows Terminal Server is a very basic car. It has wheels and it can drive around, although it’s very basic and most people choose to add upgrades to it to get their “essential” features.
Citrix MetaFrame Presentation Server is an upgrade kit for the basic Microsoft car. It adds leather seats, a nice radio, chrome accents, airbags, keyless entry, GPS navigation, and scheduled maintenance.
To some people, it’s perfectly acceptable to drive the basic Microsoft car, although most people choose to pay more to upgrade the car to the Citrix version.
Of course there are also people who want even more features. For them, there are dozens of smaller companies that sell very specific car upgrades. Companies like RTO and AppSense sell performance-tuning car parts. Companies like ThinPrint and triCerat sell CD changers and stereo accessory kits. No matter what you’re looking for, chances are that if there is some specific component of your car that you want to upgrade, you can find someone who makes it.
Instead of buying each accessory option piece-by-piece, most people just upgrade their car with the Citrix kit. It’s easier to order and people can buy it with the confidence that everything will work together. However, even with all this stuff, some people still choose to drive the very basic Microsoft car.
In fact, some of those basic Microsoft car people are really into music and they don’t care about anything else. For them, they buy just the basic Microsoft car and then add in the ThinPrint music system separately—it’s better than the radio that comes in Citrix’s add-on package and they don’t want any of the other Citrix features anyway.
This relationship between Microsoft, Citrix, and the third-party add-on companies is the way things were for several years. Microsoft added more features to their basic car with the introduction of each new model (power locks here, a basic AM radio there), but these features were minor in comparison to all the great features of Citrix’s upgrade package.
Then, in early 2003, everything changed.
Citrix had been making a lot of money by selling their car upgrade kits. Technically, this was fine with Microsoft since Microsoft sold the underlying car for each Citrix upgrade kit. However, Microsoft employees began to wonder whether they themselves should offer a car upgrade kit that was built-in to their basic car. They felt that there were a lot of people who didn’t even own a car, and they might be more enticed to buy a Microsoft car if that car came with all the options and the buyers’ didn’t have to look at third-party products to get their desired features.
This was not good news for Citrix. Once the general public started hearing about this rumor, people began to think, “If Microsoft manufactured upgraded cars, then who would need Citrix’s upgrade kits?”
Publicly, Citrix and Microsoft stood together and denied that anything like this was in the works. “Citrix is a key partner of ours,” said the Microsoft executives. “People cannot use a Citrix car upgrade kit without buying a car from Microsoft, so we like Citrix because they help us sell more cars.”
Privately, Citrix was really nervous about rumors that Microsoft would sell a more upgraded car. (Citrix even attacked independent websites that reported on the rumors, going so far as to say that the lack of solid information was damaging the automotive industry!)
Even though Citrix had been in the car upgrade kit business for a long time, and even though Microsoft’s upgraded car would not be as good as one with Citrix’s kit, Citrix had to develop a plan. And quick.
Citrix’s Plan: Rethink the notion of a car
Privately, Citrix was very worried about Microsoft’s upgraded base-model car. What should Citrix do?
Citrix felt that their car upgrade kit would still be much better than anything from Microsoft. However, Microsoft sold the base-model car for $11,900. The Citrix upgrade kit cost $3500 (and added $1000 to the car’s yearly maintenance bill). If Microsoft chooses to sell the newly-upgraded base model car for the old base price, then the differentiating features between Citrix’s kit and Microsoft’s base model might not be worth the $3500 price Citrix charges today. So what should Citrix do? Increase the feature set or decrease the price?
Interestingly, Citrix choose a third option. They chose to re-define the public’s view of why they use a car. Here’s what they said:
For years, Microsoft has built a basic car, and we (Citrix) have sold upgrade kits for that car. However, we now realize that this is too narrow a focus. Let’s take a step back and forget the car for a second. Why does anyone drive a car in the first place? It’s for transportation—to get from Point A to Point B. So yeah, we’ve been in the car business for ten years. But in reality, we don’t build car upgrades, we sell transportation solutions!
What our customers need is an end-to-end transportation solution, and a transportation solution is about more than just cars. It’s about the entire infrastructure that’s required to get a person from Point A to Point B. We’re talking cars, roads, bridges, gas stations, and service centers.
Citrix will be your transportation infrastructure company!
From that point on, all of Citrix’s marketing materials, press releases, training materials, and conferences talked about one thing—transportation. Transportation Infrastructure. Transportation Strategy. You would almost forget that Citrix still made 90% of its revenue from selling car upgrade kits.
So how was Citrix going to transform itself from a car company into the transportation infrastructure company of the future?
In general, people agreed with the message that Citrix was delivering. Citrix was right on about the fact that getting from Point A to Point B required more than just a car. However, people couldn’t figure out exactly what this meant for Citrix.
Is Citrix still going to make cars, or are they exiting that business to focus solely on transportation issues?
Is Citrix going to try to enter the other “core” businesses required for transportation infrastructure? Is Citrix going to start selling gasoline and building roads and bridges? What about the other companies that are already in that business? If you need a bridge built, are you going to give that business to a car upgrade company who “understands your transportation issues” or are you going to give that business to a company that has been building bridges for the past 20 years?
What about Citrix’s consulting services? They used to consult on car issues (what’s the best radio for a specific situation, etc.), but now they consult on “transportation” issues. But will anyone buy transportation consulting from a company who gets 90% of its revenue from selling cars?
The Citrix sales reps were perhaps the most upset. Their commissions have been based on how many car upgrade kits they sell, except now Citrix isn’t marketing car kits, Citrix is marketing transportation solutions. However, when a customer walks into AutoZone, they ask for car kits, not transportation solutions.
Of course no one knows the answers to these questions (not even Citrix). One thing is for certain: Citrix wants to become a billion-dollar company, and to do that they have to sell more than car upgrade kits. Whether anyone actually views them as the company with all the answers to the world’s transportation problems remains to be seen.