Jeff Fried, VP Product Management for Microsoft’s FAST search engine actually proclaimed that “keyword search is dead!”
Now, last I checked, Fast was doing around $50M — oh sorry, I mean post-correction of accounting irregularities, $35M a quarter in enterprise search revenue and that Microsoft paid $1B for the company in order to do a “best defense is a good offense” strategy vs. Google.
So regardless of what Brother Fried or his PR mavens think, I can assure you that Microsoft doesn’t think keyword search is dead. Oh, and did I forget to mention, as they say in Brooklyn, Bada-Bing!
One of my pet peeves is people or companies who think it’s cool or controversial to declare themselves dead. Why?
The first time I heard something was “dead” was in 1987 at the original Ingres. The thing in question was the relational database. At one company meeting, our executives patiently explained to us unwashed employees that because of the ANSI SQL standard relational databases were “commoditizing” and ergo that we would be de-investing in the core RDBMS engine and instead investing in application development tools.
I’m not sure there’s a font big enough to write this, but OOPS.
In 1987, the RDBMS market in total was maybe $200M. Today it’s a approximately $10B oligopoly shared by Oracle, IBM, and Microsoft. Application development tools are somewhere between 1/10th and 1/100th the size and a high fragmented market by comparison.
What went wrong?
- Lack of understanding of product differentiation. Yes, the products were arguably becoming more similar due to the SQL standard (e.g., Ingres still primarily spoke Quel at the time), but more similar != identical != commoditized. The possibilities of high-speed, low-cost, parallel-optimized, query-optimized, platform-optimized, non-stop or a dozen other possible bases of differentiation seemed to elude Ingres management. My take: if people can differentiate white rice (e.g., regular, parboiled, in a bag, basmati, jasmine, texmati) then you can sure as hell differentiate technology.
- Non-observance of industry structure in RDBMS. Product differences is just one piece of “degree of rivalry” in Michael Porter’s five forces analysis. Substitute threats were low (i.e., switching costs were high), buyer power was low, barriers to entry were high, and supplier power was low. By seeing only product and not seeing industry structure, Ingres missed that a huge, oligopolistic market was in formation. (Only Oracle seemed to really get that a landgrab was in progress, that switching costs were high, and that the goal should be to get as much market share as possible in the short term — even at the cost of making a mess — which you could then sort out later.)
- Missing industry structure in application development tools. The flip-side of the attractive industry structure in RDBMS was a rather appalling industry structure in application development tools. Barriers to entry were low, competitors were numerous, the large number of competitors was putting downward pressure on prices, and the dawn of free runtimes was already under way. Simply put, it’s very hard to make money in tools and that’s one reason why “tool” really is a four-letter word on Sand Hill Road.
- Confusing being “up the stack” with “value”. One argument is that RDBMS is just plumbing and that tools are higher in the stack and ergo deliver more value and more potential for profit. This is wrong. Why? Because while tools are indeed higher up the stack, profit potential comes from industry structure, not stack altitude. Microsoft makes plenty of profit and they are at the bottom of the stack. The Oracle DBMS business in one level up and is a key driver of Oracle’s 40%ish operating margins. There are many misconceptions about the applications business in this regard, but I won’t go there now. See the Profit Zone for more on this general topic.
- Too much emphasis on vision. If your vision for the future goes out so far that we’re all dead, then perhaps you should dial it back a bit to make it useful. Yes, we’re all dead in 100 years and one day RDBMS services may be as commoditized as electricity. But, some 20 years later, RDBMSs are nowhere near a commodity and a lot of people have made a lot of money in the meantime. It’s not predicting the eventual end that’s the hard part. It’s figuring out what happens along the way and how to make money during that evolution.
So before you go ahead and declare your business dead, ask yourself some questions:
- Am I doing this for PR soundbite? If so, is it really the kind of message you want to communicate? Is this the best you can do to sound visionary?
- If you really believe it, have you critically thought your view or are you being mentally lazy with the “in the long run we’re all dead and everything’s a commodity” argument.
- If you really believe it, then should you turn in your badge and let someone run the business who doesn’t?