Saturday, February 26, 2011

SOA Information Modelling - the power of MDM

One of the things that happens when people do information modelling is that people concentrate on creating a super-set of information models which represents the 'canonical form' for SOA. I've said before that Single Canonical form isn't the way to go for SOA so its probably worth thinking about what is appropriate. The key point here is that I'm assuming a few things
  1. You are undertaking modelling based on managed information - i.e. you have MDM
  2. Our goal is transactional accuracy not analytical models
So how do we go about it? Well first off lets pick a simple model, the top line model that I've used quite a few times before.

Pretty simple. Now the point here is that there are FOUR information models involved in this simple diagram even before we consider modelling the SOA interactional model
  1. Sales information model
  2. Finance Information model
  3. Distribution model
  4. MDM model
So there are two approaches at this stage. The first is the traditional approach to take a model which includes all of the entities and all of the attributes and creates a real mega-model. The problem with this is that its unstable and complicated.

So what is the next approach? Well its to think about information in two clear ways
  1. MDM information - share the key only
  2. Transactional specific - required to be shared
In our model above for instance in order to send an invoice from Sales to Finance we need to know
  1. The customer - MDM
  2. The products - MDM
  3. The delivery address - MDM
  4. The quantities - transaction specific
  5. The agreed price at time of sale - transaction specific
  6. The order itself - MDM
So this means that the model for this interaction is

The point here is that our modelling for business information between domains is concentrated much more on the entity models than on the attributes and the full details. So which the finance solution may require a confirmation that the invoice address is associated with the customer, it doesn't actually need that relationship sent through as it will have that via its own domain and via MDM. If the customer has specified a default address than this could even be excluded as again its available via MDM if required.

The point here is that the interaction does not need all of the information required for the receiving service to complete the interaction it just needs to supply sufficient information for the receiving service to complete the interaction this is a very important distinction as it means that modelling is concentrated primarily on the top level entities and transaction specific elements and other pieces are accessed either locally, because they are domain specific, or via MDM, as they are authorised.

In other words a better approach to information modelling is to consider MDM as an operational part of information governance and to focus information modelling on enabling MDM to deliver its value.

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Tuesday, February 15, 2011

Social Gaming ready to Pop... Farmville worth more than EA?

Okay so the latest bubble sign. According to the WSJ, hardly the hype meister generals, Farmville creator Zynga could be worth up to $9bn some key words from the WSJ:
The discussions are the latest sign of the investor frenzy around a small class of large, fast-growing Web start-ups focused on the consumer market that have yet to go public.

Although valuations of the most successful Internet start-ups are getting pricey [...] part of Zynga's appeal is that it has tapped into a lucrative method of making money online.

Umm does that really stand up? Well the pricey bit certainly does.

Lets think about a company that has got into making money on-line, the sort of company maybe that makes a range of mobile games for iPhone, Android, Blackberry, Windows Mobile, Palm Pre and Symbian and indeed has a history of games on mobile platforms. How about a company that has already got a pretty extensive multi-player online experience and indeed had a (failed) "social" online game and could choose to re-enter the market in a myriad of ways.

So Electronic Arts which according to the open market is worth $6bn, in other words its worth less than the low end estimate on Zynga. So what is the barrier to entry for EA, one of the world's largest games developers to take one of its internationally renowned franchises (e.g. Sim City) and develop a lightweight "social" game ala Zynga for delivery via Facebook. Much, much lower than the barrier the other way around for Zynga to develop the sort of real-time sports and action games that EA specialise in.

Again as before its more than possible I'm calling this one wrong, but its hard to imagine at this stage that EA with its new digital strategy couldn't decide to go head to head and leverage its much greater IP, brand identity and established mobile offerings. Zynga bigger than EA and investors desperate to invest and hassling to get in? What was that EA stock ticker again....

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Wednesday, February 09, 2011

Why Social Media isn't special

When I look at the valuations of Groupon, Facebook and LinkedIn I can't help feeling that Tesco, Nectar, Amex and Airmiles must be regretting that they can't just slap on a "social media" buzz on their current solutions. Lets compare Groupon with Nectar and Tesco's Loyalty programmes.

Now Groupon has 50m registered users (in the US) while Tesco has "only" 15m in a market 1/5th of the size and Nectar has "only" 16.8m users. Now what is the difference on these users?

Well Groupon know when users sign up to small business offers in a specific local. Tesco and Nectar know everything about what you buy and how you buy across a huge range of products and across multiple retailers. They give you targeted offers that are based on exactly what they know you will buy and they have the information set available to make sure this marketing is accurate.

Put it another way, Tesco Loyalty and Nectar are like Groupon + Google and yet they are rated as being worth a fraction. Now why is this?

Well arguably the first reason is that these sorts of loyalty cards are "private" between big business so you don't see them as social elements even though you are quite clearly sharing way more information with them than you do with Groupon.

The second reason is that they aren't independent, they are attached to massive corporations which makes them difficult to over-value and extract.

The third reason is that they started before the hype. Loyalty cards like Tesco with their rich set of data and massive active corporate marketing just aren't "social media", now part of this is that they aren't primarily driven via a website but the main bit is just that old isn't sexy.

So what would it take for someone like Tesco to move into the Groupon market? Well lets see
  • Would small businesses love to get access to that massive targeted customer base?
  • Would Tesco or Nectar's profiling make sales and conversions more likely?
  • Would this allow them to be more profitable?

Check, Check, Check. so the reality is that the only reason that a major loyalty programme hasn't undermined Groupon is either because they don't see the market or they haven't been bothered so far.

How long would it take for Tesco or Nectar to become the "Groupon" of the UK or equivalent organisations across Europe and the Far East? About a month.

Sometimes its worth looking at social media and looking at what its normal equivalent is and where its real advantages lie.

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Social Business when does it pop?

Okay so LinkedIn is leading the social business IPO charge with various numbers being touted as a valuation from its current off market evaluation of $2.5bn (on $161m revenues and $10m profit in 9 months) to the proposed IPO. Revenue is more than doubling over 2009, but costs are nearly matching the same level of growth which delivers the minimal actual profit. The forecast isn't exactly huge either with them predicting slow downs, not this could be CYA words but there are some good points in there.

So what would $2.5bn as a valuation make LinkedIn equivalent to in the "real world"? Well how about Easyjet? Easyjet are a low cost airline who are part of the revolution in the cost of short haul travel in europe.

Assuming LinkedIn's profit/revenue growth continues then lets say we get $210m revenue and $15m profit. So how does Easyjet stack up? Well from one perspective not well.

Revenue at EasyJet was £2.97bn so almost 40 times (1.6x $) , Profit was £121.3m or about 12x (EBITA is £274m). So bang for buck is arguably better with LinkedIn but what does this profitability mean for EasyJet's valuation? £1.7bn which is about $2.7bn or probably less than LinkedIn will IPO for.

Ah but LinkedIn has 90m users, although few use it regularly and some accounts might be duplicates... as opposed to Easyjet who have "only" 50m passengers per year.

Now there are lots of other bits that drive valuations but haven't we seen this before in terms of massive valuations for companies where profitability was a secondary element? I like LinkedIn, I use LinkedIn and I wish them all the luck in the world. I can even see their business model around job hunting and head hunting making a lot of sense and them really getting a decent set of revenue from it.

But are they worth the same as a well run and profitable airline? The answer is of course that they are worth what people will pay for them which means invest at the start of the bubble but don't forget that its a bubble.

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