Friday, February 10, 2006

Exposing the "Cash Cow" Myth.

“Cash Cow.”  Wikipedia defines it like this: “In business, a cash cow is a product or a business unit that generates unusually high profit margins: so high that it is responsible for a large amount of a company's operating profit. This profit far exceeds the amount necessary to maintain the cash cow business, and the excess is used by the business for other purposes. The expression is a metaphor for a dairy cow, which after being acquired can be milked on an ongoing basis with little expense.”

When this unfortunate term was applied to Delphi by a former interim CEO, I've seen it being parroted extensively in newsgroup postings and blog content.  While having a cash cow business is usually a good thing for a company that is looking to diversify and move into other markets, it is also a very dangerous position to be in for that cash cow business.  According to the above definition, “This profit far exceeds the amount necessary to maintain the cash cow business, and the excess is used by the business for other purposes.”  Let us examine whether or not this applies to Delphi;  It has been no secret that Delphi 2005 was... ahem... a little less than what would be considered a quality release.  If you examine the events that lead up to that release, it was clear that the management at that time actually did come to the false conclusion that Borland's developer tools were a “cash cow” business.

If the business were truly a cash cow, then minimal investment and commitment would have been all that is needed to maintain that stead cash flow.  Instead the opposite happened.  The uproar among the community was felt throughout all facets of Borland.  This lead to a renewed commitment to making sure the team was given the appropriate attention and resources to ensure that Delphi 2006 would not be a repeat performance.  By all accounts, that change in how management funded the project had a profound affect on D2006.  Which tends to explode the cash-cow myth because as soon as focus was shifted away the effects were immediate.  Yet, the “cash cow” myth seemed to remain.

Enter Tod Nielsen.  One thing that truly excited me about Tod was that he really understood what kind of investment was needed to build a complete, end-to-end development tool.  If you think about it, Delphi and C++Builder start from essentially zero.  We control the compiler, tools, frameworks, IDE, debuggers, etc...  There isn't an established compiler and framework around which tooling is built.  It is built from the ground up.  Kind of like heading out to the iron ore mine with the intent to build a car.  Other tools merely need to visit the machine shop.  I discussed this difference in detail in this posting.

Now this is pure speculation, but from my vantage point this is what I think Tod encountered as he began to assess the current state of affairs here at Borland.  On one had he came in and saw a strong legacy of popular development tools with a strong, loyal customer base.  On the other he saw a strong suite of tools that support management of the application lifecycle.  He also saw a huge scism between the way these two sets of tools are marketed, delivered, and sold.  With the dev tools, there is a strong, what is called “channel presence.”  This is a more direct to the developer model.  That is clearly where the “IDE” products thrive.  Then there is all the other things which require a long-lead, C-Level, VP of AppDev, consultancy, schmoozing kind of sale.  This is where tools such as CaliberRM, StarTeam, Tempo, (and now Segue) live.

Rather than being blinded by the new bright shiny object that is ALM/SDO, he began to take a more holistic and pragmatic approach.  He knows that in order for both to survive they needed a high degree of focus, investment, and commitment.  The problem is that Borland is in this constant tug-of-war.  It is easy to be on one side or the other and simply say, “Well just invest in both!  How hard can that be?”  The problem is, and I've said this many times before, that Borland is simply too big to act small, and too small to act big.  Tod, knowing that Borland just cannot do both things at the same time and with the same focus, he and the executive team took this radical approach.

So that is where we are now;  On the cusp of a new era.  There's sure to be a bumpy road ahead, but it's going to exciting and I truly believe, will turn out to be the best thing that could have happened to Borland and whatever the new dev tools company ends up being.  As an aside, I remember many years ago sitting in Gary Whizin's office (the then long time Turbo Pascal/Delphi R&D manager), with Chuck Jazdzewki and Anders Hejlsberg, potificating and fantasizing about the prospect of spinning off the Delphi product into a private company.  So this is not really a new idea, merely an idea whose time has finally come.

I encourage you to reserve judgment until the dust settles and all the i's are dotted and t's are crossed.  In fact, things are moving full steam ahead with our current roadmap, a new Delphi 2006 trial edition is in the works as is some new product updates and some other things I'm sure the community will be excited about.  So for the Delphi/C++Builder team, it is business as usual.