Paul Wallbank | Paul Wallbank - Communications Professional

Farewell to the knowledge economy

The promise of the knowledge economy isn’t being delivered as knowledge becomes a commodity worth less than data.

One of the mantras of the 1980s was the future of western nations lay in becoming ‘knowledge economies’, unfortunately things don’t look like they are turning out that way.

As the developed economies moved their manufacturing offshore – first to Japan and Korea, then Mexico and finally China – the promise to displaced Western factory workers was the replacement jobs would be in vaguely knowledge based industries like call centres and backoffice computer work.

From the 1990s on, those jobs also started to go overseas to lower cost centres in India, the Phillipines and other countries.

When the internet became ubiquitous in the developed world in the late 1990s, the creative industries – musicians, artists and writers – found income dried up as their work became commoditised by digital distribution channels.

Now the professions are being affected by combination of offshoring, artificial intelligence and automated processes. Many of the jobs that were done by highly paid accountants and lawyers can now be done by computers or in places not dissimilar to those that took away the call centre jobs twenty years ago.

So it turns out the knowledge economy isn’t the key to riches after all and the future turns out to be more complex than what we thought in the 1990s.

Bernie Brookes’ Blues – the inability of managers to learn from failure

Business leaders need to accept and learn from failure if their organisations are to survive.

One of the notable aspects of modern corporations is the inability of executives to identify failure.

A good example of this is the Australian department store industry. Like most Aussie industries it’s dominated by two major players, Myer and David Jones, both of whom have struggled with the realities of modern retailing.

David Jones is notable for deciding the web was too much hard work in 2001 while Myer’s management whines about sales taxes despite struggling with antiquated point of sales systems and an inadequate online presence that still lags its international competitors.

This week illustrates both companies’ state of executive denial, yesterday Myer’s CEO Bernie Brookes blamed falling profits and escalating costs on the GST and labour rates – the idea that management should take some of the blame for increased overheads didn’t seem to occur to Bernie.

One telling comment of Brookes’ are his comments about productivity and global competitiveness.

“The sector would benefit from reform to help drive productivity and become more competitive in an increasingly global marketplace,” said Brookes.

Brookes’ comment illustrates just how the Australian corporate sector has flubbed the transition to operating in a high cost economy.

At the same time Bernie Brooks was bemoaning the state of the world, David Jones CEO Paul Zahra was opening a new small format store and – like all champions of free enterprise – blamed the government for slow sales.

David Jones’ new store is interesting in itself, notably this comment in the Sydney Morning Herald story;

Mr Zahra said the store had been especially catered to the wealthy demographics of the Malvern area with a focus on high margin items.

“Higher margin categories are what we have focused on and low margin categories are available in store but in the online system so we can get it shipped directly to people’s homes.

“And we get a better gross profit per square metre as a result.”

Welcome to the Twenty-First Century, Mr Zahra.

Both Zahra and Brookes’ statements show they learn nothing from failure, indeed they don’t even seem to acknowledge they have failed.

It’s understandable in modern corporate life not to acknowledge failure, in the alpha-male environment of the executive suite admitting failure is a form of professional suicide.

However not learning from mistakes is a recipe for making more errors – “those who fail to learn from history are condemned to repeat it.”

And that’s exactly what the hapless Myer and David Jones shareholders are condemned to, as are all the other businesses whose management doesn’t see its failures.

Diffusing business risk on the cloud

Shifting risk is the name of the reseller game.

Today I was at a media lunch hosted by IP telephony company Nexon to promote their new cloud based unified communications service.

One aspect of the Nexon Absolute service is the company offers a Service Level Agreement (SLA) for customers, while I’m always suspicious of SLAs they are essential in making business clients comfortable with buying cloud services.

For Nexon, those SLAs are huge risk as they are reselling other company’s products. If Microsoft and Telstra fail to deliver, then it’s Nexon who carries the can with their customers.

While Nexon undoubtedly has their own SLAs with their suppliers, a major outage will see the company carrying the bulk of the refunds or rebates to their customers.

Essentially Microsoft and Telstra have outsourced much of their business, continuity and even reputational risk to Nexon and their other resellers.

For a reseller, even a substantial one like Nexon, that’s a risk they can’t control — what’s more, the finger pointing between suppliers in the event of a major outage could take years to resolve.

All of this suits major suppliers fine as it shifts risk and work from their businesses.

The IT and telco reseller game is not an easy one as margins fall and risks increase, one has to applaud the courage of the investors and entrepreneurs who want to play it.

A trillion points of data

As shopping centres, social media services and police forces collect greater amounts of information about us, we need to understand and manage the risks involved.

Last night, current Affairs program Four Corners had a look of the risks to families in the age of Big Data.

Earlier in the day I had the opportunity to speak on ABC 702 Sydney with the program’s reporter, Geoff Thompson, to discuss some of the issues and take listeners’ calls about Big Data and security.

What stood out from the audience’s comments is how most people don’t understand the extent of how data is being shared. The frightening thing is the Four Corners program itself understated the extent of how information is being distributed around the internet.

Looking beyond social media

Social media sites like Facebook are an obvious and legitimate area of concern with most people not understanding the ramifications of the terms and conditions of these services, however Big Data is a far more that what you share on LinkedIn or Instagram.

A major point of the program was how the New South Wales police force’s Automatic Number Plate Recognition (ANPR) equipment stores photographs of car license plates.

One of the applications of ANPR shown during the program was how an officer can be warned that a vehicle has owned by someone potentially dangerous or used in a suspicious situation, allowing them to be more cautious if they decide to pull a car over. Probably the greatest application is getting unregistered, uninsured or unlicensed drivers off the road.

Those sorts of usage is the positive side of Big Data and its role in reducing the road toll, the example also illustrates how data points are coming together with the internet of machines as traffic lights, road signs and cars themselves are communicating with each other and those police databases.

When that information is put together there’s a lot valuable intelligence and that’s why people are concerned that the NSW Police are storing millions of apparently useless images of car number plates with the time and location of the photographs.

These technologies aren’t just being used in shopping centres; instore mobile phone tracking combined with the same numberplate recognition the police use watching who is entering the carparks makes it possible to predict buying patterns and target offers to shoppers.

Couple that information with store loyalty cards and add in rapidly developing facial recognition, retailers have a very powerful way of monitoring how their customers behave.

“What instore analytics does is it takes the same kind of capablities that e-commerce sites have had for more than a decade and apply them to brick and mortar stores,” says Retail Next’s Tim Callen. Using the store’s CCTV system the company applies facial recognition software to track shoppers’ behaviour.

Securing the data feeds

The immediate concern is the security of this data, we’ve covered the hackable baby monitor and the Four Corners program examined Troy Hunt’s exposure of security flaws in Westfield Shopping Centres’ Find My Car App. Similar security concerns surround government databases like the NSW Police’s numberplate store.

As we’ve seen with the repeated data breaches of 2011, the management of big and small organisations like Sony or Stratfor don’t take security seriously. It’s hard to recall any senior public servant being held accountable for a security breach by their department.

A billion points of data

On their own, each of these data points means little but for a motivated marketer, tenacious police officer or determined stalker pulling those separate information sources together can pull together an accurate picture of a person’s private information, habits and beliefs.

Almost all the collectors of this data claim this information is anonymised or isn’t personal information, unfortunately there’s mismatch between the definition of private data and reality as number plates and mobile phone MAC addresses are not considered private, however they provide enough insight for an individual to be identified.

That aspect isn’t understood by most people, the final caller to the ABC Radio spot asked why she should be bothered worrying about privacy – it doesn’t matter.

As French politician Cardinal Richelau said in the Seventeenth Century, If you give me six lines written by the hand of the most honest of men, I will find something in them which will hang him

Today we each have six million points of data that can hang us, in a decade it could easily be a billion. We need to understand and manage the risks this presents while enjoying the benefits.

Death of a typewriter repairer

The tale of two shops shows how change threatens to overwhelm many small businesses.

Despite owing his longevity to cheap scotch and strong tobacco, the US’ oldest typewriter repairman passed away two weeks ago. The fate of his shop is one that many other small businesses will share.

Manson Whitlock of New Haven, Connecticut had run his typewriter shop from the early 1930s until shortly before his death. Needless to say, he didn’t like computers.

“I don’t even know what a computer is,” Mr. Whitlock told The Yale Daily News, the student paper, in 2010. “I’ve heard about them a lot, but I don’t own one, and I don’t want one to own me.”

While Manson’s shop had six staff at its peak, in recent years he ran the operation on his own and the business died with him.

Many Baby Boomer business owners face the same fate as Manson Whitlock as their businesses decline in the face of changing technology and shifting change.

Some of the boomers will suffer because they are undercapitalised and, as the next generation of entrepreneurs can’t afford to buy these existing business, most of those will work way wall past the date they planned to retireme.

A good example of this is a radio shop near my office which has been run by an old gentleman for many years. When I went into it in 1997 for something – I forget what – the proprietor was almost shocked to see a customer and he couldn’t help me.

It wasn’t surprising as it was rare to see a customer and the none of the stock behind the cluttered counter seemed to date beyond 1980.

The only reason the shop survived was because the proprietor owned the premises as there’s no way the place could have paid the modern rents with the non-existent turnover.

A few weeks ago the shop closed. I don’t know whether the owner retired or passed away, but the business closed with him.

Both the Neutral Bay electrical shop and the New Haven typewriter repairer show how businesses can be left behind by technology.

While both stores had plenty of time to react during the rise of computers during the 1980s and 90s, their proprietors chose not to and by the 2000s it was too late.

Today, technology and business is changing even faster and there’s many more big and small enterprises that risk being left behind by change.

It’s not only the changing market place that risks the future of these business, the failure to invest in things as simple as modern Point of Sale systems or even a basic website will leave many exposed.

The time to invest in new systems and products is now and if you can’t invest in the future, then it’s time to get out.

Bringing social networking to life

One startup project shows how different technologies are coming together to change our business world.

One of the highlights of the 2013 Australian Microsoft TechEd was a startup panel featuring local startups CoOpRating, Project Tripod and Nubis.

All three startups are interesting projects and Nubis in particular illustrated how various internet and smartphone technologies which are coming together.

Nubis is an Augmented Reality platform that projects social media onto the viewer of a smartphone’s camera. By pointing the camera at someone, the idea is a user can bring up details about a person.

“We’re bringing social networking to life,” says founder Uzi Bar-On.

As part of their Alphega project, Nubis has teamed with Glass Up, an Italian startup attempting to create a Google Glass competitor, the aim is to create a wearable computer that feeds social media information to the wearer.

While it’s not clear what the benefits will be of that – or whether Glass Up, Nubis or Alphega will be successful – the project is interesting as it brings together Augmented Reality, geolocation, wearable technologies and social media.

Over the next few years we’ll be seeing more products like Alphega tying together different technologies and using the Internet of Everything to talk to each other.

It’s these sort of projects that will show us how our businesses and lives are going to change over the next decade as smart people figure out the ways to mash together these technologies.

Paul travelled to Microsoft TechEd 2013 courtesy of Microsoft Australia

Kinkabool – the highrise past and future

A visit to the Gold Coast’s oldest high rise raises some questions about sustainability.

Today high rise buildings are the norm on Queensland’s Gold Coast, but just over fifty years ago in Surfers Paradise, nine storey Kinkabool was the first of the breed to be built. Its condition today is a warning on how skyscrapers can turn into expensive liabilities for owners.

ABC Open has an interview with one of the workers on the building and in the accompanying video Bob Nancarrow shows just how Kinkabool dominated the then sleepy seaside resort of Surfers Paradise in 1960.

A visit to Kinkabool today reveals a building struggling in the face of poor maintenance and an undercapitalised ownership. Luckily for the owners’ corporation, the Queensland government pitched in to repair the roof but much of the rest of the complex is showing its age.

The rabbit warren lobby with its orange tiles indicate some of the building was upgraded in the 1970s but apart from a lick of paint, it hasn’t seen much love since.

The lift is are where the building’s age and owners’ lack of investment really shows. An old, slow elevator that hasn’t been upgraded since the first residents moved in clunks its way up the building. Even Hong Kong’s Chunking Mansions – the world’s best example of a dysfunctional high rise – gets its lifts upgraded sometime.

Inside the lift, it’s a depressing scene and one wonders if the antiquated equipment would meet today’s building standards. Even if it does meet the regulations, the dispiriting ride on its own would knock a big chunk off the asking prices for buyers or renters.

Stepping out of the lift, the view in the stairwell isn’t much better. The lack of maintenance or investment begins to show in old fittings, damaged glass and hints of painted over graffiti.

While standing on the ninth floor, music from unit 1B drifts through the building – it’s lucky the occupant has a taste in cheesy 1970s music as some thumping headbanger music could to serious damage to the building along with the residents’ sanity.

One wonders just how noisy the building would be with a party happening or a young, crying baby although it seems families aren’t really interested in these apartments or the central Surfers Paradise location.

Though a very undistinguished building, it does have one touching little architectural feature in the different tile patterns on each floor, although probably not enough to redeem it in the eyes of most people.

Probably the saddest thing about Kinkabool is how a building that once dwarfed everything in the region is now overshadowed by its much bigger neighbours.

Across the road, and blocking out most of Kinkabool’s sunlight, is the 1980s Paradise Centre.

Time isn’t proving any kinder towards the Paradise Centre with the lack of maintenance beginning to show on the thirty-year old complex as this vent across the street from Kinkabool illustrates.

Generally, if the landlord or owners’ corporation is too stingy to afford a coat of paint, then you can be sure there are more nasty surprises

Both the Paradise Centre’s and Kinkabool’s declines illustrate a much more fundamental problem in an economy driven by property speculation and taxation allowances — there isn’t a lot of money to go around for maintaining older buildings.

While Kinkabool’s residents can get by with a clapped out lift, inhabitants of larger and more modern complexes like the Paradise Centre will find the costs of running and maintaining their buildings an increasingly difficult burden.

It could just turn out that Kinkabool, should it escape the wrecker’s ball, may well turn out the more desirable dwelling than its bigger, more modern neighbours.

For the meantime though, Kinkabool marks the beginning of a far more sophisticated era in Australian and Gold Coast history. Whether that era became too sophisticated for itself remains to be seen.

Security and the hackable baby monitor

Poor internet security on a baby camera should remind us of the importance of keeping your network secure.

Imagine a baby monitor that can be hacked, that’s the story that Forbes magazine tells about the Foscam baby monitors that can be owned by anybody using the Shodan search engine to find unsecured video devices.

Like all similar stories, the Foscam monitors’ weaknesses are born out of good intentions, the idea is parents can keep an eye on their children across the internet.

The problem, as always, is convenience and ease of use trumped security with Foscam making it easy for parents to by having trivial, if any, security on their devices.

It’s a lesson that should have been learned a million times, yet manufacturers continue to disregard the risks of poor security on internet connected devices.

As these internet connected devices become critical to business and public safety, this lack of security won’t be acceptable.

Slowly, companies like Foscam are being forced to take security seriously — hopefully consumers will accelerate the process by voting with their wallets.

In the meantime, it might be a good idea to make sure your home or business router has a good firewall before setting up internet connected devices.

Building the post-agile workplace

Yammer founder Adam Pisoni believes the Microsoft owned business could be then next phase of the industrial revolution.

“I personally believe we haven’t seen a major change in how companies work since the industrial revolution,” says Yammer co-founder Adam Pisoni. “We’re, I think, on the brink of a change as large as that.

Pisoni was speaking at Microsoft’s Australian TechEd conference on the Gold Coast and gave an insight into how Yammer’s development philosophy is being implemented at Microsoft since the smaller company was acquired last year.

He believes all businesses can benefit from collaborative, cloud based tools like Yammer however software companies like Microsoft are the ones being affected the earliest from their adoption.

“We sometimes joke that Yammer’s development methodology is post-Agile, post-Scrum” says Pisoni. “Because they were not fast enough and don’t respond to data quickly.”

Understanding modern workplaces

This will strike fear into the minds of managers who are only just coming to understand Agile and Scrum methodologies over the traditional ‘waterfall’ method of software development.

“We focused primarily in the past on efficiency,” states Pisoni. “In many ways things like scrum attempt to make you more agile but still focus on efficiency. Everyone is tasked based and hours and burn down points and all that”

“The name of the game now is not efficiency, it’s how quickly you can learn and respond to information.”

“Yammer is less of a product than it is a set of experiments running at all times. We take bold guesses about the future but then we try to disprove our hypotheses to get there.”

“So we came up with this ‘post-agile’ model of a small, autonomous, cross-functional teams – two to ten people for two to ten weeks who could prove or disprove an hypotheses based on the data.”

“This lets us quickly move resources around to double down on that or do something else.”

Flipping hamburgers the smart way

Pisoni sees this model of management working in areas outside of software development such as retail and cites one of his clients, Red Robin burgers, where the hamburger chain put its frontline staff on Yammer and allowed them contribute to product development.

The result was getting products faster to market – one burger that would have taken eighteen months to release took four weeks. The feedback loops from the customer and the reduced cost of failure made it easier to for the chain to experiment with new ranges.

With companies as diverse as hamburger chains, telcos and software developers benefitting from faster development times, it’s a warning that all businesses need to be considering how their employees work together as the competition is getting faster and more flexible.

It remains to be seen if this change is as great as the industrial revolution, but it’s now that can’t be ignored by managers and entrepreneurs.

Paul attended Microsoft TechEd Australia as a guest of Microsoft who paid for flights, accommodation and food.

We came, we saw, we were ripped off.

What a greasy schnitzel tells us about Australia’s economy in the 21st Century.

One bad schnitzel on Queensland’s Gold Coast illustrates the biggest economic problem facing Australia.

As we approach the 2013 Australian election, it’s notable how the debate – if it can be described as that – hasn’t touched on the biggest issue facing the country, the hollowing out of the nation’s economy.

In the 1980s the Gold Coast was going to be the centre of a Japanese led tourism boom.

That boom petered through a combination of greed and incompetence on the part of Australian tourism and hotel operators, a process being repeated with Chinese tourists twenty years later.

Like the rest of the Australian economy, in the 1990s the Gold Coast looked inwards with a focus on property speculation and construction that kept the workforce employed pouring concrete and fitting out kitchens.

In the meantime, the Gold Coast’s tourist assets were left to rot through under investment. Jupiter’s Casino is a good example of this, a building stranded in the 1980s and in desperate need of a capital injection.

The Gold Coast was not alone in this, a review of Perth’s Rendezvous Grand Hotel — built by Alan Bond in the 1980s — illustrates exactly the same problem at the other end of the country.

A lack of investment plagues all of Australia’s hospitality industry, a dinner at the Bavarian Bier Cafe on the Gold Coast’s Broadbeach* was a disaster as poorly trained staff were overwhelmed by a half full establishment and let down by poor business systems.

That shocking meal — which saw the staff struggle to get out a salad and two beers in over two hours with the greasy, overcooked mains arriving nearly three hours after the diners arrived — is not untypical in Australia.

Soviet style service is fine when beer and a poorly cooked, mostly breadcrumbs, schnitzel costs fifty kopecks, however at modern Australian prices the service, food and cooking should be world’s best.

That high prices rarely translate to superior standards in Australian establishments shows how poorly the nation has adapted to being a high cost nation.

While it’s fashionable to blame the mining industry for the down under manifestation of the Dutch disease, the answer to what has driven Australia’s under investment in tourism, agriculture and manufacturing lies in the cities and suburbs.

On the same day as the disastrous Bier Cafe meal, the Gold Coast media was reporting that relaxed zoning restrictions would allow unrestricted high rise building heights.

While the real estate industry welcomed this, the reality for local property speculators hasn’t been pretty with buyers in the twin tower Gold Coast Hilton development being hit with forty percent losses.

Part of the reason for the poor performance in property speculation is that Gold Coast industry has been hollowed out with local office vacancy rates varying between 27 and 14% percent.

While much of the rest of Australia’s property markets have been spared similar declines to date, the emphasis on real estate speculation over investment in industry has been similar across the nation.

That lack of investment in productive industries, whether in tourism or manufacturing is already hurting Australia, more critically it’s preventing Australian businesses’ from dealing with the transition to being a high cost economy more akin to Switzerland, Japan or Germany than the United States.

One bad schnitzel on the Gold Coast might not tell us much in itself, but the under investment in systems, training and staff is a bad omen for Australia’s economy.

Regardless of who wins Australia’s federal election on Saturday, it’s unlikely the group of pampered apparatchiks occupying the Treasury benches will have any idea of helping business or society transition to the realities of the Twenty-first Century.

*Paul travelled to the Gold Coast and ‘dined’ at the Broadbeach Bavarian Bier Cafe as a guest of Microsoft Australia

Beautiful software and changing the world

Xero founder and CEO Rod Drury has big plans for both his company and cloud computing.

Can cloud computing change the business world? Xero’s founder and CEO Rod Drury believes so and he has a grand vision for the future of business.

Interviewing Xero CEO Rod Drury at the company’s Australian roadshow in Sydney last week, it’s hard not to be impressed by his pride in the company he founded and the vision for how cloud computing will change business.

“It was only about three or four years ago we started thinking we’d have a trade show with multiple tracks and great guest speakers.” Drury said.

Xero was celebrating its 200,000 customer at the conference and Drury sees the business growing further, “we want to get to a million customers as soon as we can.”

“We’ve been doubling every year and we think that’s going to keep going. Looking at the numbers, we’re only at four percent market share.”

Markets for Xero

In Australia, that market is the 1.2 million small business the company believes needs accounting software. But it’s not just down under that Drury is looking at for growth.

“We’re operating in four main markets at the moment. We have 90 staff in Australia and that’s our main market.” Drury says, “the UK is doing really well at the moment and we’ve had a team for the last twelve months in the US.”

New Zealand Startup community

Xero is probably the brightest star in New Zealand’s startup community which, while small, is punching well above its weight internationally, Drury has some views on why such a small business community is doing so well.

“What’s cool about New Zealand is that it’s nice and small and everyone knows everybody so once a company gets to scale so there’s a nice, healthy ecosystem that lifts everybody up.”

“The small companies building apps alongside Xero don’t have to build a marketing team or sales team. If they are clever and partner with us they can access our 200,000 customers and 6,000 accounting partners.

“It’s also interesting starting from New Zealand because we have the largest banks as customers so are able do some neat things with the next generation of banking, where online banking and accounting are closely tied together.”

The Generational Change in accountants

Drury doesn’t see much of a generational divide between those adopting cloud technologies, he finds the new way of doing business is liberating older accountants and business owners as much as it is enabling younger ones.

“One of the neat things I’ve seen is that a lot of people come up to me who are in their fifties and sixties who say ‘I was thinking about getting out of the industry as I’m bored with accounting but you guys have made it exciting again.”

On beautiful software

A marketing tag line of Xero is “beautiful software”, something you don’t expect when talking about accounting technology. Drury sees this more as a philosophy than an advertising slogan.

“We came up as part of the Apple generation. Beautiful isn’t just about being pixel perfect – it’s all about having great values and having software that delights people. “

“WE did surveys at the start and people hated doing their books, they actually used the word ‘hate’. Now they love doing Xero.”

Building a partner ecosystem

The key to success in the software industry lies in building a developer and partner community. For cloud computing companies that requires having an open Application Programming Interface so other businesses can access data and provide complementary services.

“When we saw the way the small business market was changing on the cloud, we made sure we had a nice, open API. We said ’lets make it really cheap for people to buy a commodity general ledger but super easy for developers to build these line of business applications,’” said Drury.

“One of the really neat things we’ve seen is a lot of accountants are now moving over to the product side, so you go to the trade show and you see people we were selling product to with their bookkeeping hat on and now they’re selling software, so that change has been remarkable as well.”

Building the supply chain

One of the great opportunities Drury sees is in growing the logistic chain where cloud services become electronic data interchange (EDI) platforms plugging small businesses into larger businesses’ data and procurement systems.

“Take Coles supermarkets, they have probably have 2,000 very small suppliers who drop off a pallet of jam every six weeks, it’s very expensive for them to deal with all of these companies.” “Now there’s so many small business running in the cloud it’s effectively providing an electronic data interchange.”

“So we see a lot of interest from large businesses seeing how much they can improve their supply chain by now electronically connecting to small business.”

Connecting business, customers and governments

“In this early stages of this transition of accounting moving to the cloud you think it’s just moving from MYOB or QuickBooks to Xero, it’s actually that we’re connecting businesses, we’re connecting the banks” “we’re also seeing a lot more interest from government.”

Drury cites the New Zealand government’s $1.5 billion revenue department’s IT upgrade as an example where open data and APIs could save taxpayer funds and improve the delivery of services.

“The impact of the cloud is a whole lot different, it’s not just the next interface for accounting, it’s a fundamental change where everything connects. Big business to small business and business to government as well,” says Drury.

The aims of Rod Drury and Xero are big and audacious, we’ll see how well both the company and cloud computing can deliver in revolutionising the way businesses, banks, governments and consumers communicate.

Today marks a moment of reinvention

Regardless of what it means for the wider industry, Microsoft’s deal with Nokia means both companies have entered fundamentally different phases of their businesses.

In announcing the company will acquire Nokia’s mobile and devices business, Microsoft said “Today marks a moment of reinvention”.

This is certainly true, with the retirement of Steve Ballmer, Microsoft officially enters the post Bill Gates era and today’s announcement is an admission from Nokia that their moment as the world’s dominant mobile phone manufacturer is over.

What’s notable about the deal is what Microsoft doesn’t get — particularly Nokia’s maps service. While Microsoft gets a license to use Nokia’s mapping services, it leaves the Finnish company with a valuable asset and possibly leaves it as the only company capable of competing with Google in that market.

For Microsoft, acquiring the expertise of Nokia’s engineers shouldn’t be understated, although integrating 32,000 Nokia employees will test Microsoft’s management as this increases their workforce by a third.

Possibly the most fascinating part of Microsoft’s announcement though is the comment in the second paragraph of their media release.

Microsoft will draw upon its overseas cash resources to fund the transaction.

US technology companies have been struggling to deal with the massive profits they have accumulated offshore as part of their tax minimalisation strategy. What we may now be seeing is a wave of foreign takeovers as American companies start to reduce their offshore cash stashes without incurring domestic tax bills.

If that’s true, Microsoft’s agreement with Nokia may well indicate we’re about to see many more takeovers around the world .

Regardless of what it means for the wider industry, both Microsoft and Nokia have entered fundamentally different phases of their businesses.