Author: Paul Wallbank

Paul Wallbank is a speaker and writer charting how technology is changing society and business. Paul has four regular technology advice radio programs on ABC, a weekly column on the smartcompany.com.au website and has published seven books.

Ending the era of Mac complacency

Does the Flashback bug end the Mac’s virus free status?

The news that the Flashback Trojan has infected an estimated 600,000 Apple Mac computers has been greeted with joy by the dozens of industry experts that have predicted a virus holocaust for smug Mac users for nearly a decade.

While the Flashback malware – the earlier versions could be described as a computer Trojan Horse while the later editions are more like a computer worm – is a real risk to Mac users and it’s important to take this risk seriously.

The Netsmarts business site looks at how Mac and Windows users can protect themselves from Flashback and its variants.

One of the key things in the advice is to make sure anybody using the computer has limited rights; as a Managed User on the Mac and as a Limited User in Windows. This dramatically reduces the opportunity for bad things to happen while online.

I’ve discussed previously while user privileges are one of the reasons why the Mac has historically been less prone to infection to virus infections than their Windows cousins.

Microsoft made the decision in the 1990s not to tighten Windows’ security settings and their customers paid the price for the next decade. This was compounded by some poor implementations of various technologies in Microsoft Windows.

This isn’t to say the Mac, or any other computer system, doesn’t have security bugs. Every operating system does and it’s a conceit of everybody immersed in new technologies, be it cloud computing back to horse drawn chariots, to believe their products are magically infallible.

Part of the crowing from the security experts and charlatans who’ve been desperately predicting a “Macapocalypse” for nearly a decade overlook this.

Even with the proven problem of the Flashback virus, its unlikely we’re see the deluge of malware like that of the early 2000s simply because the Mac OSX, Windows 7 and all the other mobile and computer operating systems don’t have the structural flaws that Windows 98, ME and early versions of XP had.

Much of the Mac versus PC argument in security is irrelevant anyway; the main game for scammers and malware writers has moved to social media services like Facebook and this is where computer users need to be very careful.

However the stereotype of the “Smug Mac” user was true, one caller to my radio show claimed he didn’t have a problem with spam because he had a Mac. Nothing could convince him that email spam wasn’t related to the type of computer you used.

To be fair to Apple they never made the claim their computers were invulnerable to malware, apart from the odd dig at Microsoft. Their users did it for them.

That type of smug Mac user are those who do need a wake up call. For the industry though, it’s business as usual although some will be feeling a little smug their hysterical predictions of the last decade came true in a small way last week.

Should Australia pass a jobs act?

Can legal reform help Australian start ups?

Last week the US President signed the Jumpstart Our Business Startups (JOBS) Act into law.

The US law seeks to make funding easier for new businesses by lifting the burden of regulations like the Sarbannes Oxley Act (SOX) and various other financial rules.

One of the main planks of the reforms is it changes shareholder thresholds, for instance allowing 2,000 investors rather than 500 maximum before it has to go public, and allows companies to advertise their shares subject to certain restrictions.

Whether it achieves the stated aim of allowing new innovative businesses to raise funds or triggers a new generation of “boiler rooms” and investor fraud remains to be seen but it begs the question of should Australia pass a jobs act.

The funding crisis

There is no doubt Australia has a business funding crisis. Before the global financial crisis of 2008, it was difficult for smaller business to access finance.

In the aftermath of the GFC, it became even harder for businesses to raise funds as banks withdrew from the small business sector, increased their lending rates and tightened criteria.

While this situation has eased somewhat, partly due to the entrance of new angel and VC investment funds, financing of startup and small business is patchy and still tough.

An Australian Jobs Act would make it easier for business to raise funds and well crafted one might encourage both self managed and public superannuation funds to allocate some of their investments into the startup and innovation sectors.

A Scammer’s dream?

One of the big criticisms is that it reduces investor protections; while it restricts investors with less than $100,000 in annual income from punting more than 5% of their income, it’s quite clear in a full blown mania the Jobs Act will enable plenty of shoeshine boys and self funded retirees will do their life savings.

The question of course is how well the existing regulations protect investors or the community given the financial disastersof 2008.

Despite tough rules like SOX and the Basel Agreements, massive institutionalised fraud occurred and it’s surprising there have been no reforms in these rules given the huge and unprecedented costs of rectifying the problems.

In an Australian context, it’s clear local regulations aren’t working when thousands of investors are defrauded by their financial advisors in financial planner led scams like Westpoint. So reform is due.

While it’s clear the legislation isn’t working, it’s also clear the Australian financial planning industry doesn’t have the skills or ethics to advise clients should a local Jobs Act be passed.

Perhaps we should be accepting there is risk in investing and an Australian Jobs Act could help by simplifying business rules and improving transparency in accounts rather than bogging business and investors down in masses of unread paperwork.

Is the US experience valid?

Looking at the US Jobs Act it appears the Silicon Valley insiders are finding ways to extend their business models, whether this is successful creating new American jobs or just enriching the good folk of Sand Hill Road will pan out in the next few years.

For Australia it’s important we reform our laws to make business and innovation easier though we need to be careful we don’t ape the worst aspects of the Silicon Valley business model.

702 Sydney Weekend computers: April 2012

Join Paul and Simon Marnie to discuss the tech that affects your home and office

On ABC 702 Sydney Weekend computers this Sunday, April 8 from 10.15am Paul Wallbank and Simon Marnie will be looking at the end of innocence for Apple Mac users, the DNS Changer Virus and how political campaigning is coming to a Facebook site near you.

Some of the topics we’ll discuss include;

If you’d like to learn how to protect your Mac or Windows computers from malware, visit our Netsmarts article on the Flashback virus that explains the security settings and suggests some free anti-viruses.

Listeners’ Questions

While we had a great range of calls from listeners, there was only one we promised to get back to. Kay clearly has a virus infection on her Windows computers and we recommend the free MalwareBytes program to clean it up.

Our IT Queries site has more instructions on cleaning up a virus infection if you’re worried about a sick computer.

We love to hear from listeners so feel free call in with your questions or comments on 1300 222 702 or text on 19922702.

If you’re on Twitter you can tweet 702 Sydney on @702sydney and Paul at @paulwallbank.

Should you not be in the Sydney area, you can stream the broadcast through the 702 Sydney website and call in anyway.

Risks and opportunities in crowdsourcing

There are real benefits and dangers for business in the globally connected marketplace

Crowdsourcing and offshoring are changing bringing to small business the same changes we’ve seen in manufacturing and low level office jobs over the last forty years.

Those trends are going to affect local businesses – particularly the home based service providers – in a serious way as the local web designer and bookkeeper find themselves undercut by freelancers in countries where an Australian day rate is a month’s pay.

With those thoughts in mind I went along to a round table discussion with crowdsourcing advocate Ross Dawson, Freelancer CEO Matt Barrie and Design Crowd founder Alec Lynch to hear them discuss some of the issues around the concept ahead of their half day workshops in Sydney later this months.

Having read Ross’ recent book, Getting Results From Crowds, many of the concepts and arguments are familiar but its worthwhile considering how the trend of a globalised workforce is changing.

The benefits of crowdsourcing services

Crowdsourcing services like Design Crowd and Freelancer have benefits traditional outsourcing services don’t have.

Alec Lynch describes these as reduced expense, speed and risk. A broad range of cheap, accessible suppliers mean businesses aren’t locked into costly contracts with the attendant risks while they can bring projects to fruition in days.

Until recently, globalisation only bought benefits for major corporations with manufacturers contracting work out to China, back office functions to India and software development to Eastern Europe.

The rise of web based services where smaller, one off projects could be paid for by credit card has bought global outsourcing into the small and medium sized business markets.

Now local businesses are affected by business practices that, until recently, were the concern of those working for large organisations.

This is bad news for local service businesses; the suburban web designer or bookkeeper is now finding themselves competing with individuals who, as Matt Barrie points out, have a very good weeks’ income for the equivalent of a day’s pay in Australia.

Basically the same forces that drove most low value manufacturing offshore are now driving services and white collar jobs the same way.

Responding to the threat

There are major downsides for clients using these project based outsourcing services; for instance designing a logo is only part of a much bigger branding exercise which in turn has to be considered against the orgainisation’s longer term objectives.

Often, most of us don’t know what we don’t know and that’s the real reason why we hire an expert to explain why a logo should look a certain way, an expense should be allocated to one specific cost centre and not another or why we should one software package over another.

When we outsource our services, particularly to a low cost provider, we lose that expert insight and end up with someone just carrying out a task; it is up to us to supervise something we probably don’t understand ourselves.

Part of that supervisory role is project management, in the design field managing creatives can be like herding cats. This is why experienced project managers are worth their weight in gold.

Like many essential skills, project management is one of those which most of us don’t have and is chronically undervalued but when a business is outsourcing to a freelancer in Estonia or Eritrea then this service is essential.

Providing those skilled supervisor and management roles is where the opportunities lie in a crowdsourced market place.

In many ways, we’re seeing the end result of the post-industrial society. Just as we offshored the manufacturing industries through the 1970s and 80s then the low skilled office work in the 1990s and 2000s, we’re now outsourcing local services to low cost countries.

Whether ultimately this is a good thing or not is a big question but for local businesses, the trend is clear and much of the basic work is going offshore. Those who choose to whinge rather than adapt will be left behind.

Building aroung the blockages

Waiting for older generations is a waste of time.

“We have to wait for the baby boomers to get out of the way,” said the Gen Y girl after unsuccessfully trying to change a business culture.

The problem is the boomers aren’t going to get out the way; they are fit, healthy and able to work for at least another decade.

For most boomers, the promised golden age of retirement simply isn’t affordable as property prices stagnate and investment underperform.

The smart ones also know governments can’t deliver the promises of ever increasing aged care services and middle class welfare.

Waiting the boomers to get out of the way also assumes their younger replacements will be any better; the sad reality is many have the same views and 1960s or 80s ideologies of their mentors. Old heads on young shoulders.

For those waiting for older generations to get out of the way so they can start changing institutions or business, it might be time to start building ones to replace stale and increasingly irrelevant incumbents.

There’s been few times in history when circumstances have favored challenging incumbents as technology, economic conditions and social change give us the tools and opportunities to build new businesses and political parties.

It’s hard work, but it’s a lot less frustrating than waiting for the boomers to die off.

Why VCs hate Amazon

How cloud computing is changing investment and entire industries

“Venture capital investors hate us” said Dr Werner Vogels, CTO of Amazon.com at the April Sydney FED, “once you needed five million dollars to launch a new technology business, today you need $50,000 and a big box of ramen.”

Dr Vogels was talking about the Amazon Web Services (AWS) platform that underpins many of the cloud computing and social media sites which are redefining how we use computers and the web.

What’s really interesting with the doctor’s comment is it’s only part of the story; for businesses outside the tech sectors –say retailers or service companies – they get cheap or even free access to the cloud computing services running on AWS or its cloud competitors like Windows Azure.

For those businesses, it’s possible to start an idea for nothing but the founder’s time; rather than putting fliers up at the local bus stop or shopping mall an entrepreneur starting an online store or neighbourhood computer repair business now can create a website and all the local search profiles without spending a cent.

Being able to start up a business with little, if any, capital means we’re seeing a new breed of innovators and entrepreneurs entering markets.

At the corporate level, or in the $50 million dollar VC investment field, the opportunities for exploring Big Data without buying big supercomputers is another benefit of the cloud computing services.

Services like ClimateCorp which insures farmers against extreme weather couldn’t have existed a few years ago as the processing power to analyse historical rain and drought data was only available to those with insanely expensive super computers.

Today, the combined power of millions of low powered cheap computers – the definition of cloud computing – delivers the processing grunt of a supercomputer at a fraction of the cost.

Access to cheap computing power means innovations can be bought to market quickly and at a fraction of the cost that was normal a decade ago.

We’re in early days with what the effects of super cheap computing means to most industries, but it is changing industries as diverse as agriculture, banking, logistics and retail quickly.

Cloud computing is giving big business the tools to understand their markets better and small business the ability to grab customers from bigger competitors who are too slow or don’t want to face what their clients really think.

These are the forces that are changing the way business is being done; if you’re in business it’s time to start paying attention.

In reality, Dr Vogels is pulling our legs – the smart VCs aren’t hating Amazon, they are rubbing their hands at the profits that are going to be made in disrupting cosy industries.

Common interests

A successful business partnership relies upon respecting each party

KFC is booming in the world’s emerging markets. From Shanghai, China to Accra, Ghana, crowds are lining up to eat and the fast food chain is opening new outlets across the world.

Yet in KFC’s home market, the United States, the chain is shutting outlets and infuriating franchisees.

A Bloomberg BusinessWeek profile looks at the success of Yum! foods, KFC’s parent company, and the contradiction of overseas success while their domestic business fades.

One thing is absolutely clear, Yum Food’s vainglorious Chief Executive David Novak and his board have made a clear decision to focus on expanding the core business of deep fried chicken in emerging markets while making little effort to adapt to changes in their domestic operations.

At least Yum are keeping their US based KFC operations, many of their other brands are being sold off as the company responds to changes US tastes and economic circumstances.

For the US KFC franchisees, this is a difficult process as their interests are not the same as those of Yum’s management.

At the heart of every business agreement are people acting in their own interests. The most successful partnerships are those where everybody’s interests are recognised and respected.

In their US operations, the big question is how long Yum can neglect their US franchisees and markets without affecting their international operations.

For Yum’s international operations it’s going to be fascinating to see how the partnerships and joint ventures underpinning their expansion in emerging market evolve.

Yum will probably find in some of these markets that their local partners don’t share their interests. Then they may find themselves in the same position of their US franchisees.

Consumer surplus?

Inventing euphemisms for your dead business model

Last week I came across the term “consumer surplus”, the Boston Consulting Group claimed the gap between the cost of producing media content and what customers are prepared to pay creates a “consumer surplus”.

That consumers of media want it but aren’t prepared to pay for it is a basic truth; the 20th Century media model is based upon advertising subsiding journalism and entertainment.

For all forms of media this was true; from TV and radio stations being fully funded by advertising to newspapers and magazines’ cover prices barely covering distribution costs.

Take out advertising and all these models are dead. The only alternative is government funding.

Losing the advertising rivers of gold to web services is what’s killing the established business model. It appears that TV and radio will hang on, for now, but newspapers and magazines are in serious difficulties.

Simply put, there has rarely been a market for journalism; readers and viewers aren’t prepared to pay. Journalism’s golden years of the 20th Century were based upon having a relatively captive market for advertisers; now advertisers can go elsewhere, they have.

Putting a sophisticated  label on a basic concept is something consulting companies are very good at and Boston Consulting Group has done an excellent job with this report.

The fundamental truth is that it doesn’t matter how good your product is, if you can’t find a way to make someone pay you for it then you don’t have a market or a business.

Which is what the real challenge is for online content creators, finding the model that pays. The first person to do that becomes the 21st Century’s Randolph Hearst.

We come here to work

We shouldn’t under estimate the economic power of the Chinese factory worker

“We come here to work and not to play” is the quote from a Chinese production line worker in Reuter’s article on Foxconn factory workers.

That quote could have come from a hundred years ago in Western societies as young workers fled agricultural communities to make better money and find greater opportunities in the factories and cities of North America, Europe and Australia.

In their report on Chinese labour conditions commissioned by Apple and its supplier Foxconn, the US Fair Labor Association confirmed the quotes from the Reuters article.

48% thought that their working hours were reasonable, and another 33.8% stated that they would like to work more hours and make more money.

These workers have an average 56 hour working week and over a third are putting in 70 hours each week.

Like our great grandparents they are focused on bettering themselves and deeply conservative; they know their immediate livelihoods and future prospects depend upon the work they can get.

They also understand the government owes them nothing and their expectations on what the authorities will do for them are low.

It often said the Communist Party of China is the most effective capitalistic organisation on the planet today. In reality it’s the workers on the assembly lines who personify what we know as the free market.

As the leaders of Western nations continue to indulge in corporate and middle class welfare while believing in magic pudding economics where massive mis allocations of resources have no cost and tax cuts pay for themselves, it might be worthwhile thinking of the businesses those 23 year old factory workers in Shenzhen or Chengdu might be running in thirty years.

Just as our great-grandparents built modern economies and industrial empires out of their hard work, which most of us still reap the benefit from, those young Chinese workers are doing the same thing.

The tough world of smartphones

Competing in the smartphone market is tough as Dell have discovered.

Dell’s announcement they are going to exit the Smartphone business – for the second or possibly even third time – comes on the same day Nielsen release a survey showing smartphones are now the bulk of US mobile phone purchases.

For Dell this shows the problem they have in being locked into the commodity PC business, what was once a lucrative business is now suffering softening margins and slowing sales. In desperation they are looking to other product lines but struggle to differentiate themselves in other markets.

The difficulties of doing this in the smartphone sector is shown in Nielsen’s analysis of what phones are selling.

Of those sold in the last three months, a whopping 43% were Apple products while 48% were Google Android devices.

Even more frightening in those Nielsen figures is Blackberry’s collapse where the Canadian product has 12% of the market but only 5% of sales in recent months. It’s little wonder Blackberry’s owner RIM is laying off senior managers.

For Microsoft, that only 4% of phones were “other” than Android, Apple or RIM show just how tough the task of selling Windows Phone is going to be, something that won’t be helped with dumb marketing stunts.

Google’s apparent success in mobile isn’t all that it seems either; while the Android platform has nearly half the smartphone market it doesn’t appear to be particularly profitable.

The Guardian’s Charles Arthur looked at a number of legal cases involving Google’s mobile patents and extrapolated the claimed damages to get an estimate of how much Google earns from Android.

Arthur estimates Android has earned Google $543 million dollars between 2008 and 2011 which, given Google’s mobile revenues last year were claimed to be $2.5 billion last year, indicates Google makes more money from Apple devices than it does from its own products.

While Arthur’s estimates are debatable, they show how Apple’s profits dominate the smartphone market. Google, like Dell in computers, are locked into the commodity, low margin end of the market.

Just as Dell have learned that entering new markets doesn’t guarantee success, Google may have to learn the same lesson.

To be fair to Google, at least management are aware of being too dependent upon one major source of revenue.

Whether mobile services built around the Android platform can provide an alternative cashflow of similar size to their web advertising services remains to be seen.

I don’t get it

“Getting it” doesn’t guarantee business success

“I don’t get Twitter or Facebook” says the talkback radio caller, “why would you want to tell the world what you’re having for dinner?”

Once upon a time people didn’t get the motor car. There were many good reasons not to – compared to a horse a steam or petrol driven vehicle was expensive, unreliable and restricted in where it could go.

The motor car ended up defining the 20th Century.

Those who didn’t get it – like the stage coach lines and later the railway companies – eventually faded into irrelevance.

Something we should remember though is that many of the entrepreneurs in the early days of the motor car who did “get it” went broke. As did those in earlier times building railways and canals.

“Getting it” is one thing, but it doesn’t guarantee it will make you rich or guarantee your business’ survival.

Playing with Dragons

We should be careful how we treat our customers.

Chinese manufacturing has been in the news recently with various exposes of factory conditions by the New York Times, the now discredited Mike Daisey and a fascinating look at US store chain Wal-Mart’s supply chain by Mother Jones’ Andy Kroll.

In his examination of Wal-Mart’s Chinese suppliers Andy Kroll interviews factory owners and managers with a common theme, they are all loath to be identified for fear of incurring Wal-Mart’s wrath.

This is wall of silence is familiar in Australia; the reluctance of local suppliers to speak about the conduct of the Coles’ and Woolworths’ policies has hobbled enquiries into the domestic retail market.

Another aspect Chinese and Australian have in common is how the retailers drive down costs with big buyers insist upon regular price reductions from their suppliers.

This is what happens when your business is a price taker that relies on one or two suppliers; you accept what you’re offered or lose a large chunk of your business.

With many of Australia’s industry sectors now dominated by one or two incumbents, this way of doing business is now the norm rather than the exception.

As a nation Australia’s finding itself in that position as well. Now our governments and business leaders have decided Australia will only dig stuff up with a few favoured, uncompetitive industries like car manufacturing being being protected, the entire country is in a position not dissimilar to a Foshan coat hanger manufacturer.

Having that dependency on one or two major customers is a risk and when the commodities boom turns to bust – commodities booms always do – our relationships with these customers will be tested.

When that test comes, the clumsy way the Federal government has banned Chinese companies from tendering to the National Broadband Network or blocked investment in mining projects may turn out to be mistakes.

This is the problem with being a price taker selling a commodity product, you become hostage to fortune and when the market turns against you there isn’t a great deal you can do.

In the early 2000s computer manufacturers like Dell and HP decided to sell commodity products then watched with despair as Apple captured the premium, high margin end of the market. Neither business has truly recovered.

Being trapped at the commodity end of a market is not a comfortable place to be, particularly if you don’t have a plan to move up the value chain.

If your business is currently selling low margin, commodity goods then it’s worthwhile considering what Plan B is should the market turn against you. You might also remember to be nice to your customers

At least you’ll show you have more forethought than our leaders in Canberra who seem to like to play with dragons without thinking through the consequences.