Paul Wallbank | Paul Wallbank - Communications Professional

Avoiding the next wave of tech carnage

Today’s high growth businesses could be in tomorrow’s deadpool

“From the EMC boardroom you can see the carnage of the mini computer industry – Wang, DEC, Data General – you can see their buildings from the headquarters,” said VMWare’s CEO Pat Gelsinger during an interview this morning.

Gelsinger’s point is well made, those companies were victims of the last major computing shift which saw the minicomputer fall out of favour and be replaced with workgroup servers largely running Windows.

For VMWare, those Windows based servers were the basis of their successful virtualization product and the company was one of the winners of the shift to Personal Computers.

Shifting to the cloud

Now a shift to the cloud, something that Gelsinger sees as a bigger and more fundamental change than the one that dispatched companies like Wang, DEC and Data General to the deadpool in the 1990s, threatens to do the same to the companies that did well in the PC era.

That shift is seeing VMWare repositioning their business to their “unified hybrid cloud”, Dell shifting away from being primarily a PC manufacturer and Microsoft rethinking its entire existence. All of these companies are deeply threatened by IT’s move to the cloud and mobile services.

Watching for unicorpses

It isn’t just today’s incumbents that are threatened by shifting markets, a few of the current crop of today’s billion dollar unicorns will almost certainly become ‘unicorpses’ warns Nick Bilton in Vanity Fair.

That some of today’s seemingly untouchable tech startups may also join venerable older companies in the history books may surprise some but the risks are high, the shifts are great and the successful business strategies are not always obvious early in a technology shift.

One clear point is that size is no barrier to eventual failure, as we see with once untouchable giants winding up after technology and markets move against them it’s only the fast moving and flexible thinking that will survive.

The Age of Rattling the Cage

We’re in a time where when taking risk is the lowest risk in business says VMWare CEO Pat Gelsinger

“It’s no longer the big beating the small, it’s the fast beating the slow,” says Eric Pearson, CIO of the InterContinental Hotels Group.

Pearson was quoted by VMWare CEO Pat Gelsinger in his five imperatives for digital business keynote at the VMWorld 2015 conference being held in San Francisco this week.

The five are an interpretation of the trends in a radically changing business environment where the barriers to entry have fallen dramatically, industries are globalised and the time to market for new products has collapsed.

Put together, Gelsinger believes established businesses have to be more nimble as market and industry forces are going to punish those who are too slow to adapt.

Elephants must learn to dance

Gelsinger’s initial point is the world of business is now asymmetric – incumbents have everything to lose in the face of new businesses where upstarts have nothing to lose.

Part of that asymmetry comes from the world of shared resources, which gives startups and smaller businesses access to tools that were once only available to large organisations.

An obvious example of this are the cloud computing services that is concentrating VMWare’s minds, however another good example of how shared resources will change industries is the self driving car where Gelsinger cites vehicle utilisation will go from 4% to 71%.

Gelsinger points out using a car on a pay for use basis will change the structure of our cities which in turn changes the economics of living in suburbia and the business models built around it.

Standardising the cloud

Cloud computing is at the end of its formative, experimental phase and entering into a professional era where different types of services are going to have to work together.

“We have the private cloud which is focused on IT as we know it today, pulling out costs, slow and complex applications but also has powerful governance and does what I need it to do while meeting compliance purposes,” said Gelsinger. “On the the other side we have the public cloud which is fast and is able to scale effectively but has weak governance.”

In a perverse way, it’s Edward Snowden’s revelations that are driving many businesses to maintain their own private cloud networks due to concerns about foreign powers tapping their information flows and the sovereignty of data.

The consequence of a range of different cloud environments mean they are all going to have to get along with open standards becoming more important as businesses ‘mix and match’ their requirements.

Meeting the security challenge

As the Snowden affair shows, IT Security is difficult, complex and messy and becomes more so as workers start using their mobile devices and data is pushed around the cloud.

Gelsinger sees the online security sector as being the one of the biggest opportunities for startups and one of the fastest growing costs for business, “the only thing growing faster than the spend on security is the cost of security breaches.”

While Gelisinger’s focus is on VMWare’s security proposition, the security mindset is going to have be adopted by all business people. As the Target and Ashley Madison breaches have shown, the damage that can be done by a security lapse can be crippling and is a tangible business risk that senior managements and boards need to be across.

Proactive technology

Artificial intelligence has been through a thirty year gestation and Gelsinger told of his early days as a computer engineer working on AI projects in the late 1980s. Those early days of AI were a failure as the results as the time didn’t live up to the hype.

Gelsinger sees this as the next wave of computing as it moves from being reactive to proactive as systems become able to anticipate actions based on the data they are seeing.

While this has major ramifications for the computer industry, it also promises to change management and the role of many professions.

“This is going to change human experiences,” says Gelsinger however there will be challenges as businesses strike a balance between creepy versus convenience and invasive versus valuable.

Welcome to the age of rattling the cage

Half of the firms on today’s Tech 100 list will be gone within 10 years, was the warning in Gelsinger’s final point and he focused on the need for businesses large and small to break out in order to stay relevant.

“Welcome to the age of rattling the cage,” stated Gelsinger. “A time when taking risk is the lowest risk.”

Paul travelled to VMWorld 2015 in San Francisco as a guest of VMWare

Dealing with an app driven world

The challenge of dealing with a app driven, mobile workforce isn’t just one for technology companies.

“It isn’t easy to create apps for the real world,” is the opening line of this morning’s VM World conference in San Francisco.

That line encapsulates the challenge facing almost every company, not just tech companies like VMWare, in the face of shifting marketplaces and technologies.

One of the biggest business shifts is the move to mobile technologies. This isn’t just changing marketing and user experiences but also changing companies’ operations as staff increasingly use their own smartphones and tablets to work.

Managing a shifting market

That shift though is not simple, as ZD Net reports Facebook’s move to ‘mobile first’ was a tough path in the words of the company’s senior engineer Adam Wolff.

“I think everyone would say it was worth it, but it was extremely painful,” Wolff admitted, explaining each sub-team was building in their own ways because there was no one to crossover with necessary knowledge.

Facebook has probably been the most successful company is dealing with the mobile shift and their difficulties despite their massive resources show just how difficult it is for companies to change not just their technology, but their business processes and in many cases the entire mindset of the organisation.

Those pain points in transitioning between ways of doing business is where opportunities lie, for VMWare they are seeing IT departments struggling with the development and deployment of apps along with the security risks of staff bringing their own mobile devices.

Happy coincidences

For VMWare, this is a happy coincidence in that their main business of computer virtualisation is as much at risk from the shift to cloud computing and mobile applications as any other business. By offering the tools for companies to manage that shift, they can retain their place in the market.

The threat though is this space has many other contenders – not least Facebook itself with its open source React platform the company developed out of its experiences in developing its mobile product.

One of the strengths VMWare has is being an incumbent, which is why they are pushing their ‘hybrid cloud’ offerings where companies use both their own data centres along with the public cloud providers such as Amazon and Microsoft.

Stuck with sunk costs

For large corporates with huge sunk costs in their own infrastructure and those with security or operational reasons for keeping some of their functions in house that hybrid strategy makes sense as it’s unlikely any board or CIO is going to happily burn their existing systems and process down and go to a ‘pure cloud’ or mobile strategy.

While catering to that market is lucrative for the moment, the longer term risk is that the next wave of large corporations – and today’s high growth businesses – are pure cloud companies.

For the companies catering to the old ways of doing business, for the short term there’s profits to be made in the pain points from an evolving marketplace but in the long term it’s how well businesses are placed for the world the end of that transition that will guarantee their survival.

The process facing software companies like VMWin dealing with as business shifts is a challenge faced by almost all industries, the question is how to adapt to a very changed way of working.

Does broadband really create an innovative economy?

Building a competitive nation is more than just rolling out broadband connections

How much does broadband really matter in developing a competitive and innovative modern economy? A corporate lunch with US software company NetApp last week illustrated that there’s more to creating a successful digital society than just rolling out fibre connections.

Rich Scurfield, NetApp’s Senior Vice President responsible for the Asia-Pacific was outlining the firm’s plans for the Australian market and how it fits into the broader jigsaw puzzle of economies across the region.

Like many companies in the China market NetApp is finding it hard with Scurfield describing the market as “chaotic”. This isn’t unusual for western technology companies and Apple is one of the few to have had substantial success.

Across the rest of East Asia, Scurfield sees them ranging as being mature, stable and settled in the cases of Japan, Singapore, Australia and New Zealand through to India where the opportunities and the challenges of connecting a billion people are immense.

Digital outliers

The interesting outlier is South Korea, one of the most connected nations in the world, where the promise of ubiquitous broadband isn’t delivering the expected economic benefits to the entire community.

In theory, South Korea should be seeing a boom in connected small businesses. As Scurfield says, “from a technology providers’ view this connectivity means you could do more things very differently because of the infrastructure that’s available.”

Global Innovation Rankings

Korea’s underperformance is illustrated by last year’s Global Innovation Index that saw South Korea coming in at 16th, just ahead of both Australia and New Zealand whose broadband rollouts are nowhere near as advanced as the ROK’s.

Making a close comparison of Australia and the Republic of Korea’s strengths in the WIPO innovation index, it’s clear the technology and engineering aspects are just part of a far more complex set of factors such as confidence in institutions, the ease of doing business and even freedom of the press.

Putting those factors together makes a country far more likely to encourage its population to start new innovative businesses that can compete globally. When you have a small group of chaebol dominating the private sector then it’s much harder for new entrants to enter the market – interestingly a private sector dominated by big conglomerates is a problem Australia shares.

Small business laggards

NetApp’s Scurfield flagged exactly this problem, “Korea is an interesting market in there’s about six companies that matter and from a competitive view those companies are extremely advanced, they have great technology and great people.”

“However what’s not happening across the rest of the country is this adoption isn’t bleeding into the broader community,” said Scurfield “Because of that I don’t see broadband connectivity as having a wide impact.”

That Korean small and medium businesses aren’t using broadband technologies to develop innovative new products and service in one of the most connected economies on earth raises a question about just how effective investment in infrastructure is when it’s faced with cultural barriers.

Certainly we should be keeping in mind that economic development, global competitiveness and the creation of industry hubs is as much a matter of people, national institutions and culture as it is of technology.

We shouldn’t lose sight of the importance of our people and institutions when evaluating the strengths and weaknesses of a nation in today’s connected world.

Developing the world of trustworthy data

Recent security problems start focusing the minds of those designing the Internet of Things and connected cars

Last month’s remote hacking of Jeeps through their entertainment systems was a wake up call to the technology industry as it underscored the risks of connected devices and now a series of initiatives are looking at improving the security landscape.

One of the benefits of the new top level domain regime, despite its reeking of rent seeking by the ICANN names agency, is larger companies and industry groups can improve management of their online identities and those of the services and devices their operations rely upon.

Top level security

Having their own top level domains and being able to issue security certificates for devices and services within their own walled gardens means financial institutions, hardware vendors and service providers can have more confidence in the identities of those they are dealing with.

Bloomberg Business examines how corporations are applying for domains to enhance and while the focus is on guaranteeing the veracity of their websites, the scope in having done that expands to a range of other application, particularly that of ensuring everything from bank point of sale equipment through to connected cars and kettles are authenticated.

A top level domain is only part of the answer though and for the systems to work effectively there has to be more sophisticated ways for systems to ensure they are talking to trusted parties. This need becomes particularly acute with automated systems making business decisions in milliseconds where corrupt or incorrect data can cause havoc with financial markets or supply chains.

Blockchain’s potential

Some of the work being done around Bitcoin, particularly with the use of Blockchain technology to ensure transactions are valid, is one intriguing area where researchers are looking at ensuring all parties in a connected society are genuine and trustworthy.

It’s early days yet in the development of these services and there will be many mistakes as businesses and consumers adopt services where security hasn’t been properly thought through or implemented.

As Chrysler found with the Jeep hack, the risks of getting it wrong are real and potentially fatal and it’s notable Uber has hired the researchers who discovered that vulnerability to design security for their driverless car project.

Trustworthy data

With autonomous vehicles authentication is essential, not just for the passengers or operator starting the car but for all the devices and services communicating from outside and within. As the Jeep hack showed, the braking system needs to have confidence the instructions its receiving are genuine and not coming from a malicious outsider.

Outside the car other services will be communicating, the vehicle’s navigation system needs to be confident the mapping information it’s receiving is reliable and from the genuine provider. Similarly plans to reduce the road toll using roadside devices and other cars needs to ascertain the data being transmitted about highway conditions is trustworthy.

It’s often said computers are only as smart as the data going into them – garbage in, garbage out is the classic saying of the computer industry. As we move into a world where more decisions are being made by machines, those systems are going to become more demanding that information is trustworthy.

Researching the next generation of wearables

The Obama Administration teams with industry to develop a Silicon Valley based wearable tech hub

The Obama Administration teams with Apple, HP, Boeing and others to develop a Silicon Valley based wearable tech hub with $170 million in funding reports Venture Beat.

Over $17o million will be invested by the US government and its private sector partners in hybrid flexible electronics manufacturing research that may well underpin the next generation of wearable and embeddable devices.

For the US, its success in the electronics industry is based upon its strong research sector. Making the investments today will help the nation compete as the technology landscape evolves.

Pricing the friendly skies

The dynamic pricing of GoGo’s inflight Wi-Fi is a marker for the future of many industries.

Possibly the holy grail of business is to find a product that your customers will pay almost anything for.

In flight Wi-Fi service provider GoGo may be close to achieving that with a product that business customers depend upon. The New York Times describes how the company has found it can use dynamic pricing to customise its prices for each flight.

One of the limitations GoGo faces is the connections between the aircraft and the ground stations is narrow so a plane full of bandwidth hungry travellers will quickly bring everyone’s service to a crawl.

To overcome this – and to make more money – the service has developed algorithms to anticipate the demand on each flight and then customise the charges to suit.

In many respects what we’re seeing with GoGo is similar to services like Uber where fast, intelligent systems can analyse traffic patterns and use the predicted demand to set prices. It’s the ultimate demand driven economy.

Over time, this model is going to flow out across many industries – the airline industry leads the way in pricing around demand management – and consumers need to get used to the idea of a fixed price tag being a quaint memory.

Why do we still use fax machines?

Fax machines were once a standard form of business communication, today they are a superseded transition effect. Why do still use them?

If you’re in the ABC Canberra area at 4.05pm, I’ll be talking about this with Adam Shirley. Listen live here.

One of the most frustrating statements in modern business is “you’ll have to send a fax.”

Facsimile machines, once the pinnacle of 1980s business communications although they were first invented in 1843, started to die once the internet became common and email became the dominant messaging system.

Once dial up modems started becoming standard on computers, receiving faxes electronically became feasible and for while businesses struggled with the notoriously unreliable software to receive facsimile messages without the hassle of paper.

Eventually however they passed away as most business found there was no need for faxes and anything requiring a signature could be electronically signed or a scan of the original document sent.

Some industries and sectors – particularly the legal world and some government agencies – still hold out the need to send an ‘original’ by fax, party under the fallacy a facsimile copy is more secure, reliable and legally more valid than an email or electronically lodged document.

During the ABC Canberra program one listener pointed out the medical industry is dependent upon the older technologies, “we couldn’t operate without them” she told the producers. In a time of connected medical equipment and electronic data interchange, the medical industry has little justification in using outdated manual methods but habits die hard in a very conservative industry.

None of the myths around the reliability of fax are true and the reality is details sent by fax are just as easily intercepted by nefarious employees or third parties as emails. In many respects a fax is less secure than electronically interchanged data.

If you do have the need to send or receive a fax though all is not lost, services like eFax will still send or receive messages and then, ironically, email them onto you.

However there is a downside with these services, as one harried PA whose organisation still receives faxes due to its dealings with the legal profession described, the vast bulk of messages they receive are junk messages mainly offering cheap deals on office supplies.

The fax machine is another example of a transition effect where a stop gap product was effective for a short period as businesses adapted to new technologies, the SMS is going through a similar process now. Neither will be the last example of this.

Zooming ahead of the supply chain

China’s control of the supply chain gives its manufacturers a powerful advantage

One of the least understood, but most important factors in modern industry is the logistics of moving supplies to manufacturers and goods to market.

Mastery of the supply chain is one of the key advantages Chinese manufacturers have says PCH Industries’ CEO Liam Casey in an interview with Fortune Magazine.

Fortune describes how Casey has become the ‘go-to’ man for companies wanting to outsource their manufacturing to China, a process that can be steep learning curve for an inexperienced startup team.

Since first travelling to China twenty years ago, Casey has been studying how the country’s manufacturers operate and he believes they are “light-years ahead when it comes to the supply chain.”

That strength is something that shouldn’t be underestimated by China’s competitors and western countries hoping to rekindle their manufacturing industries as Chinese costs increase, getting goods to market is as much an value add as making the products.

Winning the global fintech race

Winning the global fintech race – why history and focus matter

One of the things that strikes you when wandering around London’s Docklands district is the sheer amount of advertising for financial technology companies.

That London has established this position should surprise no-one, its civic and national leaders have been aggressive in maintaining the city’s position as technology has swept through the banking sector.

One of the notable things when interviewing the Chief Executive of London and Partners, Gordon Innes, two years ago was how engaged both the city’s business and political leaders were in the development of the town’s technology sector and the financial industry was a natural focus.

An example Innes gave of that engagement was the co-operation between the offices of the Prime Minister and the London Mayor where staffers meet on a monthly basis to agree on business and technology policy, which is then put into action by Westminster and the UK Parliament.

Poaching the Aussies

The benefits of that co-ordination and focus are global, with the London fintech sector attracting startups from as far as Australia.

Australia’s experience, or lack of it, in the fintech sector is notable. As the story linked above mentions, the UK Trade and Investment agency actively scouts out promising businesses while the local state and Federal equivalents sit on the sidelines (disclaimer: I worked for the New South Wales government on its digital economy strategy).

For Australia, the late entry into fintech doesn’t bode well. The country’s financial sector is overwhelmingly weighted towards domestic property speculation – a structural weakness seen as a strength by most Australians – and the country’s high costs make it tough for startups.

Defining a competitive advantage

High costs in themselves aren’t a barrier to a city’s success – London, New York and San Francisco themselves would be among the highest cost places to do business on the planet.

To justify those costs a city needs a competitive advantage and there’s little to suggest Sydney or Melbourne have anything compelling as a financial centre beyond a bloated domestic banking industry fixated on residential property.

Two of the arguments used to support Australia’s claims are it is on the doorstep of Asia and it is in the same timezone as the growing East Asian powerhouses.

Timezone myths

If timezones do matter in modern business, the sad truth for the Aussies is the powerhouses themselves – specifically Shanghai, Hong Kong and Singapore – are in roughly the same longitudes so any time differentials aren’t great.

Being on the doorstep of Asia is probably one of the greatest Australian myths of all – it’s actually quicker to fly from Beijing to London than it is to Sydney. London might be on the edge of Europe – one US entrepreneur once told me how they can get Spanish developers into the UK in an afternoon – and New York is the gateway to the United States however there’s little reason to go Down Under for any other reason than to visit Australia.

The power of history and focus

Comparing London to Sydney is useful though as it shows the power of history and trade routes. London became a global financial centre because it was the financial centre of a global empire just as New York is today and possibly Shanghai in the not too distant future.

For the Aussies, the trade routes aren’t so encouraging in indicating the country has a future as a financial sector. Even ignoring history, the commitments of governments and local corporations are at best half-hearted compared to their global competitors – as we see with London poaching Australian businesses.

One of the strengths in those global centres is a constant re-invention and the ability to adapt to changing circumstances – how China adapts to a rebalanced economy will define whether it remains a global economic power – and in the UK the government is looking at the next big things in biotech and the Internet of Things, two areas where it has strengths and can attract global investment and skills.

For countries and regions aspiring to be global players, they need not just to be playing to their own strengths but also to where the future lies and not be late entrants into the current investment fad.

Learning the tools of online business

Accountants are faced with a great opportunity, but they have to learn the tools of online business

The accounting and professional services industries are uniquely positioned as the economy goes digital, while their own sectors are undergoing radical change so too are their clients.

Given the changes facing the accounting industry, the invitation to host last week’s CPA Australia Technology Accounting Forum‘s second day in Sydney was a good opportunity to see how the profession and its clients are dealing with major shifts in their industry.

The accounting profession has been one of the big winners of the Twentieth Century’s shift to a services economy. Last week’s story on how the workforce has been changing illustrates this with a chart showing how the occupation has grown over the past 140 years.

In many respects accountants should be well placed to benefit in a data driven economy given the training and skills they posses. The big challenge for existing practitioners is to shift with the times.

The transition from what’s been lucrative work in the past will be a challenge for some in the profession. Many of the manual tasks accountants previously did are now being automated with direct data links increasingly seeing operations like reconciliations and filing financial returns being done in real time without the need for any human intervention.

In private practice, the shift to cloud computing and direct APIs has stripped out more revenues with useful earners like selling boxed software petering away as services like Xero and Saasu arrived and established players like Intuit, Sage and MYOB moved to online models.

Shifting to the cloud

That shift has already happened with the presenter in one breakout session asking the audience how many practitioners used exclusively desktop software, purely cloud service or a hybrid of the two. Of the twenty in the room, the vast majority were using a combination with three being purely online and one sole operator still stuck with a desktop system.

For accountants the message from all of the sessions was clear; the future is online and businesses based around paper based models are doomed. The question though for them is how will they make the transition to being professional advisers.

Strangely, the big challenge for accountants in private practice may be their clients. A number of panel participants pointed out small business owners are slow to adopt new technologies and this holds both them and their service providers back. Divorcing tardy customers may be one of the more difficult tasks facing professional advisors.

The Technology, Accounting and Finance Forum showed the potential for accountants and professional services providers to be the trusted advisors in an online world, the task now is for practitioners and their clients to learn and understand those tools.

A handy guide to a company’s performance

Venture capital firm Andreessen Horowitz’s sixteen point guide to evaluating a tech startup’s performance is useful for all businesses.

Venture capital firm Andreessen Horowitz has a nifty sixteen point guide to evaluating a tech startup’s performance.

This is a handy checklist when looking at the claims of any business – big or small, tech startup or something more conventional.

Pre-booking of contract revenues in particular is one of my favourites and it’s something we’re going to see more of as the subscription economy becomes more widespread.