Paul Wallbank | Paul Wallbank - Communications Professional

Shifting the cloud business model

Just as the cloud vendors disrupted the software market, they themselves face shifting business models

“What’s the biggest risk to your business?” was one of the questions asked of Netsuite CEO Zack Nelson during a post keynote discussion at the Suiteworld event in San Jose yesterday.

Nelson’s response was the shift to transaction based businesses and cited cloud based human resources company Zenefits as an example.

The transactions model can work two ways with either a fee being charged for each transaction – something that data analytics Splunk does – or Zenefit’s model of taking third party commissions.

A commission driven business

Zenefits doesn’t charge for its software instead making money from commissions paid by companies they refer users to. When a client needs workplace insurance or a new benefits package, the service gets a fee from the provider.

Investors love the idea with the company yesterday raising $500 million in a round that values the business at $4.5 billion dollars after just two years since being founded.

Regulators however don’t like its less than transparent commissions with the service in trouble in a number of US states and it’s clear to see how such a revenue model would hit problems in countries with strong disclosure rules.

Both of the transaction models present a threat to current cloud computing software businesses such as Netsuite and Salesforce that charge fixed license fees based on the number of users and the features they want. Both Splunk and Zenefits on the other hand give their software away.

Disrupted disrupters

Just as the cloud providers’ licensing model disrupted the traditional massive negotiated contracts for enterprise software and the fixed cost box model for small business, the online companies themselves might be facing their own disruption to the way they make money.

For executives like Zach Nelson, shifting from one lucrative model to another more uncertain revenue source will be something keeping them awake for a while longer.

Adventures in Startupland – the brutal truth of starting a business

Zendesk CEO Mikkel Svane’s book Startupland describes the challenges faced by most business founders and business owners.

Startupland is a magical, mythical place where the unicorns roam free and much of the advice dished out to nascent entrepreneurs has more in common with a romantic fantasy novel than the hard work of building a business.

Mikkel Svane’s Startupland is not one of those books. Svane, the co-founder and CEO of cloud based customer business Zendesk, is instead a tough description of the challenges and personal costs of venturing into business for yourself and the harsh, demanding realities of the Silicon Valley statup model.

“No-one tells you how little you get paid,” warns Svane as he charts his own journey from developing and selling through Stockholm’s computer shops of the mid 1990s a basic program that created 3D optical illusions through to floating Zendesk on the NASDAQ in 2014.

During Zendesk’s journey Svane and his business partners experienced the entire range of challenges that a business founder could face ranging from managing high growth, laying off staff in the face of a downturn, the inevitable pivots and, sadly, the passing of a valued employee.

“Startups are fragile” warns Svane and observes how he nearly fell for the trap all business owners have been tempted by in doing consulting work to provide cash for the business. Invariably the side job comes to dominate and the new venture withers due to lack of attention.

Working from home

For those starting out in business, whether it’s a tech startup or something a big more mundane, the observations and tips on working for home are worthwhile in themselves, if you find you’re one of the type that “sits at home and eats toasts and masturbates” then it’s probably best to find an office or coworking space.

Having had the opportunity to interview Svane a number of times, his own passion and character comes clearly out of the book including his view that seemingly boring things like customer support is sexy, citing how Marilyn Monroe fell for Arthur Miller (although that didn’t end well).

The ‘boring is sexy’ mantra is one Svane repeats throughout the book, and his contention is seemingly mudane areas like customer support are where the real business opportunities lie.

Business is about relationships

Ultimate Svane sees business as being about relationships; between customers, staff and investors. His view on accepting investor’s money is an important lesson from the book.

“Great investors have unique relationships with their founders, and they are dedicated to growing the company,” writes Svane. “Mediocre and bad investors work around founders, and the company ends in disaster.”

The brutal truth

In telling the brutal truth about starting a business Svane gives anyone considering the idea of ditching the cubicle a realistic view of the challenges ahead. That advice alone will save many families from the stresses and costs of self employment and startup land.

Those considering entering the world of startups, small business or self-employment should read Startupland. If you’ve already started that journey, then Svane’s story is worth reading to show you aren’t alone in your daily challenges.

Singapore’s Prime Minister declares the state a smart nation

Singapore’s Prime Minister stakes out the country’s place in the new economy.

This blog has written a lot about Singapore in the past, this speech by the country’s Prime Minister sums it up.

For other nations, particularly Australia, it’s time to stay paying attention to how the global economy is changing.

Singapore may not have all the answers and its government’s authoritarian tendencies may work against its ambitions to be a global tech and creative centre, but at least the government is staking a position in the new economy.

Twitter’s discordant note

Twitter’s decision to restrict access to its data has cost them dearly

It’s been a bad week for the social media service Twitter with its stock pounded after the leak of poorer than expected results.

Writer Matthew Ingham says Twitter lost its way five years ago when it started closing down access to third party developers, a move that hurt the service’s growth and user adoption.

Twitter’s move was greeted with disappointment at the time and many developers gave up working on the company’s APIs.

With the growth of third party applications stunted, there was little reason for new users to come on board and so Twitter is now disappointing the market with its results.

Basically Twitter CEO Dick Costolo and his team reaped what they sowed in restricting access; they kept control of their data but it’s cost them users and hurt their share value.

Twitter’s woes show that the economics of cloud and social media services reward business that share data. While there may be some commercial and legal limits to what information can be shared, the default position should be to make data available.

In an information rich society, those who contribute the most get the rewards. This is the point Twitter’s management missed.

RIP David Goldberg

With the passing of Survey Monkey CEO David Goldman the tech industry has lost one of the smart, good guys

The sudden and unexpected passing of Survey Monkey CEO David Goldberg at age 47 yesterday is a genuine shock.

Last year we interviewed David for Decoding The New Economy and found him to be a gracious and intelligent interviewee – a genuinely nice guy who wasn’t fazed by me constantly confusing Survey Monkey with Mailchimp.

With the passing of David the tech industry has lost one of the smart, good guys. Condolences to the his loved ones.

Is your job really safe?

Even in industries that are safe individual jobs aren’t secure as technology changes most roles

Yesterday we looked at the PwC report on the value of science and engineering education to the economy.

The survey wasn’t good news for the workforce with the survey predicting over two in five workers’ jobs were at risk as digital technologies changed industry.

Notable in the list were the industries PwC believed to be safe over the next twenty years; largely being the medical, health and ‘people’ businesses like public relations.

While the industries themselves might be safe, specific jobs in those sectors may not be so with roles ranging from hospital porters being replaced by robots to surgeons carrying out remote operations.

Looking at the list of relatively unaffected industries, it’s hard not to see how digital technologies aren’t going to disrupt those occupations.

Redefining public relations

PR for instance is undergoing a radical change as the media industry is being totally disrupted requiring today’s public relations professionals to have a very different set of skills to those of twenty years ago.

Those skills include a much more adept use of technology itself and having to deal with a faster, more fragmented industry.

Public relations professionals brought up in the days of boozy lunches and far off deadlines struggle in a time of bloggers, social media and data journalism.

Evolving medicine

Similarly medical practitioners, the top position on the list, have seen their jobs dramatically transformed over the past twenty years by computers and those changes are far from over as medical equipment gets smarter, personal fitness devices become pervasive and the amount of data being collected on patients grows.

Across the medical industry the roles of almost every occupation is being redefined as technology changes the tools they have, along with the nature of ailments their patients present with.

Big Data and analytics

Some professions will grow but automation in those fields will grow exponentially faster, a good example being the fifth role on the list – database administrators and ICT security professionals.

Ensuring the reliability and security of servers and networks is going to become even more essential as the economy increasingly depends upon these systems however security and IT professionals are going to rely on algorithms and Big Data to manage the massive task they have – these are the opportunities for companies like Splunk and Microsoft Dynamics.

In all of these comparatively safe industries the jobs of tomorrow are going to need different skill sets to what they require today.

For workers in these ‘safe industries’ this means further education, training and reskilling to stay employed. Just being employed in a sector that’s expected to stay static or grow isn’t enough to keep your job.

Employers in these ‘safe industries’ also face a challenge in making sure their staff have the right skill sets to use the new technologies.

The airline analogy

If you were running an airline in 1965 it would be cold comfort to look at the explosive growth ahead for the industry in the jet airline era when all your staff are trained to keep propellor aircraft in the air.

So when we talk about digital disruption, it’s not just about industries being shut down and jobs being lost but about radically changing occupations.

It would be a brave person to assume that just because their industry is safe, their own job or business is secure.

Stemming the Innovation drought

Science, Technology, Engineering and Mathematics studies are essential to the future economy a PwC study shows.

When discussing how industries are changing, the constant question is ‘what will happen to today’s jobs?’

Even in the Future Proofing Your Business webinar earlier this week this question was asked by a number of the small business owning listeners.

That concern forms the basis of the “A smart move: Future-proofing Australia’s workforce by growing skills in science, technology, engineering and maths” report released by accounting firm PwC yesterday in Sydney.

PwC’s report warns 44 per cent of current Australian jobs are at high risk of being affected by computerisation and technology over the next 20 years.

The report highlights that Science, Technology, Engineering and Maths (STEM) subjects are critical in the jobs that are going to benefit, or be created, by that technological change.

Finding the right courses

Sadly for Australia, and most of the western world, STEM courses are deeply out of fashion with students preferring to study in business related courses such as accounting, commerce and law.

As PwC flag, those industries are at risk with accounting at the top of the list for job losses.

On the other hand, PwC forecasts professions in health, education, personal care and – worryingly – public relations will be in increased demand. Something that may underestimate the effects of technology on those industries.

Competing with STEM

PwC’s main contention is that economies which want to compete in the new economy are going to need more STEM graduates.

The shift to STEM education is something the OECD highlighted in its recent report, OECD report How is the Global Talent Pool Changing?

In their report the organisation forecast that the number of students studying around the world would increase from 130 million today to 300 million by 2030 with all of that growth being in Chinese and Indian STEM courses.

Already that science and engineering emphasis is clear in today’s numbers.

To counter the drift away from STEM courses among students, PwC suggests a campaign to engage young people while they are still at junior school.

The Australian conundrum

Sadly, that’s unlikely to work in Australia given the nation’s economy is built upon property speculation driven by the wealth effect of rising real estate prices.

Two nights before the PwC report one of the highest rating shows on Australian television came to its 2015 finale. The Block, which features couples renovating and flipping properties, finished its season the apartments being sold at auction at record prices and the contestants pocketing between 600 and 800,000 dollars for a few month’s work.

For young Australians the message from their parents and society is clear; don’t innovate, don’t create, just buy as much property as you can afford.

In the US on the other hand, the business heroes are the builders of new enterprises; people like Steve Jobs, Elon Musk, Bill Gates, Mark Zuckerberg and the founders of Google.

Other countries like Israel, India and China, are aspiring to be the next generation of tech leaders. That’s what’s necessary to build a dynamic economy.

Creating enduring jobs

As the PwC report claims, “the jobs most likely to endure over the next couple of decades are ones that require high levels of social intelligence, technical ability and creative intelligence”

Harnessing that combination of social, creative and technical intelligence is going to be one of the challenges for all economies in a decade of change.

Getting the supply of STEM skills right will be essential for success for all countries at a time when digital technologies will drive most industries.

Microsoft builds its future

Microsoft makes a statement on its future

A billion devices running Windows 10 was the promise made by Microsoft at the company’s Build Conference in San Francisco yesterday.

The ambition is based upon delivering the system on devices ranging from desktop computers down to the embedded systems on Internet of Things devices.

As part of the drive to get onto the IoT, Microsoft also announced Windows 10 initiatives for the makers’ community with various programs for Arduino, Raspberry Pi and Intel’s Minnowboard.

At the same time the company announced how some software will soon be able to run on iPhones and Android devices with an extended Software Developers Kit.

While this makes Windows more attractive for developers who no longer have to develop different versions for the Microsoft product, it’s also an admission the company’s phone strategy has failed.

For Microsoft yesterday’s Build Conference was the opportunity for the company to show their vision of the market’s future that involves computers, mobile devices, the cloud and the Internet of Things.

Whether Microsoft is part of that future is the main concern of CEO Satya Nadella.

Telstra adds Singapore to its Muru-D startup network

Telstra opens its Muru-D incubator program into Singapore as the company expands its Asian ambitions

Today Aussie incumbent telco Muru-D opening in Singapore.

Muru-D is loosely based on Telefonica’s Wayra incubators that the Spanish telco has set up across Europe and Latin America.

Wayra’s fortunes have been mixed recently with the incubators coming off badly in the company’s restructure last year and it’s interesting that Telstra are copying the model of opening in strategic neighbouring markets.

Complicating matters is Telstra’s Singapore based rival Singtel has its own chain of incubators Singtel Innov8. Singtel’s model is different in that they sponsor incubators, Sydney’s Fishburners for example, rather than set up their own Wayra or Muru-D style operations.

So Telstra’s moving into Singapore could be seen as another move by the Aussie incumbent to take on Singtel on it’s own home ground, something that will be assisted by the recent acquisition of PacNet.

Also notable is the Singaporean government’s support for Telstra’s with Kiren Kumar, Director of Infocomms & Media at the Singapore Economic Development Board, welcoming the launch as enhancing the city’s repuation as “the innovation capital of Asia”.

Telstra’s move is another showing how telcos are trying to move out of being utilities along with Telstra’s need to grow out of the domestic Australian market it now dominates.

For Telstra both moves are well outside the company’s historical expertise, it will be interesting to see how successful they are.

Apple keeps ticking over

Once again Apple beats the market and shows the way to its competitors

Once again Apple keeps surprising the market with Apple second quarter results beating the analysts’ estimates roundly and putting the company on track to becoming the first US corporation to have a trillion dollar market valuation.

Coupled to nearly fourteen billion dollars in profit for the last quarter is that the company is looking to return $200 billion of cash back to shareholders.

A particular high point in Apple’s results are its China sales with the company showing seventy percent year on year growth, showing it’s possible for western companies to sell into the PRC.

Those results are from iPhone sales and, given the Chinese smartphone market is ruthlessly competitive, it puts the managers of all US and European companies on notice that there are no longer any excuses about not performing in the Middle Kingdom.

Another key takeaway from Apple’s results is the tablet market is limited with iPad sales down 23% compared to last year.

The question now is how big are watch sales going to be? It may well turn out that the Apple Watch is similar to the iPad – a market defining product but one that isn’t the company’s mainstay.

Regardless of how well the Apple Watch, the iPad or the iPhone’s Chinese sales perform next quarter, it’s safe to say Apple will probably break more records over the next year.

Opening Telstra in a life and death market

A new CTO seeks to make his mark on a dominant telco

“Communications are a life and death issue”, says Vish Nandlall the chief technology officer of Telstra. “You realise that when that pipe gets shut off people can die in the field.”

Nandlall’s experience in weapons technology led him to a life in the telecoms industry which bought him to Australia as he believes Telstra is one of the most innovative companies in the industry. How much this is due to Telstra dominating its domestic market is a discussion for another post.

Nandlall was speaking last week at a lunch for journalists and bloggers hosted by Telstra in Sydney. It was an opportunity for the company to introduce their CTO to the media following his joining the company last August and to publicise their push into health care services.

One of the areas Nandlall was particularly keen to push was how Telstra was looking at opening their platforms to third party developers as he sees the nine to ten million strong community as offering opportunities that even the best resourced telecoms company can’t access.

“How can I get telecom services into places where developers can access the information?” Nandlall asks.

His answer is to open the services through the Telstra Developer Site which at present is fairly Spartan although one expects it will become more impressive ahead of the I love APIs conference the company is sponsoring in Sydney this June.

Down the track Nandall sees the open systems assisting the company moving into the key growth areas for all telcos such as the Internet of Things, smart cities and the productivity growth applications in industry verticals.

The big opportunity the company sees is in health care where a fragmented industry struggles to corral disparate sources of information that touch almost every person. It though just one of the growth telcos are looking at in a dramatically changing marketplace.

For Nandlall the challenge is to grow Telstra beyond the domestic Australian telco market that it increasingly dominates as its competitors lose interest in the market and the nation’s ambitious but failed national broadband network slowly fades into irrelevance.

While Telstra is by no means facing any life or death issues, many of its customers could be. Nandlall and his fellow executives are hoping they can help them.

Hacking medical devices

Security researchers show how easy it is to hack a medical robot

Security experts have hacked a teleoperated surgical robot Security experts hack medical robot.

In a recently published paper, a group of academics showed how they had been able to change the instruction sequences, override commands or even take full control of the Raven II medical robot.

That such a lack of security isn’t in the least bit surprising is a sad commentary on the world of connected devices and the Internet of Things.

At the root of this problem is the software running this equipment has security added, at best, as an afterthought given the designers work from the assumption operators are in the room with the equipment,

If we’re going to connect these devices to the public internet then security has to be built into them from the beginning.

Whether we’re discussing remote medical equipment, driverless cars or the smart home, hardening and securing IoT devices is going to be of today’s industrial challenges.