Sep 032015
 
even the biggest businesses can die if they don't understand the world around them

“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.

Sep 022015
 
Pat_Gelsinger_CEO_VMWare

“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

Sep 012015
 
andriod_apps

“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.

Aug 272015
 
fax-machine

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.

Aug 242015
 
Accountants and bookkeeping ledger

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.

accountants-employed-the-uk

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.

Aug 222015
 
420-402 D75 SE boxshot art

“No-one is making money from cloud software, in the early days everyone made money from software,” bemoaned one of the panellists at last week’s CPA Technology, Accounting and Finance Forum.

A good example of this is the US accounting software giant Intuit putting the 32 year old Quickbooks on to the market.

Intuit was built on the back of Quickbooks but today the product today makes less than 6% of the company’s revenues and under 2% of the profits. Making matters worse is the old code base is clunky, proprietary and expensive to maintain.

Apart from getting a captive – and almost certainly dwindling – client base, there doesn’t seem to be a lot to attract buyers for Quickbooks as a desktop based product in a market shifting to the cloud.

The shifting business model hurts more than Intuit; the accountants, resellers and other service providers who were making a decent income from selling or supporting the box products have seen their margins evaporate.

For users, both Intuit and the services providers moving away from the product risks leaving them and their data stranded, something every business should understand about the risks of proprietary formats.

The shift though by Intuit should be a warning to small businesses that the days of box and inhouse software are numbered and running packages on servers and desktops will soon be for large organisations or niche applications.

Almost every business is going to have to plan its move to the cloud, those who don’t are increasingly going to be left behind in a shifting market.

Aug 212015
 
Sydney Lord Mayor Clover Moore presents the prize to the small businesss award winner

Yesterday I hosted the second day of the CPA Australia Technology, Accounting and Finance Forum that looked at how the accounting profession is being affected by the changing technology landscape.

There’s plenty to write about from the day and how the accounting profession is facing technological change which I’ll write up shortly but one theme from the day was striking – that older small businesses owners are struggling to deal with adopting new tech.

Gavan Ord, the CPA’s policy advisor warns older practitioners are opening themselves to disruption and  the Australian business community is in general is at risk as older proprietors aren’t investing or embracing technology at a rate comparable to their overseas competitors.

Older small business owners

That older skew in small business operators is clear, in 2012 The Australian Bureau of Statistics found 57% of the nation’s proprietors are aged over 45 as opposed to 35% of the general population.

Even more concerning is many of those small business owners expect to retire with a 2009 survey finding 81% were intending to retire within ten years – it would be interesting to see how those ambitions changed as the global financial crisis evolved.

A risk to the broader economy

This blog has flagged the risks of an aging small businesses community previously, but Gavan Ord’s point flags another risk – that older proprietors being reluctant to invest in new technology means a key segment of the Australian economy is unprepared for today’s wave of technological change.

A key message from the CPA forum was that the shift to cloud computing is radically changing the business world as sophisticated data management, analytic and automation tools become easily available. Companies, and nations, that don’t take advantage of modern business tools risk being left behind in the 21st Century.