Paul Wallbank – Brilliant Communications

Category: cloud computing

  • It’s hard to make a buck on the cloud

    It’s hard to make a buck on the cloud

    Microsoft released its quarterly financial results to general acclaim from the stock market which drove the shares seven percent higher after reporting slightly better than expected returns.

    The market was applauding the continued shift to cloud services with income rising five percent in the company’s Intelligent Cloud division, however the decline in the company’s more traditional strengths of software licenses and devices saw earnings fall by eleven percent over the corresponding period last year.

    More concerning for the company’s shareholders would be the profits that have fallen 23% which once again proves that cloud services are much less profitable than Microsoft’s traditional software business.

    To make matters worse margins on cloud services are falling with returns from the division declining despite sales being up five percent. It’s not hard to see the effects of Amazon Web Services’ ruthless driving down of cloud service prices.

    While Microsoft’s results are encouraging in that they show the company is continuing its evolution to a cloud services business, it’s clear the legacy products are still the key cash generators.

    As of December 31, Microsoft has a 102 billion dollars in the bank so there’s little risk the company will be going broke soon however the company has to find a way to make better profits from its new business models.

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  • Keeping the IoT simple and safe

    Keeping the IoT simple and safe

    Ten years ago a joke going around was “what if Microsoft built cars?” The answer summed up the frustrations users had with personal computers and the differences in engineering standards between traditional industries and that of the IT sector.

    As we enter the Internet of Things era, that tension between consumer devices and good engineering continues as shown by a software bug that rendered Nest thermostats useless.

    That poor software would drain the battery without warning the user, illustrates how poorly designed many of these devices are.

    Ironically Nest’s owners, Google, held a conference earlier this week where the company’s leaders flagged the importance of standards, security and privacy.

    In a call to action for the IoT industry, Google’s lead advocate Vint Cerf, also known as one of the “fathers of the Internet,” warned that compatibility, security, and privacy could be obstacles to the IoT’s success.

    Reliability is also important, particularly when talking about safety and security – Nest also make carbon monoxide detectors – where a device crashing or failing can have terrible consequences.

    At present most of the Internet of Things is about the gimmick of connecting devices to the cloud and controlling them from your mobile phone. Consumers are not going to embrace IoT products if they add cost, complexity and risk to their lives.

    Keeping it simple and safe are probably the most important things designers of IoT devices can do.

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  • Creating a digital spaghetti divide

    Creating a digital spaghetti divide

    Are we seeing a new digital divide develop between big and small businesses, particularly in areas like retail and hospitality?

    This thought occurred to me during a radio spot earlier today where we were talking about Apple Pay’s Australian launch. Many small businesses don’t have the capital or expertise to implement many of these new technologies.

    A number of factors contribute to this including the legacy systems installed in small businesses, the proprietors having a poor understanding of technology and, most importantly, the lack of either capital for reinvestment or cashflow to fund the monthly charges that are standard for cloud computing services.

    The expensive cloud

    One unstated factor with cloud computing services is how the cost of services add up. For example a Premium 10 Xero customer with Receiptbank attached is looking at a $100 a month in charges. It’s not hard to see how adding cloud based Point of Sale, rostering and customer service software could see a small business incurring $400 a month in fees, throw in Salesforce and you could be looking at a very expensive exercise.

    No doubt for those companies that can afford these services this is money well spent but for many margin or low turnover businesses, the charges could be a deal breaker.

    Spaghetti Junction

    Another aspect to the cloud services is the myriad of different platforms that need to be stitched together in most businesses, one cloud service founder calls it “digital spaghetti.”

    Managing this bowl of complexity isn’t easy and raises a number of business risks as different services apply varying policies and practices to the data they collect and store. A breach or service failure at one could cause a ripple effect through all business operations.

    For many small business owners, particularly older proprietors, managing this complexity is intimidating if not downright scary.

    It may well be there’s a number of opportunities for a canny service provider to offer an out of the box small business solution, but for many older small operators with limited capital and restricted cashflow affording such a product might also be difficult.

    The risk though for those businesses is they will find themselves falling further behind as markets, consumer demands and the workforce’s expectations evolve. A business digital divide could be fatal for those caught on the wrong side of it.

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  • Profiting from the industrial internet

    Profiting from the industrial internet

    Opening the first official day of Oracle Open World, CEO Mark Hurd spoke with James Fowler, the Chief Information Officer of General Electric about the company’s digital transformation.

    Fowler described how the company intends to be driving $15 billion in revenues from its digital operation in the face of stagnant industrial spending.

    Earlier in the presentation Hurd had described the problem of stagnant spending facing all major industrial companies, whether they are enterprise software providers like Oracle or engineering organisations like GE, where companies are ‘sweating the assets’ ruthlessly.

    For GE, making a compelling argument for companies to reinvest in new capital equipment is essential while Oracle is facing an industry wide decline in revenues and a structural shift to cloud technologies which Hurd described in stark tones.

    Last year, he claims, the major tech companies saw a gross decline of $16.4 billion in revenues while cloud services only picked up by billion meaning the market shrank by fifteen billion dollars.

    That decline would deeply worry a salesperson like Hurd given the declining market means smaller commissions and fewer sales so it’s unsurprising the company is pivoting as hard as it can into the cloud.

    GE on the other hand is making a huge bet on the future of its market by proactively shifting onto digital and cloud services.

    The challenge though for all these companies is making money from these new business models those who figure it out will be the industrial giants of the next century. There’s no guarantee any of today’s will be among them.

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  • Killing the business of complexity

    Killing the business of complexity

    “The cardinal sin of the computing industry is the creation of complexity,” is quote attributed to Oracle founder Larry Ellison and often repeated at the company’s Open World forum which I’m attending at the moment in San Francisco.

    For the computer industry that complexity has been a very profitable profitable business with everything from the local computer shop through to the big technology vendors and integrators.

    One of the biggest beneficiaries of that complexity were the salespeople, big complex enterprise deals meant big commissions.

    With the shift to cloud services and apps, those fat margins and commissions have evaporated, leaving the lucrative old models of business stranded. IBM are probably the greatest victim of this while Microsoft are, once again, showing the company’s ability to evolve in the face of a fundamental market change.

    For the salespeople the days of fat commissions are over, with thinner margins it’s not possible to pay big lump sums for winning contracts.

    The simplification of the computer industry is changing the fortunes of many IT businesses, but that change isn’t limited to the tech sector or their salespeople as those fundamental changes are rippling into other sectors.

    A constant claim by Internet of Things evangelists is that the IoT will squeeze inefficiencies out of businesses and this is exactly what we’re seeing with cloud and mobile based services like Uber and AirBnB.

    If you’re in a business that profits from market inefficiencies then it might be time to figure out how to survive in a low margin environment. The challenge facing companies like Oracle is one whole industries are now having to face.

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