Category: Internet

Could the Internet of Things grow by fifty times?

Cisco Systems’ Visual Networking Index forecasts M2M data traffic will grow fifty fold in the next four years.

One of the annual events in the tech world is Cisco’s Visual Networking Index, the company’s survey of internet traffic trends.

The numbers, as always, are staggering and this year Cisco are forecasting that global internet traffic will grow by a factor of eleven over the next four years to 190 exabytes – that’s 190,000,000,000,000Mb or the equivalent of 19o billion hard drives.

What’s particularly fascinating about this year’s index Cisco forecast that by 2018 there will be more mobile devices on the planet than people.

Many of those devices will be the sensors and equipment that makes up the Internet of Things (IoT), or Machine to Machine (M2M) technologies and Cisco expects the internet traffic in this area to surge fifty-fold over the next four years.

This is remarkable as most of the M2M devices don’t use much data as the vast majority only need to send out the odd short signal – as opposed to smartphones that download megabytes of information each day.Cisco’s predictions underscore just how pervasive this technology is going to become in the next few years, the challenge for us is to understand how to use and protect the masses of data these systems are going to generate.

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Microsoft edges towards the post PC era and the end of Windows

Life was good for Microsoft Windows until the iPad arrived, now it’s becoming irrelevant to the business.

Microsoft’s evolution to the post PC era has been a fascination of this blog for several years now as the company’s once flagship Windows becomes irrelevant in a world dominated by smartphones and tablet computers.

The launch of Windows 8 and the Surface tablet were the great hope for the company, but it appears the business model that built Microsoft into one of the world’s biggest companies is doomed. Microsoft is shifting to the post-PC era where Windows has little role.

Yesterday’s financial results emphasised the shift as the consumer licensing business fell 6% year against last years revenues while the company’s overall revenues rose 14% – the old consumer Windows business is dying.

This is illustrated in the company’s quarterly report, where the business units that delivered the growth were all in non-Windows areas.

  • SQL Server continued to gain market share with revenue growing double-digits
  • System Center showed continued strength with double-digit revenue growth
  • Commercial cloud services revenue more than doubled
  • Office 365 commercial seats and Azure customers both grew triple-digits.

Drilling down into the numbers the trend against Windows is even more stark, here’s a chart of the performance of the division over the last ten years.

Microsoft Windows division financial performance
Microsoft Windows division financial performance

As we see, life was good for Microsoft Windows until the iPad arrived.

Following Apple’s proof that tablet computers could deliver what business and home customers wanted from a portable device, Windows’ revenue stagnated and now income and margins are falling.

The devices and services strategy of outgoing CEO Steve Ballmer recognises is a reflection of how Windows is becoming irrelevant to the business.

It’s hard to see where Microsoft now goes with Windows, the product still remains a key part of the business with 22% of revenues – although that’s down from 27% last year – and its hard to see a buyer parting with the hundreds of billions the division would be worth as a stand alone business.

For Steve Ballmer’s successor as Microsoft CEO dealing with the Windows problem will be one of many big issues they’ll have to deal with, the future of the once iconic product though won’t define the future of the business.

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Peak employment and the political challenge

The current angst about employment in an age of automation is a political, not technological, problem

This week’s edition of The Economist asks about the Future of Employment and where the jobs are in a society where work is increasingly done by machines.

For the Economist the conclusion is that the future of employment is ‘complex’ and observes economists and politicians haven’t given enough thought to the effects of the changing workplace and the dislocation of many workers.

Much of the Economist’s story is based around the ideas of professors at MIT Erik Brynjolfsson and Andrew McAfee in their upcoming book “The Second Machine Age”.

The race with the machines

Professor Brynjolfsson gives his view at TED 2013 in the key to growth? Race with the machines, a presentation countered by Robert Gordon in the ‘death of innovation, the end of growth’ and followed by an excellent debate between the two.

Brynjolfsson cites the dilemma of bookkeepers being displaced by software applications such as Intuit Turbotax as an example of where service sector staff are being displaced.

“How can a skilled worker compete with a $39 piece of software?” Brynjolfsson asks.

“She can’t. Today millions of Americans do have cheaper, faster, more accurate tax preparations and the founders of Intuit have done very well for themselves. But 17% of tax preparers no longer have jobs.

“That is a microcosm of what’s happening not just in software and services, but in media and music, in finance, manufacturing, in retailing and trade. In short, in every industry.”

The great decoupling

Brynjolfsson’s key point is that workers’ wages have been decoupled from productivity and that the workforce isn’t sharing the rewards of improved practices and increased wealth.

That is certainly true over the last forty years, however that may not be a technological effect, but the business consequences of liberalising the financial sector which has seen massive pay increases to the banking industry and managerial classes that has been way out of kilter with the rest of the workforce.

It may well be the current golden era of high executive salaries is a transition effect of an evolving economy, albeit one where our grandchildren will puzzle over an era where a failed executive can receive a $100 million payout on being fired.

As The Economist points out technological change itself tends to create new jobs that make up for those displaced in old industries, this is a view supported by GE’s Chief Economist Marco Annunziata.

The main problem that Brynjolfsson identifies is the medium term issue of dislocated workers finding themselves out of work with superseded skills and, as The Economist point out, it’s clear the developed world’s political leaders haven’t though through the consequences of that transition.

In almost every sense, the current crisis of confidence about employment prospects is more a political and social problem rather than technological.

Helping displaced workers is going to be the greatest challenge for today’s generation of business and political leaders, the real question is are they up to that task?

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What do startup founders really earn?

A global survey of salaries drawn by startup founders illustrates some truths about being a business enterpreneur

One of the myths of the current cult of the entrepreneur is that everyone will be a winner as their startup gets bought out by Google for a billion dollars. The reality is life for a startup founder is a grind.

Startup Compass looked at 11,000 startups across the world to discover what founders really earn and the results show the reality of life when you’re starting up a business is that the wages are pretty poor.

In San Francisco, London and New York, the wages are piddling compared to the cost of living in those cities.

Low pay and business success

This is good news for investors though, as there’s a clear correlation between the success of a startup business and the salaries its key staff members draw – successful businesses are built on the back of founders ploughing everything into the venture.

It’s also high risk as a failed business can leave the founder with nothing to show for several years of hard work, something that’s overlooked by the ‘liberate yourself from your cubicle’ gurus advocating everyone starts up their own venture.

Australia’s high cost economy

Notable in the stats is the high rates demanded by Australian founders, more than 25% higher than their Silicon Valley counterparts and a gob-smacking 60% more than London or Canadian equivalents.

Australia’s high cost of doing business was emphasised last year where a comparison by Staff.com found Sydney was the second to Zurich as a place to base a tech startup. Worryingly, that survey didn’t consider owners’ drawings.

Part of Australia’s high wage requirements are no doubt due to the country’s lousy tax treatment of options and share plans but a bigger problem is property ownership – an Australian who hasn’t bought a home by 35 is destined to be one of the nation’s underclass.

So an Aussie entrepreneur has to earn enough to qualify for or service a mortgage, it also discourages Australians from starting even moderate risk ventures.

The consequence of the need to draw a high salary is that the proportion of investor funds that goes into founders’ wages is almost three times higher in Australia than it is in Silicon Valley. That’s a big disincentive for foreign investors to put money into Aussie startups.

If you wanted an example of how uncompetitive the Australian economy has become, this is a good start.

Regardless of where a startup is based though, the message remains that the road to a billion dollar buyout from Google or Facebook is not paved with gold.

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Balkanising the internet

Breaking up the internet into different standards would be a backward step, but it might happen.

Could the current internet spying scandals result in the internet become fragmented into different national empires?

Over dinner with President Obama with fourteen other tech industry leaders, Yahoo!’s CEO Marissa Mayer warned that US spying threatens to ‘Balkanize the Internet’, Bloomberg reports.

Mayer has reasons to be worried, the scale of the US National Security Agency’s multiple programs monitoring internet traffic around the world has surprised even the most hard bitten commentator and it is already affecting US technology sales to China.

Coupled with  revelations that Britain’s GCHQ was tapping the subsea cables themselves in concert with US agencies almost every national government is now pondering the fact that, as an invention of the US military, the internet itself is open to being misused by its creators.

The Internet’s critical economic role

As online communications become more critical to nation’s economies and security it’s understandable that governments would be considering how to make their networks more hardened to interception or interference and creating whole new protocols outside current standards is one way of doing that.

With the industrial sector increasingly being connected through the internet of machines the stakes suddenly become much higher, as the Iranian government discovered with the Stuxnet worm that crippled the country’s nuclear research program.

After Stuxnet every country and business with critical systems exposed to the internet is now working on hardening those systems from similar attacks.

Until recently, almost all the profits from the internet’s growth have gone to US technology companies so its not a surprise that Facebook chief Sheryl Sandberg and Google chairman Eric Schmidt were with Mayer when she expressed her concerns to President Obama.

Balkanising the web

A balkanisation of the internet along national lines and industrial sectors is bad for US business which already struggles to get traction in non-Western markets like China and India.

The irony is though that Yahoo!, Google and Facebook are all trying to balkanize the internet themselves in locking users into their own networks.

While that’s a concern for internet users, it appears those commercial walled gardens don’t seem to be working.

The failure of commercial walled gardens

Yahoo!’s attempt to monopolise their corner of the web has clearly failed and it’s appearing that Google’s attempts to take over social media are failing despite forcing YouTube users onto Google+ while Facebook is beginning to buckle under the sheer weight of its own News Feed.

Common wisdom about internet markets is that you have to be the number one provider in your niche to succeed, what we may well be seeing is those niches are smaller than we thought and leadership in one sector doesn’t automatically guarantee success in another.

As Deloitte’s Eric Openshaw told this blog last week, ““one way or another, these things can be problematic in the short run but typically over time they are resolved.”

Tesla, Edison and Jonathan Swift

One of the reasons for the internet being one of the most successful technologies is that it was standardised relatively early, it didn’t have the battles over industry standards like the AC versus DC electricity arguments between Edison and Tesla, or the insanity of different railway gauges plaguing countries and international trade.

Jonathan Swift parodied these technological arguments in Gulliver’s Travels where the main point of contention between the warring empires of Lilliput and Blefuscu was over which end boiled eggs should be cracked.

It would be a great economic loss if security concerns or commercial opportunities saw the internet follow those examples and saw the online world carved up into many little empires.

Should it happen, we deserve a future Jonathan Swift to parody us mercilessly.

Walls of Constantinople by Bigdaddy1204 through Wikimedia

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Does small business really want high speed broadband?

Is big business getting all the benefits of high speed broadband?

One of the mantras of the digital economy is new technologies, such as the web and cloud computing, level the playing field for small businesses competing against large corporations. Could it be that belief is wrong?

The Australian Centre for Broadband Innovation last week released its Broadband Impacts report where it examined how high speed internet is changing communities. The results weren’t good for small businesses.

One of the key metrics the ACBI used was business use of websites, it’s shocking enough that only 70% of Australian corporations have an online presence but less than half of small businesses being on the web is disgraceful.

Australian-business-internet-use

An interesting quirk in the above table indicates that there’s quite a few microbusiness using online sales services and one wonders if the question being asked by the Australian Bureau of Statistics is too limiting in its definition of websites.

The ABS defines businesses with a web presence as those with a website, home page or other web presence but excludes those listed solely as part of an online listing. A web presence was reported by 45% of Australian businesses as at 30 June 2012.

With this definition excluding social media and listing services, it probably does understate the number of Microbusinesses that have an online presence but not a website as defined by the ABS.

The relevance of broadband

In the context of broadband it’s worth noting that websites and online commerce don’t need high speed internet connections, so it’s hard to conclude that giving these businesses faster access is going to make a difference to the way they work.

Where high speed broadband and ubiquitous internet really make a difference is in business operations. As workers become more mobile and the internet of things rolls out, having access to reliable connections is going to become critical to most organisations. Again though, small business tracks poorly on this measure.business-reporting-new-operations-by-size

legend-to-australian-business-barchart

Overall the use of cloud services – which is what the bulk of these “new operational processes” will be – is pretty poor across the board although one suspects in the larger organisations various groups have changed their business practiced around services like Dropbox and Documents To Go without senior management being aware of it.

What’s particularly disappointing about this statistic is small businesses are the group most suited to using cloud services and those not adopting these technologies are missing a competitive advantage.

So who needs broadband internet?

These results beg the question – does small business really need high speed broadband access? If they aren’t doing things that could be done on a dial up modem, like registering domains or setting up websites, it’s hard justifying the investment of connecting SMBs to fibre networks.

While there’s no doubt high speed internet is essential to the economic future of communities and nations, we have to keep in mind that not all groups will take advantage of the new technologies. Some will be left behind and in Australia’s case, it may well be small business.

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It’s tough in YouTube land

The problems for YouTube channel owners illustrates the business risks of relying on one social media service.

For owners of YouTube channels life has been tough in the last few months as Google plays with the service and its features.

The first irritant for YouTube administrators was the integration of Google Plus into the comments that now requires commenters to have an account on Google’s social platform.

Google’s reasoning for this is some transparency in YouTube’s comments will improve the services standards of conversation and there’s no doubt that YouTube comments truly are the sewer of the internet with offensive and downright deranged posters adding their obnoxious views to many clips.

Unfortunately the objective of improving YouTube’s comment stream doesn’t seem to have worked which casts the effectiveness of Google’s identity obsession into doubt, but it has had the happy – and no doubt totally unintended – effect of boosting user numbers for the struggling Google Plus service.

The latest blow for YouTubers has been Google’s copyright crackdown where the service is removing posts it claims are in breach of owners rights. Many channels, particularly game review services, are being badly hit.

Of course the Soviet attitude to customer service that Google shares with many other Silicon Valley giants doesn’t give these folk many options of getting their problems resolved.

All of which illustrates the risks of being dependent on one social media service which the poor YouTubers are finding this the hard way.

Watching this play out, it’s hard not wonder how vulnerable services like YouTube are to disruption, while they have the network effect of being the leader it’s not hard to see how alienating the people who create the platform’s content opens up opportunities for new players.

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