Internet | Paul Wallbank - Communications Professional

Is there a tablet to cure the reality distortion field?

Microsoft founder Bill Gates puts up an argument for Windows 8 tablets. But is he living in a reality distortion field?

It’s hard not to be impressed by the calibre of guests CNBC’s Squawk Box when they’re able to get Warren Buffett and Bill Gates on together for an interview.

During the interview Bill Gates made an interesting assertion about Apple’s iPad, ““A lot of those users are frustrated, they can’t type, they can’t create documents, they don’t have Office there.”

Bill’s undoubtedly right, some iPad users are frustrated by the device’s limitations. However for every irritated iPad user there are a dozen baffled by the lack of a Start button on Windows 8.

The reality distortion field though is strong, “Windows 8 really is revolutionary,” says Bill. “It takes the benefits of the tablet and the benefits of the PC and it’s able to support both of those.”

The Microsoft founder is enthusiastic about the company’s Windows tablet, “you have the portability of the tablet but the richness, in terms of the keyboard and Microsoft Office, of the PC.”

It’s notable Gates mentioned Microsoft Office, particularly given the question was about the cloud. It’s clear one of Microsoft’s priorities is to maintain their strength with productivity applications and move with their customers onto the cloud.

The problem though for Microsoft is that Apple’s iOS and Google’s Android are dominating the cloud focused operating systems, leaving Windows behind.

Making matters worse for Microsoft is it’s clear Windows 8 tablets are never going to catch their competitors. Consulting group Gartner last year predicted the global market for tablet computers will double over the next three years, but Microsoft will capture barely 10% of the sales.

OS	2011	2012	2013	2016
iOS	39,998	72,988	99,553	169,652
Android	17,292	37,878	61,684	137,657
Microsoft	0	4,863	14,547	43,648
QNX	807	2,643	6,036	17,836
Other Operating Systems	1,919	510	637	464
Total Market	60,017	118,883	182,457	369,258

Sitting in a reality distortion field is fine when things are going well and you dominate your world, but Microsoft – despite still being insanely profitable – no longer dominates the markets that made it into one of the world’s leading companies.

The challenge for Bill Gates and Microsoft’s management is adapting to those changes, projecting your own frustrations onto the users of a competitor’s product, isn’t a recipe for success.

Taxing the internet

US laws making online retailers levy state taxes are going to spread internationally as lawmakers look at closing loopholes.

One of the competitive advantages for online shopping has been the difficulty in levying taxes on internet transactions.

This has been particularly true in the United States where individual states, counties and cities have different sales taxes, meaning a consumer in Birmingham, Alabama might pay 10% more than their friends in Billings, Montana.

Amazon in particular has been aggressive in exploiting these price differentials, right down to threatening states where ‘Amazon taxes’ has been proposed.

Now the US Congress looks set to pass a law which would make online sellers responsible for buyers’ state sales tax obligations.

The next stage will be treaties between countries on the collection of sales or value added taxes.

For many retailers though this won’t be particularly good news as price differentials are more than just the 10% GST or VAT and online shopping sites compete as much on product range and customers service.

What the US Congress’ bill really shows is how online retailing is maturing – rather than thinking of companies like Amazon, eBay or niche operators like Shoes Of Prey as being disrupters they are the new normal.

Moving to a subscription economy

Customer subscription models are changing many industries which opens up opportunities for smart businesses

One of the biggest changes in business is the move to subscription based services rather than selling one-off, lump sum products. This is affecting industries ranging from the motor industry to software.

Business Spectator has a good interview with Tien Zhou of Zuora on the subscription economy and how it’s changing the business world.

We’re pretty passionate in our belief that every company will be a subscription business in the next five, 10, 20 years. That’s certainly what we’re seeing with digital companies, whether they are technology firms (software, hardware), media and publishing firms, or telecom companies. The ideas of content and access are starting to blend together and we are seeing more and more commerce companies dip their feet as well. So we’re really see this as an across the board phenomenon.

Probably the industry most focused on the subscription model right now are newspapers – subscribers have always been an important revenue stream for the print media and the loss of their advertising rivers of gold means they are looking at ways to get more money from readers.

As Tien Zhou points out, businesses moving to subscription services is an across the board phenomenon.

Yesterday I mentioned the Google Maps connected treadmill, that is a subscription model where the treadmill seller gets money from the initial purchase, but also a revenue stream from the services attached to it.

The same business model applies to connected motor cars or the social media enabled jet engine. The aim is to replace lump sum purchases with lifetime subscriptions.

Getting customers onto lifetime subscriptions has been one of Microsoft’s aims for the past decade as the company realised that software users, particularly those using Microsoft Office, hung onto their CDs for years and increasingly decades.

Perversely it took Google and Apple to show Microsoft how to wean customers onto subscription services.

That Microsoft Office is a good example of the evolution of subscription software, or Software-as-a-Service (SaaS), isn’t an accident. The enterprise computing sector is currently the most profoundly affected as companies like Google and Salesforce threaten high cost incumbents.

A good example of the changing economics of software is the supermarket chain Woolworths moving onto Google Docs.

With 26,000 seats, the reseller can expect to make $260,000 a year in commissions based on Google’s standard terms of $10 per seat per year.

That total sum is less than the commission a salesperson would have earned for a similar sized IBM, Oracle or Microsoft installation.

A whole generation of IT salespeople who’ve grown fat and comfortable on their generous commissions now find their incomes being dramatically reduced.

Similar things are happening in industries like call centres with Zendesk, point of sale systems and event ticketing with Eventbrite – incumbents are finding their incomes steadily being eroded away by online services.

At the same time agricultural and mining equipment suppliers are introducing big data services for their customers where the information gathered by the sensors built into modern tractors and bulldozers are providing valuable intelligence about the crop and ore being gathered.

The subscription business model is nothing new, King Camp Gillette perfected the strategy with the safety razor at the beginning of the Twentieth Century. The razors were cheap but the blades were where the money was.

Microsoft and the rest of the software industry tried to introduce subscriptions in the late 1990s with Software as a Service, but failed because the internet wasn’t mature enough to support the model. Today it is.

Like many things in today’s economy, the subscription model is going to change a lot of markets. It’s a great opportunity for disruptive businesses.

Subscription envelope image courtesy of jaylopez through sxc.hu

Sports cars, the cloud and the need for broadband

How the V8 Supercar races use the internet and networks shows why businesses need reliable communications and the way organisations are using cloud computing.

My relationship with sports cars is similar to horses – I have a vague idea of which end water goes in and where not to stand.

So Microsoft’s invite to the Launceston V8 Supercars to showcase their Office 365 cloud service as the race’s official sponsor wasn’t expected but it was a good opportunity to see how a sports organisation uses modern technology.

Riding the cloud

At the opening media conference V8 Supercars CEO David Malone and Finance Director Peter Trimble described the IT problems the organisation had in the early days.

“We were penny wise and pound foolish” said Peter about their small business system that couldn’t grow with the event.

To properly meet their needs V8 Supercars would have needed a bank of servers, cumbersome remote access software and a full time team of several IT staff for their scattered workforce and constantly changing locations.

With cloud services, they eliminated many IT costs while simplifying their systems.

That staff can now access documents regardless of location is a very good case study of where the cloud works well and understandable that Microsoft wanted to show off what their services can do.

Networking the cars

When challenged about the point of car racing, enthusiasts cite how the sport is a test bed for the motor industry.

The motor industry is one sector leading the internet of machines with one car manufacturing executive recently describing the modern motor vehicle as being a “computer platforms” on wheels.

Eventually we’ll see our cars connected to the net and reporting everything from the engine’s servicing needs to the driver’s musical tastes.

That’s reality in today’s high performance racing, both the drivers and the cars are in constant contact with the crews as sensors report everything from engine performance to the foot pressure the driver is putting on the accelerator pedal.

As continuous data feeds from the cars is essential to the teams the event has its own trackside network with receivers located along the course that are used for both vehicle telemetry and the video feeds from both car mounted and fixed cameras.

Owning the rights

In what’s becoming the future of sports broadcasting, the V8 Supercars organisers run their own camera crews and provide the feed to their broadcast partners and media outlets.

This allows them to control all the rights across TV, cable and online channels.

Having full control of the pictures also gives the V8 Supercars more revenue through signage and sponsorship by guaranteeing advertising placements which wouldn’t be available if they didn’t manage the feed.

Connectivity matters

v8-supercars-launceston-communications-cable — Spaghetti Junction as the various feeds come together

Getting the images out to the media and broadcast partners along with delivering the in car data to the racing teams is major challenge for organisers. The communications centres resemble a giant bowl of cable spaghetti as various groups plug into the network.

It’s no coincidence that part of the deals the V8 Supercar management strike with track owners and governments includes providing fiber and microwave links to the venue.

That single factor illustrates how vital communications links are to a modern sporting event.

Another important factor is that everything will be packed up and taken away. Following Launceston, the entire show is packed up and moved onto Auckland, New Zealand. This in itself is a major logistic challenge which would fail without good connectivity and reliable systems.

v8-supercars-launceston-truck-fleet — the fleet of trucks ready to move on

It’s easy to dismiss the V8 Supercars as a bunch of testosterone driven rev-heads, but the challenges in staging these complex events fifteen times a year shouldn’t be underestimated.

We also shouldn’t underestimate how important communication links are to any business. It’s why debates about the need for high speed internet services are last century’s discussion.

Apple and the argument for hybrid cloud computing

The argument between cloud computing purists and hybrid advocates continues with both sides suffering setbacks

There’s two different philosophies about cloud computing, hybrid and ‘pure’. In recent days the hybrid school hasn’t been doing so well, but the matter isn’t settled yet.

Pure cloud computing means doing everything in the cloud with all your software running over the net with the data stored on other people’s computers and everything is accessed through web browsers.

Hybrid cloud is where some of the work is done on your computer or smartphone with data often being synchronised between the device and the cloud storage.

Most smartphone and tablet computer apps do this and increasingly software like Microsoft Office and Apple iLife have a hybrid cloud computing angle.

Apple’s hybrid cloud service, iCloud, promised Apple users the ability to work on any device – laptop, desktop, tablet or smart phone – with the synchronised with central servers. Every Apple product you own can then access your iCloud data.

Recently though stories in the The Verge and Ars Technica report how Apple’s developers and customers are becoming steadily irritated by the lousy reliability of the company’s iCloud service.

Incumbent software and hardware vendors like Microsoft and Apple are pushing the hybrid idea for a good reason, it allows them to maintain their existing PC and laptop based products while being able to offer cloud services like their competitors.

For Microsoft and Apple, along with companies like Oracle, Dell and MYOB, the hybrid cloud gives them an opportunity to wriggle out of what Clay Christensen called The Innovator’s Dilemma.

Customers actually like the hybrid cloud as many distrust ‘pure’ cloud offerings as they don’t trust the providers or their internet connections. Basically they like to have a copy of their data stored in house.

The problem with the hybrid cloud is that it’s complex as Xero’s founder Rod Drury, one of the ‘pure cloud’ evangelists, said at his company’s conference last year, “hybrid technologies are cumbersome and add far more complexity into software. Cloud technologies are the right technologies.”

Complexity is what’s bought Apple’s iCloud unstuck as even some of best developers struggle with getting their programs to work with it.

All is not well for the ‘pure cloud’ evangelists either, as the shutting down of Google Reader has shaken many technologists and made them question whether the cloud is as safe as they would like.

Added to this uncertainty about the cloud is lousy service by providers, arbitrary shutting down of user accounts and the corporate boycott of Wikileaks – all of which have forced people to reconsider the wisdom of saving all their data or running applications in the cloud.

So the debate between the cloud purists is by no means over and it may well be that some form of hybrid, even just for local backup to your own computer, may turn out to be the common way we use cloud services.

What is for sure though is cloud software is biting deeply into the revenues of established software companies as people find the attractions of running programs and storing data on other people’s computers outweighs the risks.

Like all relatively new concepts it’s going to take a while for us to figure out how to use cloud computing most effectively in our business. The first step is how we manage the risks.

Dodging an internet apocalypse

If the internet is destroyed by a digital apocalypse, we can be sure the tech industry’s cockroaches will survive.

There’s nothing a like a little hiccup to the internet to bring the tech charlatans and other coackroaches out of the woodwork, although wiser heads are now starting to prevail.

Sam Biddle’s article in Gizmodo, the last link in the above paragraph, is a good overview of how the internet wasn’t “shaken to the core” by a childish spat between two groups of self-righteous geeks.

It’s worthwhile keeping non-events like this in mind the next time you read a breathless article about an evil hacker, cyber terrorist or rogue regime threatening to bring the online world down.

What’s really disappointing with hysterical stories like this is there are real risks to the internet, ranging from telephone exchanges burning down, divers cutting subsea cables to solar flares toasting the planet’s electronics.

Interestingly, 2013 is predicted to be a year of intense solar activity. So we might get to test some of the doomsday scenarios.

Fear, Uncertainty and Doubt (FUD) is the main marketing tool of the technology scoundrel, events like the online squabble of the last few days bring out those scoundrels.

The irritating thing with these people is their snake oil rarely addresses the real risks we have to deal with.

Watch out for them, they want to scare you into buying something.

The high cost of new media experiments

The BBC’s expensive exit from their Lonely Planet investment shows the costs and risk for old media empires as online business models evolve.

The BBC yesterday sold Lonely Planet to US media company NC2 Media. Their £80 million loss on the venture puts them in good company as established media struggle to find new online channels and revenue streams.

While the losses aren’t trivial, they are not quite in the league of News Corporation $545 million loss on MySpace or Time Warner’s billion dollar adventure with AOL.

All three stories show how tough it is for ‘old media’ adapting to a new landscape.

The problem is there for ‘new media’ as well, most ventures struggle to make money and many of the success stories like Huffington Post rely on a combination of free content and a greater fool buying them.

No-one has really figured out what the new media revenue models are; not the established publishers or the online upstarts.

Lonely Planet’s online success was due to their forums which, like most web discussion boards, can feature discussions politely described as “robust”.

This was always going to a problem for the BBC’s public service management culture and it resulted in the shutdown of the Lonely Planet Thorn Tree forums over Christmas.

So it’s not surprising that the BBC has decided to end its experiment and now the corporation’s management is dealing with the criticism of those losses.

While it’s easy to criticise the BBC for the deal, at least the broadcaster was attempting something different online, doing nothing is probably a poorer strategy than buying MySpace or Lonely Planet.

Over time, we’re going to see a lot more experiments and many will be public embarrassments like those the BBC and News Corporation have suffered, but there will be successes.

Someone will crack the code and they will be the Randolph Hearsts of this century. It could one of the Murdoch heirs, it could be the owners of NC2 Media or it could be some young, hot shot developer working in a Rio favela or the slums of Kolkata.

But it will be someone.

It’s an exciting time to be in business.

Latently obvious – the importance of data networks

The internet of things is going to see more emphasis on reliable and fast network connections.

One of the big buzz phrases of 2013 is going to be “the internet of everything” – where machines, homes and even clothes are connected to each other.

In the near future, we’re going to be more surprised when things when things like cars, washing machines and home automation system aren’t connected each other.

To get all these things talking to each other requires reliable communications with low latency – quick response times – so technology vendors are seeing big opportunities in this area.

Last night Blackberry launched its new platform and the beleaguered handset company’s CEO Thorsten Heins was adamant in his intention to focus his business on the internet of machines where he sees connected cars and health care as being two promising areas.

Blackberry isn’t alone in this with the major communications providers and telcos all seeing the same opportunities.

Cisco has been leading with their role in ‘the internet of things’ and much of their Cisco Live conference in Melbourne two weeks was spent looking at the technologies behind this. The company estimates the “internet of everything” will be worth 144 trillion in ten years.

Rival communications provider Ericsson sees the revenue from this sector being worth $200 billion by 2017, so it’s not surprising everyone in the telecommunications industry want to get a slice of it.

The question is though how to make money from this? Most of these communications aren’t data heavy so metering traffic isn’t going to be the deliver the revenues many of these companies expect.

If offering priority services with low latency is the answer, then we hit the problem of ‘net neutrality’ which has been controversial in the past.

Whichever way it goes, businesses will want to be paying a premium to make sure their data is exchanged quickly and reliably. For many organisations data coverage and ping speeds are going to be the deal breakers when choosing providers.

The ‘machine to machine’, or M2M, internet market is something we’re going to hear more about this year. It’s clear quite a few executives are staking their bonuses on it.

Will Google Deals be the next service to join the graveyard?

Google Deals was an attempt to compete with group buying services like Groupon, that experiment has failed and another tombstone for Google’s Graveyard should be on order.

Google’s graveyard of discontinued services is getting crowded, with Google Reader being one of a dozen services to bite the dust in last week’s springclean.

As Google ruthlessly cut services that don’t make the grade, the question is ‘which ones are next’?

Towards the top of the list has to be Google Offers, the group buying service that was set up in a fit of pique after Groupon spurned the search engine giant’s $6 billion acquisition offer.

Google Offers has only rolled out in 45 locations across the United States over the last two years and the deals in recent times have become increasingly desperate, here’s a recent New York deal.

Schmakery’s Cookies may well be fine products, but getting one free cookie isn’t exactly a jump out of your seat experience and it shows just how Google are struggling with this service.

That Google are struggling with Offers isn’t surprising though, the daily deals business relies on sales teams working hard to acquire small business advertisers. Small business is a sector that Google struggles with and running people focused operations is the not the company’s strong point either.

Google’s exit from the group buying market may be good for Groupon and other companies in the sector. The Economist makes the point that Google’s presence in these markets distorts the sector for other incumbents while scaring investors and innovators away.

This is rarely permanent though as companies like Google and Microsoft often suffer a form of corporate Attention Deficit Disorder – Knol is a good example of this and Seth Godin describes what happens “when the 800 pound gorilla arrives”.

Eventually the 800 pound gorilla finds there aren’t a lot of bananas, gets bored and wanders off.

Which is what has happened with RSS feeds and Google reader. Now the little guys can get back to building new products on open RSS platform while Google, along with Facebook and Twitter, try to lock their data away.

For Groupon, the departure of Google from the deals business may not be good news as it could mean smart new competitors enter the field. Either way, there’s some challenges ahead for the owners of group buying services.

You call that a graph?

A good chart can help tell a story, all too often though graphs are designed to mislead.

One way to illustrate a story is with charts. All too often though misleading graphs are used to make an incorrect point.

A Verge story on Groupon shows how to get graphs right – clear, simple and tells the story of how the group buying service’s valuation soared and then plunged while it has never really been profitable.

The vertical axis is the key to getting a graph right, cutting off most of the y-axis’ range is an easy way to mislead people with graphs. In this case you can see just the extent of Groupon’s valuation, profit and loss over the company’s short but troubled history.

Since its inception, The Verge has been showing other sites how to tell stories online, their Scamworld story exposing the world of affiliate internet marketing sets the bar.

Using graphs well is another area where The Verge is showing the rest of the media – including newspapers – how to do things well.

For Groupon, things don’t look so good. As The Verge story points out, the company’s income largely tracked its workforce which grew from 126 at the start of 2010 to over 5,000 by April of 2011. Which illustrates how the business was tied into sales teams generating turnover.

The spectacular growth of Groupon and other copycat businesses couldn’t last and hasn’t. The challenge for Groupon’s managers is to now build a sustainable business.

For investors, those graphs of Groupon’s growth were a compelling story. Which is another reason why we all need to take care with what we think the charts tell us.

Graph image courtesy of Striker_72 on SXC.HU

On being a good Internet citizen

What are the hallmarks of a responsible digital business?

I grabbed a quick coffee with Zendesk founder CEO Mikkel Svane and his Australian manager Michael Hansen in Sydney yesterday where they told me about the company’s story to date.

While I’ll be writing in the interview up in depth in the next few days one thing that stood out was Mikkel’s comment about Zendesk being a good internet citizen.

Those traits of being a good online corporate citizen include open APIs, a transparent culture and giving customers full access to their data.

Online companies have to embrace those principles if they are going to succeed and it’s the key to the fast growth of businesses like Zendesk and other cloud based services.

These principles have been the underpinning of the success of companies like Twitter, Facebook and Google.

What’s interesting with those companies is how they’ve moved away from those principles as they’ve grown and the pressures to ‘monetize’ have increased.

Abandoning those principles opens opportunities for many new players to disrupt the businesses of what have become the market incumbents.

With the pace of business accelerating, the assumption that companies like Google, Facebook and Twitter will retain their positions might be tested as the market moves to providers they can trust.

Those principles of being a good internet citizen may prove to be more important to online businesses than many of their managers and investors believe.

Are Small Businesses becoming Digital Roadkill?

We all agree that the internet is changing business, but how many smaller companies are prepared for the massive changes ahead?

Technology Spectator today discusses if fast broadband initiatives like the National Broadband Network will be good for all small businesses.

Andrew Twaites of Melbourne consultancy The Strategy Canvas posits that many businesses aren’t equipped to compete against global competitors.

The additional competitive pressures that the NBN rollout is likely place on segments of the small business sector that have to date enjoyed a degree of natural protection as a result of their customers’ inability to access super-fast broadband.

Once that natural protection falls away, many small businesses will for the first time be exposed to competition from interstate and overseas businesses

This is a very good point; many small businesses are transaction based service providers who can be easily replaced by lower cost overseas companies, particularly now foreign suppliers are easily accessible through services like O-Desk and Freelancer.com.

Every time I see Freelancer.com’s CEO Matt Barrie talk to a small business audience, I’m surprised the room doesn’t lynch him as he’s describing how their businesses are threatened species and many are living on borrowed time.

One of the reasons why small businesses are threatened is because they are under-capitalised, many simply can’t invest in the technology or training they need to compete.

There’s also a reluctance to embrace technology, that half of all small businesses – in the US, the UK or Australia – don’t have even a basic website.

On a recent holiday in Northern NSW, I checked dozens of tourism businesses’ online presences. Few had a website and almost none had bothered filling in their Google Places profiles, let alone set up social media presences.

Yet almost all of their new customers are looking for them on the web, increasingly through mobile devices or social media services where they are invisible.

Not having a website, local listing or Facebook page are trivial things; but the fact that most businesses haven’t done the basics doesn’t bode well as the speed of commerce accelerates over the rest of this decade.

That many small businesses will be put out of business by today’s changes isn’t unprecedented – blacksmiths were out of job shortly after the motor car rolled out and whale oil manufacturers by gas and then electric lighting.

As Andrew points out, we assume ‘creative destruction’ just disrupts big incumbent corporation. In reality it’s the little guys who feel more pain than insulated executives of big business.

Many of us little guys are going to have to start thinking about adapting to very changed times, the risks of being digital roadkill are real.

Doll roadkill image courtesy of Pethrus through WikiMedia