Category: Internet

Tech’s tough days

Apple and Amazon’s quarterly reports steal the attention from Microsoft’s Windows 8 launch

Today sees another tough day for tech stocks with both Apple and Amazon missing their projected earnings which again finds Microsoft being stood up at their own party.

For Amazon, along with the costs involved with a new range of Kindles, there’s a huge write down in their Living Social investment, another indicator that the group buying bubble has passed into history alongside tulips, 19th Century Argentinian railway bonds and South Sea investments.

It’s worrying that while Amazon’s quarterly sales have increased by 23% over last year’s figures to $11.546 billion dollars, their cost of sales has also gone up 23% from $8.325 to $10.319 billion. This is a trend to watch closely over the next few quarters.

Unlike Amazon, Apple still made a fat profit with income going up to $8.2 billion for the quarter, an increase of 24%. This missed many Wall Street analysts’ estimates.

Apple’s missed earnings were put down to supply chain constraints and development costs, but what jumps out looking at the cash flow is the six billion turnaround in the company’s Accounts Receivable. One assumes this is the value of pending invoices on the new ranges of iPhones, iMacs and iPads sent out to their sales channel.

If that’s right, Apple are looking at a big boost in their cashflow next month, although there’s few companies who would like to have five billion dollars in outstanding invoices in today’s economic climate.

Once again though, Apple have managed to steal Microsoft’s thunder. Despite the glitz and glamour of the Windows 8 launch in New York, Microsoft’s announcement has been muted by the tech and business press’ reaction to the earnings reports.

What is clear from all three companies though is that hand held devices – the Apple iPad, Amazon Kindle and Microsoft Surface – are going dominate the tech and financial coverage of all three companies for the rest of the year.

Unprotected computing practices

The news that many medical computing systems are infected with malware doesn’t suprise those working in the field

A US study finding malware is rampant on medical equipment shouldn’t come as a surprise to those running industrial computer systems in their businesses.

It’s notoriously difficult to update medical equipment or other sensitive systems as a security patch could have unintended consequences. Unlike a home or business computer, these patches have to be thoroughly tested beyond the precautions vendors take.

So it isn’t surprising that these systems aren’t kept up to date although some equipment suppliers are more tardy than they should be in updating the servers they supply.

A few years ago I came across CCTV systems running on the original version of Windows 2000 which were hopelessly compromised. This is an unacceptable situation for the customer and was more the result of vendor carelessness than any concern that customers could be affected by these unsecured machines.

Not having the latest software patches creates a weakness in any computer device as most common way viruses find their way onto networks is through systems not being updated – Australia’s Defense Signals Directorate rates unpatched systems as being the number one cause of corporate security breaches.

This is what caught out the Iranian nuclear program with the Stuxnet worm as the Siemens SCADA devices used by the Iranians were running older, unpatched versions of Windows. The designers of Stuxnet took advantage of a number of known weaknesses in the software and were able to damage the equipment being controlled by the systems.

Obviously systems should be patched wherever they can be and there’s no excuse for not patching most office and home computers. It’s also worthwhile carrying out a number of other security steps to ensure an infected computer can’t damage your network or catch a virus through your Internet connection.

The survey looking at these medical systems is a good wake up call to all of us that we need to take computer security seriously in our businesses.

ABC Nightlife: Apps down the farm

For the October ABC Nightlife spot we’ll be looking at how the agriculture sector is using smartphone and tablet computer apps

If you missed this program where we covered a wide range of subjects, you can listen to the ABC Nightlife podcast of the show.

Paul Wallbank joins Tony Delroy to discuss how technology affects your business and life.

This week we’re talking about how the agricultural industry are using smartphone apps and the web. A list of apps for farmers is available from the NSW Department of Primary Industry website.

We’ll also be looking at how machines are talking – in agriculture, the next generation of farm equipment will be sending data straight to the farmers’ tablet or laptop computer using the technologies we’re seeing in jet engines and other high tech equipment.

Connecting everything does come with risks. A US report found that networked medical equipment is rife with malware and the Defense Signals Directorate points out that out-of-date computer systems are one of the main causes of data breaches.

One of the things driving the apps world is cloud computing and Google have given a rare glimpse into the data centres that run their services.

Social media is one of the things that are driving cloud computing, but there’s traps for businesses in posting information about customers and staff. We’ll be looking at those as well.

We’d love to hear your views and comments so join the conversation with your on-air questions, ideas or comments; phone in on the night on 1300 800 222 within Australia or +61 2 8333 1000 from outside Australia.

Tune in on your local ABC radio station or listen online at www.abc.net.au/nightlife.

You can SMS Nightlife’s talkback on 19922702, or through twitter to @paulwallbank using the #abcnightlife hashtag or visit the Nightlife Facebook page.

Free content’s shaky foundations

The free content model of many Internet startups is inevitably flawed.

Musician’s rights advocate David Lowrie has a takedown on his Trichordist of Pandora’s campaign to change the US music royalty payment system through the Internet Radio Fairness Act.

Pandora and other online streaming services claim the current arrangement is unfair and puts them at a disadvantage to terrestrial AM and FM radio stations. Artists and record labels claim this is just a way to cut rights payments.

David suggests that Pandora’s founders either lied about the sustainability of their business at the time of their IPO last year or are just being plain greedy.

Regardless of what is true, or whether David is overstating the case against the IRFA, a truth remains that many Internet business models are unsustainable and Pandora’s may be one of them.

Most unsustainable of all are those who rely on free content.

Eventually the market works to filter out those who won’t pay for content – the good writers and artists move onto something more profitable, like driving buses or serving hamburgers, or they figure out they may as well control their own works rather than let some Internet company profit from their talents and labor.

The website or service offering nothing in return for the contributor’s hard work eventually ends up distributing garbage – Demand Media or Ask are examples of this.

In a marketplace where crap is everywhere, just pumping out more crap is not a way to make money.

Those looking at investing in businesses which rely on free content need to remember this, if no-one values the product then you have no business.

Sadly too many internet entrepreneurs, and corporate managers, believe the road to their wealth is through not paying artists, musicians or writers. They are the modern robber barons.

Securing your online passwords

On ABC Sydney we look at how you can make your passwords move secure

Every Internet user has to struggle with the burden of passwords as we’re expected to remember dozens of log in details for various websites and computer networks.

As we’re seeing though, passwords aren’t that effective with universities and private companies being hacked on a regular basis. The problem is so bad banks are considering moving to fingerprints to replace PIN and password logins.

Even if passwords are going to become irrelevant as we move to biometric logins like fingerprints and iris scans they aren’t going away quickly, so how do we protect our important online accounts?

Use different passwords

One of the key ways to protect yourself is not to use the same passwords for every site. Some critical sites, like your online banking and email, need protecting with strong passwords while others like social media sites don’t require such tough security.

As we’ve seen with various security breaches, most notably the continual Sony hacks of 2011 and the deeply embarrassing Stratfor leaks, even the strongest passwords are useless if some dill leaves them on an unprotected server.

Use strong passwords

For the sites that matter, make sure the passwords are strong. You’ll find how to make memorable, easy to use and strong passwords on the Netsmarts site.

You don’t need to use strong passwords on every site, for some websites that require registration to access you might want to fall back on the much maligned password or 12345 for those publications.

Change default passwords

Most of the hacks on university and corporate networks happen because the default passwords on servers aren’t changed. This was also how News International workers broke into British mobile phone message banks.  When you get a new phone or tablet computer, make sure you change the basic passwords that have come with the device and any associated service.

Update your systems

One of the biggest vulnerabilities for home and business computer systems is unpatched systems. Malicious websites, viruses and various tricks use known weaknesses in computer systems to bypass security measures. This applies to Apple Mac users as well.

Consider two factor authentication

Two factor authentication involves having double security, this could be a password linked to a SMS or a special one-off code. Services like Gmail offer this as do many corporate networks and banks.

Be careful linking social media services

A bigger risk than hackers is phishing where someone tricks you into giving away your password. This has become very common in hijacking social media accounts.

If you’ve linked various social media services together then one being compromised can mean bad guys have access to all of your accounts, so be cautious about what applications you allow to connect with your Facebook page or Twitter account.

For businesses

Cyber security is critical for business, it’s been estimated that one in six companies who’ve been compromised will fail as a result of the breach and a credit card lapse can be expensive as well as embarrassing.

The Australian government’s Defense Signals Directorate has an excellent guide to securing computer networks. The DSD’s research shows that just following four basic rules will prevent 85% of attacks.

We should also keep in mind no security system is perfect. Just as your car doors or home can be broken into by a determined thief, the same is also true with computer networks, a skilled operator with enough time and resources can beat even the toughest cyber security regime.

Today’s business Neanderthals

Many businesses are hopelessly ill-equipped to deal with today’s realities and are doomed to extinction

“Bringing a knife to a gunfight” describes showing up hopelessly ill-equipped for the task at hand.

Two recent conferences, the massive Dreamforce in San Francisco and the smaller, but still fascinating, Australian Xerocon in Melbourne illustrate just how radically the commercial world is changing and how many business leaders are poorly equipped for today’s times.

In July, the Melbourne Xero Convention bought together 400 Australian partners of the cloud accounting service which showed how how one New Zealand based company is building it’s business through engaging other suppliers who add features to the basic service.

Vend, a Point Of Sale cloud service provider, was one of the companies exhibiting at XeroCon. In the past POS systems have been a pain for retail businesses with most suppliers’ business models being about locking customers into expensive contracts.

With cloud services, the old vendor lock in model dies as stores can use any device they like such as a PC, tablet computer or a smartphone so a business is no longer locked into using an overpriced and often antiquated piece of equipment.

Making the cloud offering even more attractive is that Vend, and many of their competitors, also take advantage of APIs – Application Program Interfaces – built into other services so they can seamlessly change records.

So a shop can make a sale in their physical store and inventory levels will automatically change in the online stores and on services like eBay. If an item is now of stock, the websites are automatically updated to reflect this.

This business automation makes it easier and cheaper to run a business. It’s everything that computer have promised for the last thirty years and is now being delivered through cloud computing services.

At Dreamforce in San Francisco last week, Salesforce.com CEO Marc Benioff showed the 90,000 attendees how these services work on a corporate level with demonstrations from companies as diverse as General Electric, ski company Rossignol, and Australia’s own Commonwealth Bank.

What really stood out with all of these presentations was how each business had made major technology investments that in turn allowed them to deploy modern tools.

The Virgin America Dreamforce presentation was particularly telling. Having just endured a 13 hour United Airlines flight in a plane that had been barely refurbished since 1988 it was clear that the older airline simply didn’t have the hardware to compete with the upstart even if management and staff wanted to.

From both Dreamforce and XeroCon the message has been clear, those legacy managers who won’t invest in new technologies or re-organise their businesses to meet the realities of the 21st Century are simply doomed.

In Australia this sense of doom in the business community is confirmed when MYOB and Google missed their target of giving away 50,000 free business websites as part of their Getting Aussie Business Online program.

Depending on whose figures you use, between 50 and 65 percent of Australia’s 1.7 million small businesses don’t have a website – and websites are last decade’s technology.

Business has moved onto mobile and social platforms, those 800,000 businesses who are yet to move into the new century are roadkill – the competition are just going to run over them.

If you are still struggling with the idea of a website – let alone a mobile site, mobile phone app or social media strategy – then you haven’t bought a knife to a gunfight, you’ve bought a sharpened stick. It’s time to figure out whether you still want to be in business.

Disclaimer: Paul travelled to XeroCon in Melbourne courtesy of Xero and to Dreamforce in San Francisco as a guest of Salesforce.com

Meeting the solid state Woz

The fast talking Steve Wozniak surfs into town on a wave of enthusiasm.

When the opportunity comes to meet co-founder of Apple computer Steve Wozniak you jump at it, despite being jet lagged from the previous day’s flight.

One of the tough things when writing about Steve Wozniak is that he is a fast talker. You have to be quick to keep up with his ideas and words.

Steve was in town to show off the range of solid state computer memory cards manufactured by Fusion-iO, a company based in Salt Lake City.

Wozniak liked the idea so much he became Fusion-iO’s chief scientist in 2009. “When I first saw the iO drive, it was so beautiful I had to buy one from the company and put it in a frame just to frame it at home.”

What enthused Woz were Fusion-iO‘s range of NAND flash memory cards that speed up servers while reducing their power and cooling requirements.

Those power savings are important for data centres when hundreds of thousands of servers might be in one building, Fusion-iO’s CEO and co-founder David Flynn estimates this could save up the industry a $250 billion a year in operating costs.

Probably the biggest benefits though are in the corporate space, one Flynn’s boasts is how one movie studio used Fusion-iO’s products to reduce transcoding between formats from two hours to 39 seconds.

Another case study they show off is how grocery chain Woolworths were able to reduce the 17 hours to run their weekly trading reports to three hours meaning they were able to capture weekend figures for their weekly Monday morning board meetings.

For smaller businesses, the biggest benefit is these products can turn fairly basic desktop computers into workstations with the $2,500 ioFX card promising some serious post production capabilities for a system although one would expect an entry level box wouldn’t have the data connection, hard drive or – most importantly – power supply to cope with the demands of such a device would put on the typical cheap components in a basic desktop system.

All of these changes though are heralding some pretty big changes for big and small businesses.

Where Steve Wozniak sees the greatest application of moving data faster is in Artificial Intelligence applications like voice recognition. Apple’s Siri is a good example of this.

The barrier to effective voice recognition is the sheer amount of data processing required to effectively understand voice commands. Doing this on cloud services is a far more efficient and effective way of doing this.

As we saw at Dreamforce last week, the sheer amount of data pouring into companies is changing how they manage information. Getting access quickly to relevant information is an important part of managing it.

“I’ve never gotten so excited about or fell in love with a technology like this since Apple.” Says Wozniak.

Having a chance to speak to Steve Wozniak up close shows that fast talking enthusiasm is for real. The Woz is a real geek.

Like all true geeks Wozniak is passionate about what he believes in – whether it’s about NAND flash cards or becoming an Australian resident he bubbles with enthusiasm. Just don’t try writing notes down while he’s in full flight.

The real e-myth

The Internet is not killing retail, it’s lousy service, poor pricing and 1980s management that digging the incumbents’ graves.

The collective gnashing of cavity filled teeth over the demise of the Darrell Lea confectionery chain has given rise to some interesting commentary. If some pundits are to be believed, the lolly maker’s financial woes were due to the evil interwebs allowing Australians to buy choccies from cheap overseas suppliers.

But if you were to cross the road from Darrell Lea’s flagship Sydney shop you’d be outside one of Apple’s iconic stores that are the most profitable retail outlets on the planet – US Apple stores are 17 times more profitable on a per square foot basis than the average American retailer.

So retail can be successful. It just depends upon how it’s done and the internet has little to do with many of the retail failures we’re seeing at the moment.

Darrell Lea being absorbed into the VIP Pet Foods empire has a lot of lessons about retail but they are more about service and the failure to move out of the Twentieth Century, particularly when new competitors like Haigh’s and multinationals like Lindt are entering the marketplace.

Service is an integral part of this story. While the service at Darrell Lea stores wasn’t terrible it also wasn’t particularly notable and neither was the value of many of the products, leaving the customer underwhelmed.

A similar story of poor service is behind the failure of the Allans Billy Hyde chains – the comments on the Smart Company story about the music stores’ collapse indicate how customers found service lacking while the prices and range were ordinary. There was no real reason to shop there.

The business models of Darrell Lea and Allans Billy Hyde are locked into a 1980s way of doing business where one or two chains dominate a segment and attempt to charge duopoly prices while exercising their market power to screw suppliers.

A duopoly model works for Woolworths and Coles simply because of their scale. If you’re a smaller chain selling non-essential, non-perishable goods then customers will either not buy them or find better deals and service offshore.

Staff, of course, are a nuisance – after all they only serve customers and customers don’t matter when you have the market locked up – so staff are treated as a cost to be ruthlessly minimised while being paid the minimum that the well-paid management can get away with.

That contempt for retail staff is exacerbated by management’s reluctance to train them, which locks the stores into a downward service spiral as knowledgeable and experienced shop assistants find a job where their skills are valued.

Despite the scorn poured on Apple’s staff training policies, the core of their retail success is that you will get a passionate, knowledgeable person helping you at one of their stores while their competitors will leave you wandering the aisles unless they think there’s a fat commission to be had.

This contempt for suppliers, staff and customers is the real malaise for Australian retail and it’s an opportunity for smart new entrants into the marketplace.

While many of those new entrants might be online, the ecommerce side has little to do with the fundamental problems of lousy service and overpriced products.

Interestingly, while Darrell Lea had an online strategy, the new owner doesn’t. Any customer visiting the VIP Pet Foods site has no chance of finding where they can buy the products, let alone order them through the website.

While it would be nice to know where you can buy their products, the owners of VIP probably don’t care as their business model is based upon distributing their products to retailers and those stores can do their own advertising.

So retail still matters and the high hopes we had in the late 1990s that ecommerce would drive the middle man out of business was just as wrong-headed as the old-school managements of our dying retailers.

 

Salesforce’s place in the web’s walled gardens

Can Salesforce take a place alongside Apple, Facebook, Amazon and Google?

“Did he just say we’re at the half-way mark?” Whispered the ashen faced journalist beside me as Mark Benioff’s Dreamforce keynote reached the 90 minute mark.

Benioff did and the presentation did indeed go three hours because Salesforce.com had a lot to announce with launches of new mobile apps, customer service programs and HR services.

At the press conference later in the day, Benioff said “we are interested in collaboration and the customer. the reason we’re in marketing is because our customers want us to be in marketing.”

An interesting part of this is the Facebook relationship, with the Buddy Media acquisition 10% of Facebook’s advertising revenue comes through  Salesforce. This in itself makes Salesforce a key Facebook partner.

Facebook’s relationship goes deeper with Salesforce, at the media conference Marc Benioff mentioned that the company’s purchase of Rypple came about because of urging from Tim Capos, Facebook’s CIO.

That deep relationship was on show in the opening keynote where Facebook were one of the strategic partners showcased by Benioff.

Of the products showcased, one of the important points that kept being raised was Salesforce’s role as the enterprise social media identity service.

A partnership between Salesforce and Facebook to provide online identity validation would effectively kill  Eric Schmidt’s aim of Google being the Internet’s identity service although Benioff was at pains in the media conference to emphasise there was room for more than one player.

Google are also being challenged by Benioff’s announcement of Chatterbox, a secure online file storage and sharing service.

While the focus with the Chatterbox announcement was on the threat this presents to Dropbox and Box.net, the bigger targets are Google Drive, Apple iCloud and Microsoft’s SkyDrive.

Salesforce’s move into the various fields of HR, marketing, file storage and collaboration are part of the company staking its own position among the various web empires.

With a strong enterprise position, it’s quite possible Salesforce could establish itself as the fifth of the Internet’s great empires.

Every empire needs an army and a particularly strong claim Salesforce would have are the ranks of developers and supporters gathering around the service’s open APIs.

The move to establish an independent position on the web would also explain Benioff’s commitment to HTML5 as this avoids locking the company into an Apple, Google or Microsoft dominated app environment.

We’ll see over time how Salesforce establishes their position among the internet empires, right now though their range of services, customer base and partner ecosystem means they are well placed to compete with the big four currently dominating the web.

Paul travelled to the San Francisco Dreamforce conference courtesy of Salesforce.com

One platform united under Microsoft

How the software giant wants to lock corporate customers into their products.

Microsoft’s annual Australian TechEd conference on the Gold Coast this week comes at an important time for the software giant as the company launches a range of products to meet the major threats to its tech industry dominance.

With the move away from desktop and laptop computers to smartphones, tablets and cloud computing services Microsoft’s profitable server and office franchises have become less relevant in a rapidly evolving market place.

To counter this move Microsoft are refreshing most of their key product lines this year including launches of Windows 8, Windows Server 2012 and the high stakes Windows Phone 8.

Underlying these releases is Microsoft’s “one consistent platform” offering a seamless experience between traditional in-house servers, the company’s Azure cloud product along with the services of partners, integrators and resellers.

Core to Microsoft’s enterprise strategy is their Hyper-V virtualisation product that allows businesses to reduce costs and business complexity by easily replicating systems onto different servers or networks. At present Microsoft claims 25% of the Australian virtualisation market compared to VMWare’s 50%.

At the home and small business ends of the market Microsoft also have a “one consistent platform” strategy with services like Office365 offering the same look and feel regardless of whether they are using a smartphone, tablet or desktop computer.

Microsoft hopes to replicate the success they had in the 1990s by locking customers into their integrated cloud and server environment. This is consistent with the “own the customer” strategies of other major players like Apple, Amazon, Facebook and Google.

The flaw in trying to own the customer across all devices is the difference in technologies – what works on a desktop computer with a mouse, keyboard and large screen doesn’t necessarily succeed on a smartphone or tablet computer using a smaller touch screen.

Windows 8’s development has illustrated how Microsoft are struggling with their aim delivering a consistent look across all platforms as early users struggle with the now renamed “Metro” touch screen interface and demand they get their start buttons back.

The inconsistency between platforms also appears with the cloud based Office365 productivity suite which lacks many of the advanced features of the desktop Microsoft Office packages that dominate the PC market.

Office’s advanced functions are one of the areas where Microsoft has successfully held off competitors like Google Apps as office workers – and writers – find the richer features in the desktop application actually matter when using word processors or spreadsheets.

Another of the advantages Microsoft has over Google and other cloud based competitors is their army of software partners, integrators and resellers supporting their products.

One of the pillars of the “One Consistent Platform” strategy are the service providers who have built their businesses on supporting Microsoft’s products. With the move to the cloud many of these integrators and resellers have been threatened by the reduced margins offered by online services.

The stakes are high for Microsoft and their partners as the computer industry moves away from the model which has worked well for them over the last twenty years.

Whether customers will stay with the revamped Microsoft services and products is going to depend on how well the “One Consistent Platform” is executed. As Apple, Facebook and Google have shown, customers will stick with one service if their needs are being met.

Moving on from the gadget era

Amazon reinvent their business to suit changing economic times

Yesterday at the launch of the next generation of Kindle e-readers Amazon’s CEO Jeff Bezos observed why the various Google Android based tablets have failed.

Why? Because they’re gadgets, and people don’t want gadgets anymore. They want services that improve over time. They want services that improve every day, every week, and every month.

Throughout the industrial revolution progress and innovation was about creating products that improved people’s lives – whether it was Josiah Wedgwood making affordable crockery, Thomas Edison commercialising the light bulb or Henry Ford making cheap motor cars available to the masses – these innovations changed the way we lived or did business.

In the late Twentieth Century business focused more on creating gadgets and our lives became a race to accumulate more useless tat to store in our big McMansions to store the junk in.

We wore out our credit cards and home equity in “buying stuff we don’t need to impress people we don’t like” throughout the 1990s and early 2000s.

Today that’s changed, consumers are now more cautious and, despite the efforts of governments to prop up the broken system, the great credit boom is over.

Jeff Bezos is onto this, instead of Amazon offering me-too products that don’t add value,  “people don’t want gadgets anymore. They want services that improve over time.”

The word ‘service’ is notable — one of the things Amazon have achieved is changing how customers use books and DVDs from outright purchases that they can trade and sell to licensed products where Amazon and publishers control distribution.

Amazon are consolidating their position as one of the big four Internet empires. How Google, Apple and PayPal respond to Amazon’s suite of services will define much of the online economy.