Category: Investment

  • Distrusting the cloud

    Distrusting the cloud

    The recent KPMG Convergence Report looking at online trends in the mobile web found that nine out of ten Australian consumers are concerned about the security of their online data.

    In light of recent corporate security breaches such as Sony’s and Telstra’s this is understandable which creates a real barrier for the adoption of cloud computing services.

    For cloud computing to be taken seriously, customers have to be certain their data and applications will be respected and protected.

    The corporate sector’s failure to hold senior management responsible these problems shows how big businesses largely aren’t taking user privacy or security seriously.

    This is a great opportunity for new businesses, we’ve already seen Amazon become the biggest host for cloud services over storage and Internet incumbents who five years ago would have dismissed Jeff Bezo’s company as a glorified book stand.

    For newer companies offering cloud services it’s a chance to build a culture where customer service, privacy and respect comes before management bonuses and perks. Where delivering what you promise is more than waving a vague Service Level Agreement (SLA) document under customer’s noses.

    As customers, big and small businesses have much to gain from cloud computing‘s productivity, collaboration and cost saving aspects but trust that data will be protected and the service will be available is essential.

    Before choosing a cloud service have a search of the web and popular forums to check what people are saying about the product.

    Don’t rely on fancy marketing, or assume that a big company will be better at protecting your data. The evidence is clear that smaller, newer companies are doing a better job at protecting data and ensuring business continuity than many of their bigger competitors.

    Over time, customers are going to get used to trusting cloud service providers and the businesses who’ll succeed in the online applications world are those who’ve been shown to be trustworthy.

    This is one way the web is changing the way we do business.

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  • The case for faster internet

    The case for faster internet

    The National Broadband Network (NBN) is a project designed to deliver faster and more reliable broadband to Australia’s regions. While a good idea, it’s not without its critics and a fair degree of controversy.

    One of the problems the project has is the inability of NBNCo, the company established to build and run the network, to articulate the benefits and scope of the project.

    Last Friday night “John from Condobolin” grilled the Gadget Guy, Peter Blasina, about the project. John’s questions, and Pete’s answers, which can be found at 35 minutes into his program, illustrates the confusion the surrounds NBN and the failure of the project’s supporters to explain the benefits.

    So how should proponents of the National Broadband Network – people like me who believe that high speed broadband are the freeways and railways of the 21st Century – respond to questions. Let’s answer John’s questions from last Friday.

    Lightning might affect fibre networks

    John’s first question was about lightning affecting the NBN, commenting when Pete confirmed electrical storms would affect the network that “it’s no better than the existing service.”

    Sadly all infrastructure is affected by weather – a freeway is just as affected by fog as a dirt road, perhaps even more so, but it doesn’t mean you don’t build a highway because of that. The same applies for the NBN.

    Interestingly the wireless and satellite alternatives proposed to fibre optic cable are even more susceptible to electrical storms, which perversely makes a better argument for running a fibre optic network.

    I don’t need any NBN

    “I have got quite good reception in Condobolin and I don’t need any NBN, I can assure you” was John’s next big statement.

    That’s nice for John that he’s happy with what he has – the rest of us should be so lucky.

    For many of his neighbours and those in the surrounding district, particularly those dealing with remote suppliers and overseas markets, reliable and fast communications are essential.

    Now is good enough

    A farmer doesn’t need broadband for selling into America, he’s able to do that today, was the crux of John’s next comment after he and Pete had an exchange about rolling broadband out to remote locations.

    It’s true that farmers can do a lot with today’s satellite and ADSL connections, then again they were able to ship exports in the days of bullock carts and sailing ships. We could extend that argument against railway lines, roads, containers and bulk carriers.

    Once upon a time some guy argued against the wheel. Today’s technology has been good enough has always been the argument of those who don’t see the benefits of new tools; we’re talking about tomorrow’s markets and society, not today’s.

    Broadband is all about fibre

    “You’re talking about satellite dishes and things like that, not NBN.”

    The National Broadband Network isn’t just about fibre; fibre optic cables makes up the network’s core and bulk of connections, but wireless and satellite are essential in order to make sure the entire nation has access to the network.

    Unfortunately the nonsense argument that technology improvements in wireless will render fibre optics redundant has been allowed to take hold by self-interested politicians and sections of the media pushing a narrow agenda.

    Wireless, satellite, fibre optic and other cable technologies are all part of the mix, the real argument is on the proportions of that combination and the consequences to the government’s budget.

    Spotting the clueless

    As an aside, the cable versus wireless argument is a good yardstick for measuring the knowledge of anyone joining the NBN debate.

    Someone clueless arguing against the project says investment in fibre optic cable is unnecessary as it’s speed and data capacities will be one day superseded by those of Wireless networks.

    This betrays a failure to grasp the inherent advantage of having a dedicated cable connection to your property as opposed to sharing a wireless base station with hundreds, if not thousands, of others.

    Equally anyone pro-NBN who says that fibre is faster because it travels at the speed of light is equally clueless as wireless, copper wire and even smoke signals also travel at – or close to – the speed of light.

    Games and videos

    “Is this only to watch videos and DVDs?” was John’s last question.

    Well, does Condobolin have a video store? A quick Google search shows it does, along with local and satellite TV stations. So the residents of Condobolin are just keen as the rest of us to watch the tube.

    Increasingly our viewing habits are moving online and fast broadband is necessary to deliver that. John may be happy to exclude his town from being able to do that, but my guess is plenty of his neighbours would like to have that option.

    What’s more, many of those farmers, processors, trucking companies and other service providers in the Condobolin region will need those video facilities for tele-conferencing with suppliers, customers and training companies.

    Building for the future

    Video conferencing isn’t the only application for what we consider today to be high speed networks, these are going to change society and business in the same way the motor car changed us in the 20th Century and railways and telegraph in the 19th.

    Australia made a mess of the railways and the roads, in both areas we’re still playing catch up. The National Broadband Network is an opportunity to avoid the mistakes of the last hundred years and get the 21st Century right.

    Unfortunately, the objectives of building a better nation are being lost in a fog of disinformation, political opportunism and corporate incompetence. We can do better than this.

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  • So you want a business grant?

    So you want a business grant?

    “Funding Available from $1000 to $500,000! Get an advantage over your competitors or give your business the Government Funding boost it needs to be more successful!” Is the promise of a website offering to find grants for your business.

    Free money from the government sounds good and, as we’ve seen in the various Quantative Erasings and bank bail outs around the world, it sometimes is free.

    Rarely though is cash really “free”, usually there’s strings attached and government money is no different.

    Why do governments give business grants?

    First we should understand why governments make grants, subsidies and loans available to businesses.

    Governments have various objectives with their programs; they could be to get unemployed workers back in the workforce, to improve skill levels or to encourage exports. Whatever the motives are, they have clear criteria for giving money away.

    One area they don’t give funds for is to “Get an advantage over your competitors” as that website. That’s clearly not the role for governments and they’d be rightly criticised for doing so.

    The paperwork storm

    Contrary to what some media outlets portray, most public servants take their responsibilities seriously and don’t give out taxpayers’ money unless the application clearly meets their programs’ objectives.

    Meeting the objectives is important, because the public servants – and their political masters – are held accountable so they will make sure the business receiving the grant or subsidy has actually done what they have promised to do.

    This is where things get tricky for business owners and managers who have received government money. Completing the paperwork to prove you’ve met the objectives will be time consuming.

    Drive a cab

    Often it would have been more cost effective to drive a cab rather than spend hours filling in government paperwork.

    There really is no such thing as free money, there’s always a cost. While sometimes there are good reasons for applying for a government program, free money should never be your objective.

    It’s also worth keeping in mind that services offering to find government money for you will usually take a cut of the grant as commission. Also, they won’t help you do the follow up paperwork, that’s your expensive problem.

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  • The IT industry’s damaged business models

    The IT industry’s damaged business models

    JT Wang, Chairman of personal computer manufacturer Acer believes the release of Windows 8, Microsoft’s next operating system, will see a resurgence of sales for Windows based computers. Market trends suggest those hopes are in vain.

    Right now the Personal Computer market can be roughly split into two camps; those happily running Windows XP who have no need to upgrade and those who are delighted with Windows 7 who have no need to upgrade.

    Short of their computers breaking down, neither group have any good reasons to change to the new operating system as, unlike Windows 3.1, 95 or XP, there is no new technology breakthrough or advance to warrant making the jump.

    To make things worse for the PC manufacturers the rise of cloud computing services extends the life of older Windows XP systems and eliminates the biggest driver of new computer purchases in businesses – the software upgrade.

    During the PC era one of the banes of business owners were enforced software upgrades where vendors would release a new version of a program every year or two and withdraw support for the older editions.

    Frequently the newer software would require the latest hardware, forcing the business into an expensive and disruptive upgrade of all their IT systems.

    Today, software companies following the forced upgrade model are finding customers have viable cloud alternatives which destroys the revenue stream behind those frequent releases.

    When a customer moves to a cloud service, they also delay buying new desktop or server hardware which is partly driving the steady increase in the age of business computers.

    For computer manufacturers the release of Windows 8 could actually be bad news as customers will probably postpone system upgrades until the first service pack of the new operating system is released.

    Even if Windows 8 does deliver increased sales as JT Wang hopes, the trend of steadily falling PC prices as smartphones and tablet computers take market share is inevitable.

    The PC industry in both laptops and desktops has been a commodity industry for some years and any hope of establishing premium pricing from tablet computers has been dashed by the iPad’s competitive price points.

    Regardless of the hopes of the IT industry’s leaders, both the hardware and software sectors are under a lot of stress. It will be interesting to see who adapts to today’s market.

     

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  • A Capital Question

    A Capital Question

    How do you raise funding for new venture? Business coach Lindy Asimus asked over the weekend. It’s a question that perplexes many people starting out a new enterprise or trying to grow an existing one.

    The real question though is “how much capital do you need?” Being undercapitalised will often stunt a venture’s growth and is probably the reason why many otherwise excellent business ideas fail to achieve their potential.

    How much money do you need?

    While business plans are often disparaged, one of the great advantages of doing one is the budding entrepreneur gets an idea of the capital required along with the cash flow required to service any debts. Even if the business plan itself is filed away and never looked at again, understanding the upfront cash requirements can help avoid some nasty mistakes.

    The other key factor is the business itself, if you’re buying a fast food franchise, setting up a store or fitting out a restaurant then there’s going to be some big upfront capital costs involved before you start trading but there is more to it than just the immediate cash needs.

    What is the type of business?

    A business’ capital needs are going to vary with the type of business and the objectives of the owners, not just in size but also in type. As business writer and educator Steve Blank says, there are six types of startups and for certain types an equity investment from say an angle investor or venture capital company will be more appropriate than a bank loan.

    For small businesses, the type that Steve Blank describes as “work to feed the family” businesses, a bank loan that can be paid back out of cashflow is going to be the most obvious way to fund an enterprise while it would be rare a venture capital investor would even answer a phone call from such a business.

    On the other hand, a family member or friend might be interested in taking equity in such a business, the old “families, friends and fools” is a time honoured way of setting up a venture.

    Government grants

    In these times of rampant corporate welfare for big banks and major corporations, it’s tempting to think the government may be able to help the small businessperson. Sadly most of the grants available are small sums for specific purposes like export programs or hiring trainees, they aren’t designed or intended to provide entrepreneurial capital.

    Bootstrapping and “sweat capital”

    Most businesses though are best served by “bootstrapping” and “sweat capital” for most, particularly in the service sectors, funding your business out of cashflow and the hard work of the founders is the way to grow a viable enterprise.

    The term “sweat capital” refers to the founders working hard and capitalising their businesses from the sweat of their brows while  scrimping and saving every penny. Most founders of successful businesses have stories of spending years expending that “sweat capital” while living on cheap pizzas or packet noodles.

    Bootstrapping, funding your business through sales, is the other great capital source. In many ways, this is the best form of capital in that it proves a business is viable and doesn’t involve signing over assets to banks or giving equity away to investment partners. Again a well thought out business plan quickly shows whether this is feasible.

    So the question of capital is complex, but having enough is always the biggest struggle for those starting a business.

    Of course it is possible to have too much capital and we might talk about that in another blog post.

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