Tag: business

Planning a Saudi pivot

Saudi Arabia plans to pivot its economy but cultural issues may prove hard to overcome

In the face of a volatile oil price and falling reserves, Saudi Arabia’s new Crown Prince is looking at pivoting the economy to knowledge based industries.

That is a hard task in the face of Saudi Arabia’s religious, cultural and work cultures. This is not a society easily dragged into the 21st Century.

Crown Prince Mohammed bin Salman’s plans seem even more daunting when Richard Florida’s 3Ts of the Creative Class are considered – Talent, Technology and Tolerance.

It may well be easy to buy in the technology, but attracting the right talent to Saudi Arabia is going to be hard particularly given it is one of the most intolerant societies on the planet.

Saudi Arabia though has plenty of challenges, so a few big bets may be in order. Tolerance though might be the deal breaker.

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Cloud computing’s elusive gold

Microsoft and Alphabet’s Google show the fragility of even the most profitable online business models

Alphabet, aka Google, and Microsoft yesterday announced their quarterly results and despite both making healthy profits the numbers show the online world is a tough place to make money.

Microsoft’s stockholders took a five percent hit to their wallets after the company announced weaker than expected results for the last quarter.

Notable in the results were the stunning sales growth of its cloud services with Azure boasting a 120% year on year on year increase.

Yet Microsoft’s Intelligent Cloud division which includes Azure saw its profits fall nearly 13%, showing the company’s products may be making inroads against Amazon Web Services but making profits in that market is very tough indeed.

Similarly Alphabet’s results still show the company is sill totally dependent upon the advertising river of gold for its profits.

Particularly concerning for Alphabet is its ‘other bets’ division doubled its sales but saw losses increase by 20%. Overall Google’s advertising revenues made up 89% of Alphabet’s total revenues this quarter compared to 90% last year.

While both companies have very healthy profits – about five billion dollars this quarter for each – Alphabet’s continued dependence on Google advertising and Microsoft’s declining profitability should be a worrying sign for shareholders in both companies.

Both companies show that despite the apparent riches of the technology sector, making profits is getting tougher. Shareholders of both companies should be watching carefully for any disruption to either business.

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Silicon Valley’s unicorn monoculture

Silicon Valley’s obsession with finding the next tech unicorns could be its weakness.

What happens in Silicon Valley when your startup doesn’t fit into the current hot ‘unicorn’ categories?

I recently spoke to one female founder about her business and why she chose to setup on the US East Coast rather than follow the popular path of establishing a San Francisco base. Her answer shows the obsessions Silicon Valley investors have and why the Bay Area model may not be right for all companies.

Originally we planned to set up in the Bay area. That’s what you do right? So our company’s registered office was in Palo Alto and then I started plans to have three of my staff and myself relocate to San Francisco. I took onboard some Silicon Valley Advisors and this was a pretty horrific experience that taught me a lot. Here is my experience of trying to set up in the Bay Area then not. This is my cautionary tale to other Aussie Start Ups.

The Valley comes with a certain formula that gets beaten into you. Here’s how it goes:

A Start Up must:

  • Be in the Bay Area
  • Have had an MVP in market
  • Be an incorporated US company, preferably a Delaware company if you want US VC investment
  • Have a Run Rate (annual revenue) of $3-5million dollars in order to attract investment
  • Not be enterprise software
  • Be a SaaS company like Atlassian with a similar business model
  • Have a product that is inexpensive where clients can self-install and there is no professional services or servicing required

I found the Silicon Valley Advisors I dealt with to be arrogant, formulaic and could not see potential outside of the standard Unicorn-creating formula. So I realized the Bay Area was not going to be a good fit for My business. Additionally I figured that none of our clients were actually based in the Bay Area and I needed to be near them. As a FinTech company the logical thing was for us to go to where our clients were so that we could constantly listen to them. Listen to their problems, understand their business, build relationships, have them help us figure out what our product should be and pay us

So we moved to NYC and set up on office in Chelsea. From NYC it takes only a couple of hours to get to Boston, Baltimore, Philadelphia, Columbus, Chicago, even Texas to be with clients.

Also the investment discussions are much more ‘normal’ and investors are respectful of me as the CEO and Founder and my background and potential to build a significant, revenue led and profitable large software company. They are backing me and value that I am experienced. Not once has age or gender come up. In fact to be fair, probably the opposite. Being a woman over 40 seems to be appealing to East Coast clients and investors.

The founder’s experience also betrays a herd mentality among the Silicon Valley investors, something that may be a weakness for the industry and the region. It certainly indicates the dominant business model may be very fragile as markets turn against tech unicorns.

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When a CEO meets the Internet of Things

Life changes when you become the CEO says Bill Wagner of LogMeIn

Life changes when you become the chief executive says Bill Wagner, the CEO and President at remote access company LogMeIn. “I now spend thirty percent of my time with investors,” he says

Wagner, previously the company’s Chief Operating Officer, took over the leadership at LogMeIn last September after founder Michael Simon  stepped down.

The company is in the midst of a major change as Simon steered the company toward the Internet of Things in response to the shift away from desktop personal computing that had been the business’ core market.

LogMeIn’s IoT strategy is around being a trusted platform for controlling the myriad household, CEcommercial and industrial devices that want to connect to the internet, with Wagner only seeing AWS as being their main competitors that has seen a range of companies entering in the last few years.

“I don’t think IoT will be a wave, it’s more like a rising tide,” Wagner says.

Wagner is one of the IoT’s enthusiasts citing applications ranging from the insurance sector through to connected clothing as being potential markets, although industrial application may be the earliest adopters of LogMeIn’s services. “The more industrial the industry, the more mature is M2M to IoT adoption,” he observes.

That adoption though is tempered by the presence of industry groups where Wagner maintains LogMeIn’s hostility towards slower moving associations such as the Industrial Internet Alliance and proprietary platforms like Google Nest.

An advantage Wagner sees in his taking over as LogMeIn’s Chief Executive Officer is his experience with the company, “I don’t know how externally recruited CEOs manage it,” he observes.

With LogMeIn facing a continued transition into uncertain markets, the company needs a steady vision. It may be that internal recruitment is an important strategic move.

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Google focuses on the short term

Google’s reported divestment of Boston Robotics could mark a fundamental change in the business’ culture.

Just over two years ago Google acquired high profile robot developer Boston Robotics, at the time it appeared a major step both the search engine giant  and the industry.

Today, Bloomberg reports Google are looking at divesting Boston Robotics as the company is not proving to be fit into the company’s other divisions while management sees better revenue prospects in other ventures.

If the latter is true then the sale marks a shift in Google’s attitude towards long term investments. That may mark a turning point in the company’s development.

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Australia’s contempt for technology

The contempt shown towards the technology sector by Australian governments betrays a deeper problem in the Australian mindset

“The minister sends his regrets….”

Yesterday I commented how the Australian Tech Leaders event would be a good measure of the state of the country’s technology industry. Instead it illustrated the sheer contempt the nation’s political leaders hold the industry.

One of the government’s key platforms in the upcoming election is its Innovation Statement and the accompanying Ideas Boom so it wouldn’t have been expected that a minister or at least an informed backbencher would address a room full of technology journalists.

Instead the government drafted one of their local MPs, Fiona Scott, to make the short drive up the hill from her electorate to haltingly deliver a poorly written speech that focused on her local electorate issues.

To be fair to Ms Scott, the outer Sydney suburban seat she represents is a bellweather electorate which tends to swing between parties as government changes. It also happens to have a workforce that’s beginning to feel the effects of a shifting economy. Her focus on local issues is understandable.

However as a member of a government aspiring to drive a technology driven jobs boom and the representative of an electorate whose workforce is in transition, it is remarkable that Ms Scott is so poorly briefed on tech issues.

What’s even more remarkable is the contempt shown by the government towards the country’s technology sector, a long standing problem in Australian society but particularly stark with the current administration given the Prime Minister’s fine words on the topic.

One of the saddest things about Australia’s squandered boom is how the nation turned inwards at the beginning of the Twenty-First century and decided to ignore the global technological shifts.

The contempt shown by the current government towards the technology sector shows a much deeper problem in the Australian mindset, if the country is to rely on more than its luck in the current century then it’s essential to shake off that way of thinking.

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Amazon Web Services and the new rules of business

Amazon Web Service CTO Werner Vogels lists the lessons from a decade of AWS operations. These could be the new rules of business.

The one company that has driven both the adoption of cloud computing and the current tech startup mania is Amazon Web Services.

Later this week AWS celebrates its tenth birthday and Werner Vogels, the company’s Chief Technical Officer, has listed the ten most important things he’s learned over the last decade.

The article is a useful roadmap for almost any business, not just a tech organisation, particularly in the importance of building systems that can evolve and understanding that things will inevitably break.

Importantly Vogels flags that encryption and security have to be built into technology, today they are key parts of a product and no longer features to be added later.

Most contentious though is Vogels’ view that “APIs are forever”, that breaking a data connection causes so much trouble for customers that it’s best to leave them alone.

Few companies are going to take that advice, particularly in a world where changing business needs mean APIs have to evolve.

There’s also the real risk for businesses that their vendors will depreciate or abandon APIs leaving key operational functions stranded, this could cause major problems for organisations in a world that’s increasingly automated.

Vogel’s commitment to maintaining APIs may well prove to be a competitive advantage for Amazon Web Services in their competition with Microsoft Azure, Google and an army of smaller vendors.

Werner Vogel’s lessons are worth a read by all c-level executives as well as startup founders looking to build a long term venture, in many ways they could define the new rules of business.

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