internet | Paul Wallbank - Communications Professional

Farewell to the knowledge economy

The promise of the knowledge economy isn’t being delivered as knowledge becomes a commodity worth less than data.

One of the mantras of the 1980s was the future of western nations lay in becoming ‘knowledge economies’, unfortunately things don’t look like they are turning out that way.

As the developed economies moved their manufacturing offshore – first to Japan and Korea, then Mexico and finally China – the promise to displaced Western factory workers was the replacement jobs would be in vaguely knowledge based industries like call centres and backoffice computer work.

From the 1990s on, those jobs also started to go overseas to lower cost centres in India, the Phillipines and other countries.

When the internet became ubiquitous in the developed world in the late 1990s, the creative industries – musicians, artists and writers – found income dried up as their work became commoditised by digital distribution channels.

Now the professions are being affected by combination of offshoring, artificial intelligence and automated processes. Many of the jobs that were done by highly paid accountants and lawyers can now be done by computers or in places not dissimilar to those that took away the call centre jobs twenty years ago.

So it turns out the knowledge economy isn’t the key to riches after all and the future turns out to be more complex than what we thought in the 1990s.

Collecting tolls on the information superhighway

The failure of Melbourne IT’s management proves that clipping tickets on the internet is not always the path to riches.

The news that internet services company Melbourne IT is looking at cutting management costs and returning cash to shareholders in the face of declining revenues doesn’t come as any surprise to observers of the firm.

In many ways Melbourne IT is a historic relic, one of the last examples of the late 1990s dot com boom where management from those heady days survived unscathed by the realities of the 21st Century.

Melbourne IT story illustrates the poor management and flaw investment strategies of the big dot com float and also illustrates the risk of under-investing in key areas, as anyone using the site or the services of its Web Central subsidiary will understand.

Both companies feature clunky sites and extremely poor customer service. For resellers and customers using the Web Central command center, the experience and technology is straight out of the late 1990s.

While overseas businesses like Rackspace, GoDaddy and Bluehost innovated and invested in their platforms, Web Central and Melbourne IT sat back and how expected their dominant position would guarantee them profits.

Much of that management complacency was born out the founding of Melbourne IT when it was spun off from the University of Melbourne to exploit the then monopoly the university’s computer faculty had on granting Australia commercial domains.

In 1998, as the dot com boom was entering its most heated phase, Melbourne IT was floated and immediately attracted anger and allegations of wrong doing – none of which was proved – as the stock debuted on the stock market at four times its listing prices which generated huge profits for the insiders who were fortunate to get shares allocated before the sale.

Melbourne IT’s huge stock valuation was based on the belief the company would exploit its dominance of the critical domain market – it was similar to other technology floats of dominant players at the time such as accounting giant MYOB in 1999 and Telstra’s spin off of its small business Commander operation the following year.

All of these stock market floats proved to be disastrous as each company’s management showed they were incapable of exploiting their privileged market positions.

Of the three, Melbourne IT’s management survived longest partly because of the riches expected to flow into the company’s coffers through Top Level Domain sales as gullible government agencies and corporates being driven by a Fear Of Missing Out overpay for new online addresses.

Now it appears ICANN’s top level domain river of gold isn’t going to flow, partly due to arrogance and management incompetence in that organisation, so Melbourne IT is now going to have to cull its executive ranks.

Steadily, both Melbourne IT and Web Central have gone from being dominant to irrelevant and provide a good case study of how poor management and complacency can squander a dominant market position.

The failure of Melbourne IT’s management proves that clipping tickets on the internet is not always the path to riches, particularly when you don’t invest or innovate.

Fighting in the sandbox

The walled gardens of the mobile phone industry aren’t good for users.

The current spat between Microsoft and Google over the Windows Phone YouTube app illustrates the value, and hindrance, of the internet’s walled gardens.

Google’s locking Microsoft Phone users out of YouTube shows the strength of these online empires and when coupled with control of the mobile phone platforms, as Google has with Android, it makes it hard for outsiders to compete.

In one respect, this is corporate karma coming back to bite Microsoft who ruthessly exploited their market position with Windows, MS-DOS and Office through the 1990s and early 2000s.

That doesn’t change the problems facing Microsoft Windows Phone users who want the same access to internet services enjoyed by Android and iPhone owners.

Being locked out of a service because of the product you choose to use is in many ways the antithesis of the internet and challenges the underpinnings of the online economy.

All internet and mobile phone users need to watch how this spat between Microsoft and Google develops, captive markets aren’t good for anyone.

Dicing up the mobile web

A series of reports last week told how we use computers, tablets and smartphones is evolving. There are big consequences for all businesses.

Last week we had a series of reports on the changing web from Cisco, IBM and Ericsson along with Mary Meeker’s annual State Of The Internet presentation.

One thing all the reports agreed on was there is going to be a lot more data pushed around the net and the composition is changing as business and home users adapt to smartphones and tablet computers.

Cisco’s Visual Networking Index forecast online traffic would triple by 2017 while Ericsson’s Mobility Report predicts mobile internet traffic will grow twelve times by 2018.

What’s notable in those predictions is the amounts and types of data the different devices use. Cisco breaks down monthly traffic by device;

Smartphones 0.6 GB
Tablet computers 2.7 GB
Laptops and PCs 18.6 GB

In one way this isn’t surprising as the devices have differing uses and their form factors make it harder to consume more data. Cisco also points out that data consumption also varies with processor power. As PCs are the most powerful devices, it makes sense they would chew through more information.

Ericsson breaks down data use by application as well as device and that clearly shows the different ways we’re using these devices.

Notable in the graph is how file sharing is big on PCs but not on tablets or smartphones while email and social networking take up a bigger chunk of cellphone usage.

What’s also interesting in Ericsson’s predictions is how data traffic evolves. It’s notable that video is forecast to be the biggest driver of growth.

Both Ericsson’s and Cisco’s predictions tie into Mary Meeker’s State Of The Internet presentation at the D11 Conference last week.

It’s worth watching Meeker’s presentation just for the way she packs over eighty slides into twenty minutes with a lot of information on how the economy is changing as the internet matures.

What all of these reports are telling us is that our society and economy are changing as these technologies mature. The business opportunities – and risks – are huge and there isn’t any industry that’s immune to these changes.

Take ten engineers and the internet of everything

LogMeIn CEO Michael Simon sees the future of his business in the internet of machines

It seems a far jump from running a gaming platform to a remote access software company with a focus on the internet of machines, but that’s the journey remote access company LogMeIn and its CEO Michael Simon has travelled.

“Anything that could be connected will be connected in the next decade.” Micheal told me in Sydney last week and it’s where he sees the next step for the company he has led since its founding in 2003.

LogMeIn grew out of a team that formerly worked for uproar.com, an online gaming company sold to a division of Vivendi Universal for $140 million in 2001.

Two years after the sale Michael, who had been CEO of Uproar, and a team of ten engineers who formerly worked for the company thought they could solve the complexities of accessing computers remotely.

For geeks and big business, accessing your computer across the internet in 2003 wasn’t much a problem however it involved configuring software, punching holes in firewalls and configuring routers.

The LogMeIn team wanted to find a way to make this technology cheap and easy for small businesses and homes to use.

A decade later they employ 650 staff, half of whom are engineers, and have twenty million users of their product.

Building the freemium model

The vast majority of those users are using LogMeIn’s free services – Simon estimates that over 95% of users are using the free version.

In this, LogMeIn is one of the leading examples of the freemium business model – offering a free version of a software product and premium paid for edition with more advanced features.

One leader of the freemium movement was the Zone Alarm firewall, a product which earned its stripes in the early 2000s at the peak of the Windows malware epidemic.

Today one of Zone Alarm’s veterans, Irfan Salim, sits on the LogMeIn board along with two former executives of Symantec, the company whose PC Anywhere and Norton Internet Security products competed with both Zone Alarm and LogMeIn.

While LogMeIn has done well over the last ten years, the market today is very different to that of a decade ago with cloud computing technologies taking much of the need for remote access software

Mike Simon sees these changes as an opportunity with the computer industry having gone through three phases – the PC centric era, the mobile wave and now we’re entering the internet of things.

To cater for the mobile wave LogMeIn has released Cubby, a cloud based storage system that competes with Dropbox, Google Drive and Microsoft’s Skydrive, but Simon has his eye on the next major shift.

Controlling the internet of machines

The internet of things is a crowded market, but Simon believes companies like LogMeIn have an advantage over the telco and networking vendors as businesses with freemium and startup cultures look for ‘pennies per year’ rather than the ‘dollars per device’ larger corporation hope to make.

It’s a big brave call, but with the market promises to be huge – General Electric claimed last year nearly half the global economy or $32.3 trillion in global output can benefit from the Industrial Internet.

That’s a pretty big ticket to clip.

Whether Michael Simon and LogMeIn can achieve their vision of being integral part of the Internet of things remains to be seen, but so far they do have success on their side.

ABC Nightlife technology – April 2013

For the April Nightlife tech spot Tony Delroy and I be talking about the mobile phone turning 40, the end of the Internet and Windows 8.

For the April 2013 Nighlife spot Tony Delroy and I looked at the mobile phone turning 40, Windows 8 coming to an end, Blackberry’s chances of succeeding and what happens when the internet goes dark.

Danny Hillis gives a great discussion of what could happen if the internet was turned off along with the history of the net in this TED talk.

If you missed the show, you can download it from the Nightlife website.The next show will be on May 16 and we hope you can join us then.

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.

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.

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.

Microsoft’s China crisis

Microsoft’s Chinese partner is blocking Skype messages and possibly passing user details onto PRC authorities. This security concern could damage both Microsoft and Skype.

That the Chinese Public Security Bureau is blocking your messages – and may even be reading them – would make anyone pause before they used a service.

Bloomberg Businessweek reports Microsoft Skype is doing exactly this with its Chinese customers. Anything deemed inappropriate is censored and referred to servers belonging to TOM Online, the company that runs the Skype service on behalf on Microsoft in China.

The Bloomberg story goes onto detail how one Canadian researcher is reverse engineering the Chinese blacklists, giving us a wonderful insight into the petty and touchy minds of China’s censors and political leaders.

What raises eyebrows about this story is how nonchalant Microsoft is about this issue, in a wonderful piece of corporate speak the software giant answered Bloomberg’s question with the following bland statement;

“Skype’s mission is to break down barriers to communications and enable conversations worldwide,” the statement said. “Skype is committed to continued improvement of end user transparency wherever our software is used.”

Microsoft’s statement also said that “in China, the Skype software is made available through a joint venture with TOM Online. As majority partner in the joint venture, TOM has established procedures to meet its obligations under local laws.”

Microsoft have to fix this problem quickly, glibly saying the Chinese government eavesdropping on conversations is a matter for partners is not going to be accepted by most customers.

It would be a shame should Microsoft’s Skype investment fail – Skype is a very good fit for Microsoft, particularly when the technology is coupled with the Linc corporate messaging platform, so squandering goodwill over protecting users’ conversation seems counterproductive.

One of the great business issues of this decade is the battle to protect users’ privacy. Those who don’t do this, or don’t understand the imperatives of doing so, are going to lose the trust of the marketplace.

Twenty years ago, Microsoft could have risked this. Today they can’t as they struggle with a poor response to their Windows 8 operating system and their mobile phone product.

Losing the trust of their customers may be the final straw.

Will the top level domain milk cow save Melbourne IT?

The new global top level domains promise to be a rich cash cow, but is it enough to save Melbourne IT?

Beleaguered domain registration company Melbourne IT hopes the new breed of global top level domains will be its salvation after a decade of indifferent returns and a wallowing shareprice.

When the top level domains – known by their geeky acronym of gTLDs – were proposed five years ago they smelled like a revenue grab and so it has turned out.

To date 1930 organisations have applied for one of the top level domains, with a $135,000 evaluation fee that’s a juicy 260 million dollar pot to be shared between ICANN and the various domain registrars. No wonder Melbourne IT’s management is drooling.

One of the assurances of ICANN when the top level domains were announced was that trademark ownership would be part of the expensive evaluation process. That Melbourne IT is now spruiking gTLDs as a defensive intellectual property tactic is a notable backflip from ICANN’s earlier position.

The trading names aspect of the new global TLDs is going to be problematic for the registers and ICANN, a quick look at the applicant list for the new names sees domains like Tennis, Fail and Compare being applied for.

Good luck with defending those names in court – although having a spurious claim on the global use of the word ‘tennis’ will no doubt keep an army of Tennis Australia’s well paid lawyers occupied for years.

Even more delicious is Telstra’s claim to the domain name ‘yellowpages’. Despite being a declining business the Yellow Pages trademark is fiercely defended by various incumbent phone and directory companies around the world so it’s hard to see how that application will get passed without strong objections.

The real tragedy in the Melbourne IT story is how the company has gone nowhere for over decade after being the darling of the stock market when it was floated in 1998.

When Melbourne IT floated, it attracted controversy with it’s shares being priced at 2.20 and opening at $8.80. A stag gain of 300% for the insiders who got shares.

Despite the beliefs of those brainwashed by government privatisation campaigns in the 1990s, a staggering stag (pardon the pun) is money straight of the pocket of the listed company’s existing shareholders – Melbourne University in this case – and is evidence of either gross incompetence or malfeasance by the board and its advisors.

Given the Victorian government’s Auditor-General cleared the Melbourne IT board of any wrongdoing, the only explanation for the company’s botched float is gross incompetence.

The company’s share price since is clear evidence that gross incompetence remains a problem within the organisation’s leadership.

Whether the strong demand for global Top Level Domains can drag Melbourne IT out of it’s long term mediocrity remains to be seen but with the management’s track record it’s difficult to be optimistic.

Disclaimer: I was a director of a company that was a Melbourne IT reseller. There’s a long blog post in the poor, 1995 IT systems used by MelbourneIT and those might be related to the company’s poor performance over the last decade.