Paul Wallbank – Brilliant Communications

Tag: microsoft

  • Has Google peaked?

    Has Google peaked?

    This article originally appeared in Technology Spectator as Google’s Wavering Trust Presumption.

    Google revolutionised the Internet when the service appeared just over a decade ago, the search engine’s clean and reliable results saw it quickly capture two thirds of the market from then competitors like Altavista and Yahoo!.

    One of the keys to that success was trust – Google’s users had a fair degree of confidence that the service’s results would be an accurate representation of whatever they were looking for on the web.

    With the continuing integration of social media services, local search, paid advertising and travel services into those search results, it’s time to ask whether we can continue to trust what Google delivers us.

    Google’s attempt to become a social media service is seeing results being skewed with by Google Plus profiles. Search Engine Land’s Danny Sullivan yesterday illustrated how Google+ profiles are changing Google’s search results.

    One thing that notable in these searches – and Google’s behaviour in enforcing “real names” on its Plus social media service – is the importance of brands and celebrities.

    It’s no coincidence in the example Danny Sullivan shows above that typing “Brit” into a Google search comes up with the instant suggestions of Brittany Spears and British Airways.

    More troubling is Google’s foray into travel with the purchase of  travel software company ITA. The travel industry site Tnooz recently looked at how searches for flights is now returning results from Google’s own service before the airlines or other travel websites.

    Another of Google’s search strengths was the clean interface. When advertising was introduced, most users accepted this was the cost of a free service. Today a search result on Google is cluttered with Google+ suggestions, local business locations, travel results along with the ubiquitious advertising.

    Suddenly Google’s search results aren’t looking so good and when you do find them, you can’t be sure they haven’t been skewed by the search engine’s determination to kill Google, Facebook or the online travel industry.

    If it were only search and online advertising that Google was tinkering with, we could excuse this as being an innovative company experimenting with new business models in a developing industry, but a bigger problem lies outside its core business.

    The purchase of Motorola Mobility – which is still subject to US government approval – changes the game for Google. Motorola Mobility employs 19,000 staff, increasing Google’s headcount by 60%.

    Even if Google has only bought Motorola for the patents, closing down or divesting the operations and laying off nearly twenty thousand staff would be a big enough management distraction but there is real possibility though that Google want to make phones.

    Google as a phone manufacturer, their previous attempt with the Nexus One wasn’t a great success, creates the problem of channel conflict with its partners who sell mobile phones with the Android operating system installed.

    Right now those partners are having great success selling phones through mobile telcommunications companies who desperately want an alternative to the iPhone given they perceive, quite correctly, that Apple is taking their customers and the associated profits.

    Apart from Apple the incumbents of the mobile phone industry are failing as Motorola have given up and are selling themselves to Google while Nokia are desperately seeking salvation in the arms of Microsoft.

    Microsoft’s failure to take advantage of Google’s missteps is also instructive. Microsoft seem to be unable to capitalise on the conflicts in the mobile handset industry with Windows Phone while their competing search engine, Bing, seems to following Google’s cluttered inferface and anti-competitive practices.

    With Microsoft largely out of the way with as an innovative competitor, it has fallen on newer business to challenge Google.

    In social media we clearly have Facebook and Twitter while in phones Apple is by far the biggest and most profitable opponent, something emphasised by Google giving Android away for free.

    The biggest question though is who can replace Google in web search, while there are worthy attempts like DuckDuckGo, Blekko and even Microsoft Bing, it’s difficult to see one of these displacing the dominant player right now.

    Which isn’t to say it can’t happen; as we see with the examples of Nokia, Motorola and possibly Microsoft, the speed of change in modern business means empires fall quickly.

    For Google, the lack of management focus on their core businesses may well cost them dearly in the next few years if web users stop trusting the company’s search results.

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  • Tightening the screws

    Tightening the screws

    Google had a big boost this week with Spanish bank BBVA announcing its 110,000 staff will switch to use the cloud based productivity software.

    This wouldn’t be good news for Microsoft as their struggle to retain their almost monopoly position in corporate desktop applications and will undoubtedly mean reducing licensing fees and accepting tighter margins on their products.

    BBVA’s move is interesting on a number of fronts although there’s a few myths among the trend towards cloud computing services and office productivity.

    Cost saving myth

    Part of the focus of selling these products is on cost and the head of Google Enterprise apps in Europe, Sebastien Marotte, said that his corporate customers on average achieved cost savings of between 50% and 70%.

    The cost aspect is interesting, I’ve posted before about exaggerated claims for cloud computing savings, and Marotte’s statement deserves a closer look.

    It’s highly likely the claimed cost savings are based on licensing – the standard Google Apps cost of $50 per user per year is substantially less than even the discounted rates large corporations receive on Microsoft licenses.

    While the licensing cost is a serious line item, particularly when you have 110,000 employees, it isn’t the whole story; there’s training, maintenance, disaster recovery, security and a whole range of other issues.

    Cloud computing services address a lot of those costs, but nothing like the order of 50 to 70%. In fact, it would be hard to find an enterprise that had the sort of slack in its IT operations to achieve those sort of savings.

    In one respect, this is where its disappointing that cloud computing vendors tout those sort of savings – not only does it commoditise their industry but it perpetuates the myth amongst executives that IT staff spend the bulk of their time playing video games.

    While there are real savings to be made for businesses switching to cloud computing, any sales person claiming a 50% or greater saving should be asked to justify their claims or shown the door.

    Clean slate

    Another interesting point with BBVA switching to Google is how the bank wants employees to leave all their old email and data in their old systems. Carmen Herranz, BBVA’s director of innovation, says we “want to start from scratch… don’t want to carry across old behaviours”.

    Not migrating data is an interesting move and how BBVA’s users deal with retrieving their contact lists, dealing with existing email conversations and how staff will deal with feature differences like document revision tracking – an area where Microsoft Office outdoes Google Docs.

    Internal use only

    BBVA are only applying the Google services to internal documents as well which means the bank will be using other software – probably Microsoft Office – for corresponding externally.

    This makes it even more unlikely the touted cost savings of 50 to 70% are achievable, and may actually increase support costs while reducing productivity as many customer facing staff will have to deal with two systems.

    Having one system for use inside the business and another for external communications seems to be a European trend – before Christmas French company Atos announced it was abolishing email within the company but still using it for outside messages.

    Both abolishing email and moving to cloud based office packages are really about improving productivity in a business while cost savings are nice, the main focus on adopting cloud computing – or any other new technology – should be on freeing your staff to do more productive work.

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  • The business of baffling choices

    The business of baffling choices

    In his Daring Fireball blog, John Gruber’s takes to task the view that Apple suffers through not having a wide product range.

    John makes the valid point that Samsung seems to stealing market share from HTC rather than Apple but the whole theory of offering too many choices strikes to the heart of two industry’s business models.

    Those two industries are the mobile telco business and the Windows personal computer sector.

    In the PC world, the wide range of models has been both an advantage and a weakness; it’s allowed Dell and others to create custom machines to meet customer needs but also leaves consumers – both corporate and home buyers – confused and suspicious they many have been taken advantage of.

    All too often customer were being had; frequently buyers found they’d bought an underpowered system stuffed with software that either was irrelevant to their needs or an upgrade was necessary to get the features they hoped for.

    The entire PC industry was guilty of this and Microsoft were the most obvious – the confusing range of operating systems and associated software like the dozen version of Microsoft Office was deliberately designed to confuse customers and increase revenue.

    For the PC industry, the “baffle the customer” model reached its zenith, or nadir, with Windows Vista where Microsoft deliberately put out an underspecced ‘Home’ edition designed to push sales up the value chain.

    Compounding the problem, most of the manufacturers followed Microsoft’s lead and put out horribly underpowered systems in the hope that customers would upgrade with more memory, better graphics card and bigger, faster hard drives.

    Most customers didn’t upgrade and as a result the Vista operating system – which was horrible anyway – enhanced its well deserved reputation for poor performance.

    In the telco sector, consumer confusion lies at the heart of their profitable business model; a bewildering range of phones and plans often leaves the customer spending too much, either through an overpriced plan or paying punative charges for ‘excess’ use.

    Having a hundred different types of Android phone adds to the confusion and, by restricting updates, they can cajole customers into ‘upgrading’ to a new phone and another restrictive plan every year or so. This is why you get phone calls from your mobile phone company offering a new handset deal 18 months into a two year plan.

    Apple’s model has been different; in their computer range there has never been a wide choice, just a few configurations that meet certain price points. The same model has used for their phones and iPads.

    For Apple, this means a predictable business model and a loyal customer base. They don’t have to compete on price and they don’t have to fight resellers and telcos who want to ‘own’ the customer. It’s one of the reasons mobile phone companies desperately want an alternative to the iPhone.

    Companies using the baffling choices business model – Microsoft, HP, Dell and your local mobile telco – may well continue to do okay, but that business model is coming under challenge as new entrants are finding new niches.

    For all of us as consumers all we can do is make the choices that are simple are reject complexity. Warren Buffett has always maintained he doesn’t invest in businesses he doesn’t understand, perhaps we should have the same philosophy with the purchases we make.

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  • Channel Conflict

    Channel Conflict

    I first became aware of the term “Channel Conflict” in the late 1990s when running an IT business that was a Microsoft reseller.

    A channel conflict is where a supplier starts competing with the merchants they supply, or promoting one group of their customers against another. A good example is Google’s Travel Search that is upsetting many of Google’s own advertising customers.

    As a local IT support business my channel conflict came from Microsoft advertising their own direct sales and consulting services as well as promoting their premium “gold” partners.

    Conflict with such a big channel partner was frustrating and unavoidable given Microsoft’s position in the market. We couldn’t do anything about it except work towards Gold Partner status and differentiate ourselves from the competitors who had the advantages of Microsoft’s marketing.

    The web – in particular online commerce – is increasing these channel conflicts as the Internet sweeps away existing middlemen and allows others to develop.

    A good example of how e-commerce is changing things was a tweet from Australian business broadcaster Brooke Corte where she found a swimsuits retailer’s prices were 40% cheaper through her shopping mall’s website.

    Essentially the swimsuit retailer is being undercut by their own landlord’s e-commerce service – an incredibly difficult channel conflict.

    For the retailer, they are up against Westfield; a big, multinational player with substantial market share and deep pockets who also happens to be their landlord in many high traffic locations.

    It isn’t all bad news for the small retailer facing a channel conflict; Seth Godin has a good perspective of what happens when the big boys decide to play in your sandpit.

    Seth’s situation was in 2008 Google launched a competitor – Knol – to his Squidoo businesses. This appeared to be the death knell, or Knol, for Squidoo.

    Three years later, Google killed Knol.

    In many cases channel conflict turns out not to be such a problem for the specialist retailer – big companies like Google, Microsoft and Westfield are good at what they do and dealing with the minutiae of retailing is not necessarily one of them.

    Small businesses also have an advantage in the very online tools that are disrupting retail and other fields. TechCrunch recently looked at some of the mobile and price comparison tools and how local retailers can use them to compete with Amazon.

    Coupling technology with service and focus – two factors that large companies usually struggle with – can define the battlefield for smaller businesses struggling with channel conflict.

    As declining margins and new technologies tempt big suppliers into dabbling in areas they previously avoided channel conflict is only going to increase, though for the creative and confident businesses it isn’t the threat it first seems to be.

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  • The business of denial

    The business of denial

    Denial is a powerful sedative, it allows us to trundle dozily along a well worn patch oblivious to the reality our comfortable world has changed.

    Last week’s claim that youth is fed up with the iPhone by Nokia’s Niels Munksgaard – who has the wonderful title of Director of Portfolio, Product Marketing & Sales – is a great example of how far and how long denial can continue while there’s still money to pay executive bonuses.

    Canada’s beleaguered Research In Motion, manufacturers of the Blackberry phone, showed the same delusions when they released their Playbook tablet computer with the declaration Amateur Hour Is Over.

    The only amateur hour was in the hubristic minds of RIM’s marketing team.

    While profits keep flowing big organisation can afford delusions – Google can indulge their social media fantasies while the Adwords rivers of gold continue to flow ever faster and Microsoft can continue to indulge their delusions while their Windows and Office products remain immensely profitable.

    Microsoft’s “droidrage” campaign, designed to embarrass Google’s Android mobile phone platform, is part of that delusion; for Microsoft’s campaign to work they have to prove there is a widespread Android malware problem, show their system isn’t prone to the same flaws and – most importantly – have enough product on the market to sell to those disillusioned Google customers.

    Such a negative campaign has many fallacies – it assumes there are widespread security problems in Android, that Microsoft will pick up disaffected Google customers and there are enough Microsoft based products to grab those sales.

    Probably Microsoft’s biggest problem is the assumption that customers actually care about that stuff – for years Windows dominated its market despite being riddled with computer with security holes and malware.

    Microsoft succeeded because their competition was delusional; the best example being WordPerfect claiming graphic systems like Windows were a fad at a time when an inferior Microsoft Word was gobbling up their markets.

    By the time WordPerfect realised their error and released a truly dreadful WordPerfect for Windows it was all too late, like a stagecoach company realising the motorcar is here to stay.

    The problem for businesses in denial is that reality eventually does bite; plenty of people in the newspaper industry believed their advertising based model was secure and profitable – indeed many of the cosseted managers in that sector still believe it is – which now leaves them struggling in a changed world they thought they could ignore.

    Denial among incumbents is a great opportunity for newer, more flexible players; for years mobile phone and tablet computer manufacturers were in denial about the usuability of their product – Apple proved them wrong and now commands the most profitable chunks of those markets.

    Being the village blacksmith or a buggy whip maker was a good business to be in at the beginning of the 20th Century. Thirty years later those block boys and saddlemakers who hadn’t made the jump found themselves out of work.

    It’s going to be interesting to see will be this century’s buggy whip manufacturers.

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