software | Paul Wallbank - Communications Professional

Shifting Microsoft’s culture

Microsoft CEO Satya Nadella continues to grapple with changing the company’s culture

“What would be lost if we disappeared?” is the question Microsoft CEO Satya Nadella claims is driving the company’s direction in his latest memo to employees.

In the email obtained by website Geekwire, Nadella told his staff redefining the company’s culture is key to success, “we can do magical things when we come together with a shared mission, clear strategy, and a culture that brings out the best in us individually and collectively.”

That culture though is not static and Nadella is describes how the company needs to focus on helping its customers through its cloud and Windows based products.

For Microsoft this is not new, the change from a desktop and server based licensing business to one dependent upon cloud subscription services has been a huge change for the business since the iPhone was released nearly a decade ago.

The challenge for Nadella however is to keep revenues coming in as the river of gold that was Microsoft’s Windows licenses slowly dries up.

One of the biggest changes to Microsoft’s culture could be in coming to terms that it isn’t such a huge and powerful corporation any more.

How software defines the Industrial Internet

The Internet of Things is a fourteen trillion dollar opportunity for industrial companies says Bill Ruhe, the head of GE Software

The Internet of Things is a three legged stool of the consumer, enterprise and industrial applications says Vice President of GE’s software division, Bill Ruh.

“It’s about connecting machines, connecting people and driving a new kind of experience. For the consumer it’s a social experience, for the enterprise it’s a whole new way of how their IT departments running, in the industrial space it’s a revolution where we get to rethink how we operate.”

Ruh sees the IoT as being worth over 14 trillion dollars to GE over the next two decades, making it bigger than the other two legs combined.

Eliminating downtime

Most of that value comes from three areas; improved resource utilisation, operational optimisation and eliminating unscheduled downtime.

“The fact is downtime is expensive, for airline 41% of all delays and cancellations are due to mechanical errors. If we get rid of those your life gets better, my life gets better and the airline’s lives get better.”

“Zero unscheduled downtime doesn’t sound sexy but it’s one of the most profitable and sexiest topics ever.” In this Ruh agrees with Salesforce’s Peter Coffee that eliminating outages is a key part of delighting the modern customer.

Ruhe sees that the industrial sector hasn’t used IT and the internet well in the past, “RFID was going to change the world and it didn’t, we saw smartgrids were going to be the biggest thing and it didn’t achieve a lot of the hype that people saw.”

“Now the technology is aligned not just with technology for technology’s sake but to an outcome that leads to growth for an industrial sake.”

An example of the operational efficiencies that Ruh is particularly proud of is GE’s PowerUp technology that promises to improve the output of wind turbines, “it is a series of technologies used to analyse information about every wind turbine on a farm and to dynamically adjust each and every one to optimise the wind speed.”

“When you do that we’ve found we can generate up to five percent more electricity per wind farm because of software, which adds twenty-five percent more profitability.”

“In the next generation of wind turbines all this kind of software is going to be embedded in it from the design phase through to the operational phase,” Ruh says. “It’s going to change how our customers are going to operate wind turbines.”

Building digital twins

Another aspect Ruh sees with the changes is how machines and data will work together where equipment or parts are shipped with a ‘digital twin’, a software representation of the device that lets the customer test scenarios on their computers.

“I can now do ‘what if’ analysis on that machine using its data and that’s going to change how things work. That takes everything from 3D modelling, to manufacturing, to maintenance to operations.”

Building on domain knowledge

Ultimately Ruh sees GE’s strength with the Industrial Internet being the company’s domain knowledge, “this world is different and you cannot come from outside and pretend you’re going to learn it as you go.”

“The way people buy equipment is totally different, we have equipment that’s eighty years old and we still support it. That’s totally different from the software world.”

Google joins the IoT operating system race

Google joins the vendors looking to power the Internet of Things

Later this week Google will announce an Android based IoT operating system later this week at their I/O Conference, Netimperative reports.

In doing so they’ll be joining Microsoft, GE, BlackBerry and a host of others in looking at providing the software that runs the Internet of Things.

The carving up of the IoT continues.

Seven flavours of Windows

Microsoft’s latest Windows roadmap may well be the last hurrah of the old software licensing model

In a post on Microsoft’s blog the company’s VP for Windows, Tony Prophet, yesterday laid out the final line up of the upcoming Windows 10 software.

As previously, Microsoft have decided to spoil the market with choice, offering Home, Pro, Enterprise and Education versions of the operating system along with two different versions of the mobile package and a stripped down product for Internet of Things devices.

In many respects this is Microsoft desperately holding onto the old model of operating systems where a consumer version bundled into a commodity PC offered less than an Enterprise version supplied as part of a lucrative corporate license.

That model still works – Microsoft’s licensing revenue was $19 billion last year – although it is in slow decline although the problem is operating systems are now commoditised and the old position of dominance in the PC industry doesn’t work in a world of cheap, lightweight devices interacting with cloud based services.

One theory running around the tech industry at the moment is that Windows 10 will be the last Microsoft operating system, if that’s true then today’s seven flavours of the software is the last grab at the old licensing model.

Winning the cloud

The cloud computing war may have been won but the battles for profit continue.

“The cloud has won, the argument is over and any software company that hasn’t moved onto the cloud is doomed,” stated Netsuite CEO Zack Nelson at the Suiteworld 2015 conference in San Jose this week.

Nelson and Netsuite certainly can say their software is selling with revenues increasing thirty percent over the last year, although the company’s overall losses were the same as a year earlier at $22 million.

As with all conferences the focus was on big product announcements with Netsuite showcasing their enhanced Point of Sale services, European data centres and their alliance with Microsoft.

Microsoft become partners

The video appearance of Microsoft CEO Satya Nadella to announce the partnership covering Azure web services and Office 365 is another step by Nadella to move Microsoft into strategic relationships with key cloud computing companies following another with Dropbox last month and with Netsuite’s fierce rival Salesforce last year.

For Netsuite the partnership offers the opportunity to integrate more tightly into Microsoft’s office productivity and enterprise tools that have been clawing their way back in marketshare after sustained attacks from Google and other cloud services.

In the product offerings, Netsuite was showing its push into ecommerce and retail showing off both its Point Of Sale system and its site builder capabilities with the big boast their back end services are “faster than Amazon’s.”

Taking the game up to Amazon is a big boast and it will be worthwhile seeing how the Seattle based giant responds, certainly for Netsuite’s customers having an e-commerce system that can match the industry leader will be a big attraction.

Rolling out the data centers

Data centers are always an issue for cloud computing services with the questions of redundancy, data sovereignty and latency being raised. The announcement that Netsuite will be opening centres in Europe will help the company in those growth markets.

For the Asia Pacific, there are no immediate plans for data centers in the region but the company’s main push is on developing deeper relationships into the Chinese markets with resellers and partners.

The international push is important for Netsuite with the proportion of its non-US revenues being stuck at just over a quarter for each of the last three years with Craig Sullivan, the company’s Senior Vice President for Enterprise & International Products, flagging China, Brazil and Germany as key growth markets in the coming years.

A native look and feel

In all three countries the company is betting on partners growing market share through a Most Valued Players and reseller programs aided by the company’s claim the software works natively in 19 different languages.

“We want international users feel like NetSuite was designed for them,” is Sullivan’s ambition for the service’s global operations.

Cloud computing may have won the software wars but there’s still plenty of battles to be fought over who will make the profits from the online software market, a fight not helped by evolving business models.

Suiteworld was a good demonstration of what Netsuite is hoping to fight that battle with. Whether it’s enough to succeed either as a company or a takeover target remains to be seen.

Shifting the cloud business model

Just as the cloud vendors disrupted the software market, they themselves face shifting business models

“What’s the biggest risk to your business?” was one of the questions asked of Netsuite CEO Zack Nelson during a post keynote discussion at the Suiteworld event in San Jose yesterday.

Nelson’s response was the shift to transaction based businesses and cited cloud based human resources company Zenefits as an example.

The transactions model can work two ways with either a fee being charged for each transaction – something that data analytics Splunk does – or Zenefit’s model of taking third party commissions.

A commission driven business

Zenefits doesn’t charge for its software instead making money from commissions paid by companies they refer users to. When a client needs workplace insurance or a new benefits package, the service gets a fee from the provider.

Investors love the idea with the company yesterday raising $500 million in a round that values the business at $4.5 billion dollars after just two years since being founded.

Regulators however don’t like its less than transparent commissions with the service in trouble in a number of US states and it’s clear to see how such a revenue model would hit problems in countries with strong disclosure rules.

Both of the transaction models present a threat to current cloud computing software businesses such as Netsuite and Salesforce that charge fixed license fees based on the number of users and the features they want. Both Splunk and Zenefits on the other hand give their software away.

Disrupted disrupters

Just as the cloud providers’ licensing model disrupted the traditional massive negotiated contracts for enterprise software and the fixed cost box model for small business, the online companies themselves might be facing their own disruption to the way they make money.

For executives like Zach Nelson, shifting from one lucrative model to another more uncertain revenue source will be something keeping them awake for a while longer.

Microsoft builds its future

Microsoft makes a statement on its future

A billion devices running Windows 10 was the promise made by Microsoft at the company’s Build Conference in San Francisco yesterday.

The ambition is based upon delivering the system on devices ranging from desktop computers down to the embedded systems on Internet of Things devices.

As part of the drive to get onto the IoT, Microsoft also announced Windows 10 initiatives for the makers’ community with various programs for Arduino, Raspberry Pi and Intel’s Minnowboard.

At the same time the company announced how some software will soon be able to run on iPhones and Android devices with an extended Software Developers Kit.

While this makes Windows more attractive for developers who no longer have to develop different versions for the Microsoft product, it’s also an admission the company’s phone strategy has failed.

For Microsoft yesterday’s Build Conference was the opportunity for the company to show their vision of the market’s future that involves computers, mobile devices, the cloud and the Internet of Things.

Whether Microsoft is part of that future is the main concern of CEO Satya Nadella.

Los Angeles finds the limits on school computers

Los Angeles finds the limits of computers in schools, this might be a good thing for the education tech sector.

Two years ago the Los Angeles school board proudly announced a $1.3 billion project to roll out iPads in some of its more disadvantaged schools.

Now the contract has collapsed and the school board wants the money back from Apple and its partner, education publisher Pearson.

It seems the program’s big problem was the software with Pearson supplying a poor product that was unusable for students.

What we may well be seeing though is the end of the obsession politicians and education bureaucrats have with technology, something that ran ahead of teachers’ skills to use the tools and the capabilities of those tools – as we see with Pearson.

Perversely though this may be the time that education technology starts to flourish as the sector falls into what Gartner describes as the ‘pit of disillusionment.’

Dropbox and Microsoft’s alliance of convenience

The Microsoft alliance with Dropbox puts Google at a disadvantage and shows how alliances are evolving on the cloud

Today’s announcement that Dropbox and Microsoft have deepened their alliance throws a further challenge out to Google’s ambitions to take a slice of the office productivity market while further reducing profits for the once dominant software giant.

Dropbox’s new deal with Microsoft give of users the ability to edit Office documents natively in their browser. It’s an advanced version of the feature that Google have offered with their Docs service for some years.

A notable aspect of this deal is how Dropbox have been prepared to partner with Microsoft – a decade ago smaller and relatively new companies were suspicious of working with Microsoft given the giant’s well deserved reputation for ruthless behaviour.

Equally Microsoft teaming with more agile newcomers rather than trying to bully them out of business is a distinct change from the company’s peak days under Bill Gates.

The real target of the alliance though is Google and the Dropbox-Microsoft deal makes Office 365 a far more formidable offering as a cloud service.

For Google the deal means they have to add more features to their Docs service to counter a more competitive Microsoft offering. It also shows the marketplace is shifting as alliances of convenience are forming.

Microsoft in Middle Age

Microsoft CEO Satya Nadella seeks to find a future for the company as it enters middle age.

One of the great business stories of today is how Microsoft is reinventing itself in the face of a totally changed industry. With the company turning 40, The Economist has a look at the business in its middle age.

The Economist concludes CEO Satya Nadella is making the important changes to the business that founder Bill Gates couldn’t make because he was too protective of the company’s core products and that Steve Ballmer, Nadella’s predecessor, wasn’t interested in making as he sweated the existing assets.

As this blog has pointed out before, The Economist notes the profit margins of the cloud and mobile services Nadella is focusing on are far slimmer than those Microsoft are used to from their server and desktop products.

Those fat profit margins were the reason why Nadella’s predecessors had little reason to refocus the company but towards the end of Ballmer’s leadership it was clear Microsoft couldn’t resist the shift for much longer.

Microsoft’s dilemma was clear to the stock market as well with The Economist having a chart showing the relative performance of IBM, Microsoft and Apple over the last 35 years.

When Microsoft peaked in the late 1990s, the company was worth over twenty percent of the total tech sector’s valuation – today Apple has stolen most of that value.

A particularly jarring from The Economist’s graph is just how much IBM dominated the tech sector a generation ago and its steep decline following the introduction of desktop computers.

IBM’s decline in its dotage is exactly the fate Nadella is trying to avoid for Microsoft, with companies like Google, Apple and Amazon as competitors he has a tough task ahead of him.

Who owns a smartcar’s smarts?

The question of software ownership in a smartcar opens a range of difficult questions about the internet of things.

Automakers Say You Don’t Really Own Your Car states the Electronic Frontiers Foundation.

In their campaign to amend the US Digital Millenium Copyright Act to give vehicle owners the right to access and modify their automobiles’ software the EFF raises an important point.

Should the software licensing model be applied to these devices then purchasers don’t really own them but rather have a license to use them until the vendor deems overwise.

Cars, of course, are not the only devices where this problem arises. The core of the entire Internet of Things lies in the software running intelligent equipment, not the hardware. If that software is proprietary and closed then no purchaser of a smart device truly owns it.

Locking down the smarthome

This raises problems in smarthomes, offices and businesses where the devices people come to depend upon are ‘black boxes’ that they aren’t allowed to peer into. It’s not hard to see how in industrial or agricultural applications that arrangement will often be at best unworkable.

Four years ago tech industry leader Marc Andreessen pointed out how software is eating the world; that most of the value in an information rich economy lies in the computer programs that processes the data, not the hardware which collects and distributes it.

That shift was flagged decades ago when the initial fights over software patents occurred in the 1980s and 90s and today we’re facing the consequences of poorly thought out laws, court decisions and patent approvals that now challenge the concepts of ownership as we know it.

Is ownership outdated?

However it may well be that ‘ownership’ itself is an outdated concept. We could be entering a period where most of our possessions are leased rather than owned.

If we are in a period where ownership is an antiquated concept then does it matter that our cars, fitness bands, kettles, smoke alarms and phones are in effect owned by a corporation incorporated in Delaware that pays most of its tax in the Dutch Antilles?

Who owns the smartcar’s data?

The next question of course is if the software in our smart devices is secret and untouchable then who owns the data they generate?

Ownership of a smartcar’s data could well be the biggest issue of all in the internet of things and the collection of Big Data. That promises to be a substantial battle.

In the meantime, it may not be a good idea to tinker too much with your car’s software or the data it generates.

Rampaging Ransomware

How long until we see ransomware infecting smart devices asks a Romanian security researcher?

A few years ago Ransomware was a joke, malware would install a screen that would demand a ransom be paid to ‘unlock’ the computer. It was easy to get around and almost trivial to remove.

Then came Cryptolocker, a nasty piece of malware that would gleefully encrypt a victim’s hard drives, rendering them inaccessible unless a sizeable ransom was paid.

Ransomware suddenly became serious.

Cryptolocker eventually was unpicked with a cracking tool released and the ring’s alleged founder, Evgeniy Bogachev, now on the run from US authorities with a three million dollar reward for his arrest.

A better class of ransomware

Now the gangs running the ransomware scams are even more sophisticated and well resourced with Andrei Taflan of Romanian security company BitDefender describing how Bitcoin values are often tracking ransomware activity.

“When we see Bitcoin values surging we watch for increased ransomware activity. Someone is buying Bitcoins to unlock their data,” Taflan told me last week in an underground bar appropriately called The Rabbit Hole.

Taflan’s colleague Bogdan Botezatu describes how the ransomware problem is getting worse, not better, with Cryptowall patching the weaknesses that led to Bogachev’s downfall.

One of the fascinating aspects of Cryptowall is that it’s polymorpic – it changes shape to elude traditional signature based anti-virus programs. The malware also creates unique Bitcoin wallets to make tracking transaction harder.

Paying the ransom

Many businesses being infected by Cryptowall and having data locked away by an industrial grade encryption program makes it a no brainer to pay the demands. It’s a profitable business.

Faced this rather impressive piece of work, Botezatu raises a chilling prospect about ransomware in the Internet of Things; how long, he asks, will it take ransomware to target more sensitive devices we use, including cars and medical implants?

Botezatu’s concern illustrate why security with the Internet of Things is absolutely essential if industry and the public are to have any confidence in connected devices.