Decoding the new economy

IT becomes the plumbing

As the internet of everything and cloud computing takes over, IT is becoming just like the plumbing. This is a good thing.

One of the things that jumped out of last week’s smart city tour in Barcelona is that Nicholas Carr’s IT Doesn’t Matter is coming true — IT is now the plumbing.

That’s not to depreciate IT, it means the technology is now becoming so embedded in society and business that people no longer notice.

Like roads, electricity and water people assume it will be available but don’t notice the massive effort or investment required to make sure these services work.

With cloud computing, pervasive internet and connected devices, most business never need to see an IT worker.

For telco executives, IT managers and tech support people this is a blow to their egos as they always wanted their industries to be more than utilities.

In one way being a utility legitimises IT as it makes the industry more important than just a bunch of geeks playing with computers.

That also means that things have to work, ‘best effort’ services no longer cut it when you’re a utility and things have to work 99.99% of the time. Just like in plumbing.

Becoming the plumbing could be the best thing that happened to the IT industry.

MYOB’s journey into the cloud

How MYOB is responding to the cloud computing threat by moving their boxed software products onto the cloud

The big winners of the Personal Computer era were the software companies. During that time firms like Microsoft, Oracle and Adobe became some of the most profitable companies on the planet.

With the arrival of cloud computing those profits started to dry up and those software companies that did so well out of the PC era are now scrambling to develop new products to meet a very different market.

Accounting software provider MYOB is a good example of this changing industry – a business that dominated the Australian small business market and supported an army of certified consultants now finds cloud based competitors like Xero nibbling away at their industry position.

MYOB Chief Technology Officer Simon Raik-Allen describes his company’s journey to the cloud in the latest Decoding the New Economy video clip.

“The cloud has amazing benefits for small business,” says Simon. “For twenty-two years we’ve had desktop products and for the last three or four years we’ve had cloud based services.”

“It’s been a really interesting journey, we’ve been on it for three or four years now where we’re converting the company to a cloud company.”

“But it’s also a cultural journey,” Simon observes. “I love seeing how people start to think differently when stuff is in the cloud.”

“Having things in the cloud opens the opportunity for employees to start slicing and dicing data in different ways.”

“It opens up the innovation curve to what’s possible.”

Bringing partners on the journey

Like Microsoft, one of MYOB’s strengths is its partner community – in particularly the company’s twenty thousand strong Certified Consultant program.

Those consultants, like Microsoft’s partners, are seeing their traditional revenue streams challenged as their business models change, a topic discussed with Growthwise’s Steph Hinds in a previous video interview.

“Everybody takes the cloud journey at their own place,” says Simon. “For bookkeepers in particular this is an opportunity to change their business in a positive way.”

“Normally a bookkeeper would drive around and visit two, three or four customers a day and help then with their books. Now they can help twenty customers in a single day.”

Looking beyond the cloud

Simon sees more than cloud computing changing accounting software with connected devices like the Pebble Watch, voice and gesture recognition along with Near Field Communications technology all being built into MYOB and computers in the near future.

“NFC is a very powerful technology,” Simon states. “Imagine in the accounting world where you are doing your books by moving your phone.”

“In retail NFC is going to be big where you can walk up to a product, wave your phone in front of it and it will tell you about the product.”

“We are very much driven by what our clients want,” says Simon. “It comes down to the use case of will it add to our customers’ business.”

An enthusiastic advocate

One of the things that’s impressive about talking with Simon Raik-Allen is his enthusiasm for technology, whether it’s Pebble Watches, NFC enabled robots or gesture controlled accounting software.

MYOB needs that enthusiasm in its move away from the once immensely profitable box software business onto the cloud where margins are thinner, the advantages of incumbency aren’t great and the competition from well funded competitors like Xero is immense.

As with many other ventures, MYOB is dealing with a huge disruption to their core business and the challenges are immense.

Image courtesy of Morrhigan through sxc.hu

Intel’s challenge to find a new message and market

Can Intel adapt to the post PC marketplace where the old Wintel dominance no longer matters

Twenty years ago people cared about the specifications of their computers and chip maker Intel led the industry with its marketing of 486, Pentiums, Pentium Duos and Pentium IIs.

As we come to the end of the PC era, the consumerisation of technology and the rise of cloud computing mean customers no longer care about what’s inside their systems and Intel is struggling to find a new message.

Over the last few months Intel have been showing off their latest range of Central Processing Units (CPUs) to enterprise and small to medium business (SMB) groups. Last week the company hosted an SMB event in Sydney that illustrated how Intel is struggling to cut through the market.

Speaking at the event was Steph Hinds – an evangelist for cloud computing – who told the story of how her Growthwise accounting practice was flooding out during storms.

Because her systems were on the cloud Steph and her staff were able to work from home and local cafes while the landlord fixed her offices. Had Growthwise been using a server based system the business would have been crippled while her IT people implemented a disaster recovery plan.

Steph’s story in itself illustrated the Clean, Well Lighted Place argument for cloud computing and also showed how Intel is struggling to sell its PC and server upgrade cycle message in an era where that business model is dead.

This didn’t stop some of the other speakers at the small business event trying to sell the idea that upgrading computer systems and retaining an IT support company were essential to small business success but it’s a message that was valid a decade ago.

For Intel the challenge is to find a new message – it may well be that the company’s future lies in supplying the powerful CPUs that run data centres, or maybe the low energy and maintenance chips required to control the billions of intelligent devices that will run the internet of everything.

The company’s launch of their Galileo board – a tiny computer designed to compete in the intelligent devices market with the likes of the Raspberry Pi – is a step in the latter direction and shows Intel is exploring the possibilities.

Wherever Intel’s future lies, it doesn’t lie in trying to sell a business model that is quickly going the way of the Brontosaurus.

During most of the PC era, it was the Wintel partnership that dominated the computer industry, now Microsoft have realised this fundamental market change and started their journey to become a devices and services company.

The challenge now lies with Intel to decide where their journey will take them in a post PC world.

Google, Facebook and the Silicon Valley paradox

The paradox of Silicon Valley is cloud and social media companies want us to use the products they won’t use themselves.

One of the great advertising campaigns of the 1980s featured entrepreneur and Remington Shaver CEO Victor Kiam telling the world “I liked the product so much I bought the company”.

The modern equivalent of Victor Kiam’s slogan is “eating your own dogfood” where businesses use their own products in day to day operations. It’s a great way of discovering weaknesses in your offerings.

One of the paradoxes of modern tech companies is how they don’t always eat their own dogfood when it comes to their business philosphies – they expect their customers to take risks and do things they deem unacceptable in their own businesses and social lives.

The best example of this are the social media services where founders and senior executives take great pains to hide their personal information, a phenomenon well illustrated by Mark Zuckerberg buying his neighbours’ houses to guarantee his privacy.

Just as noteworthy are the policies of Google’s IT department, for past five years most tech evangelists – including myself – have been expounding the benefits of business trends like cloud computing and Bring Your Own Device (BYOD) policies.

Now it turns out that Google doesn’t trust BYOD, Windows computers or the Cloud, as the company’s Chief Information Officer, Ben Fried tells All Things D of his reasoning of banning file storage service Dropbox;

The important thing to understand about Dropbox,” Fried said, “is that when your users use it in a corporate context, your corporate data is being held in someone else’s data center.”

This is exactly the objection made by IT departments around the world about using Google’s services. It certainly doesn’t help those Google resellers trying to sell cloud based applications.

Fried’s view of BYOD also echoes that of many conservative IT managers;

“We still want to buy you a corporate laptop, get the benefits of our corporate discounts, and so on. But even more importantly: Control,” Fried said. “We make sure we know how secure that machine is that we know and control, when it was patched, who else is using that computer, things like that that’s really important to us. I don’t believe in BYOD when it comes to the laptop yet.”

Despite these restrictions on Google’s users, Fried doesn’t see himself or his department as being controlling types.

“But the important part,” Fried said, “is that we view our role as empowerment, and not standard-setting or constraining or dictating or something like that. We define our role as an IT department in helping people get their work done better than they could without us. Empowerment means allowing people to develop the ways in which they can work best.”

Fine words indeed when you don’t let people use their own equipment or ask for a business case before you can use Microsoft Office or Apple iWork.

That Google doesn’t give its staff access to many cloud services while Facebook’s managers restrict their information on social media shows the paradox of Silicon Valley – they want us to use the products they won’t use themselves.

Back in the 1980s, Victor Kiam liked what he saw so much that he bought the company. You’d have to wonder if Victor would buy Google or Facebook today.

Microsoft’s continued evolution

Microsoft are evolving to a changed market, but can they evolve quickly enough to beat their competitors?

Today’s investor briefing by software giant Microsoft shows the company’s evolution as their markets shift.

Microsoft Chief Operating Officer Kevin Turner broke out the key numbers for the company’s revenues which illustrate just how the company’s business model is changing.

Over half of Microsoft’s revenues are coming from enterprise customers and of the product lines, Office unit makes up just under a third, Server and Tools slightly more than a quarter while Windows has fallen to 25 percent.

Despite the decline in Widows’ revenues, there’s no doubt about Microsoft’s determination to drive the PC upgrade cycle through the retirement of Windows XP as Turner explained.

We have a giant XP install base. But guess what? We’ve made so much progress on that XP install base. It’s down to 21 percent worldwide, and we have plans to get that number to 13 percent by April when the end-of-life of XP happens.

A big part of the change is the shift to the cloud with Turner claiming two hundred percent growth in Microsoft’s Azure services.

Despite the change in Microsoft’s focus, the threats remain with Apple releasing both iOS7 and their new range of iPhones along with Google making their QuickOffice mobile app free to iOS and Android users.

While Microsoft are steering their ship around, the incumbents in other sectors are protecting their positions. In an evolving world, survival is not guaranteed.

Category: cloud computing

IT becomes the plumbing

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