Decoding the new economy

Reinventing Microsoft in the age of cloud computing

Microsoft’s CEO Satya Nadella seems genuine in his push for cloud services and alliances, but there’s still a lot of marketing speak wrapped up

“Why does Microsoft exist?” Asked the company’s founder Satya Nadella at the Dreamforce 2015 conference.

Nadella has asked this question before and his answer at the San Francisco event was that Microsoft exists to empower people through technology, something that Bill Gates and Paul Allen envisaged in the mid 1970s when they founded new startup.

To show how he sees Microsoft’s position in the modern workplace, Nadella gave a not completely flawless demonstration of Microsoft’s integration with Salesforce.

The products Nadella pushed were Windows Phone and Windows 10, which he claims to be part of a major change in businesses with data transforming the way we work.

Interestingly, he framed the Windows 10 IoT strategy around endpoint security. While there are millions of vulnerable devices, it’s not clear shipping them with Microsoft’s firmware will resolve the problem.

“What’s the big technology shift? It’s how we use the data.” Nadella proclaimed in laying out how he sees a data culture transforming the places we work.

A Grand Pivot

Microsoft itself is dealing with a cultural transformation with the company shifting across to cloud based subscription services. “The thing that it’s done for us is it’s not a one-for-one move. It’s not like we’re just moving Exchange on premise to Exchange as a Service, it changes the value proposition for the customers.”

Nadella sees those cloud services as an opportunity to sell more products – and add more value – to customers, particularly small businesses.

The CEO’s role

A business’ success relies upon its culture and Nadella sees the role of the CEO as being about curating that culture, “I always ask what it is that defines us.”

Part of that culture is about becoming customer focused which involves thinking outside of one company’s products or silos, “how is our industry going to succeed? It’s going to succeed if we can add value our customers. Our customers are going to make choices that aren’t homogenous.”

Those varied choices are what’s driving Microsoft’s current push into alliances. “If we are going to realise the power of technology, then these partnerships will amplify that,” says Nadella.

While there were nuggets of truth in Nadella’s presentation, there was also a lot of truisms and somewhat meaningless slogans. While Microsoft’s push onto the cloud and into alliances that were once considered unholy might be genuine, it’s hard not to think there’s still a lot of marketing speak wrapped around it.

Managing the data stream

Managing the data deluge is where Salesforce is focusing its efforts in a competitive market

One of the world’s biggest tech events – if not the biggest of the vendor shows – is Dreamforce, Salesforce’s annual spectacular that this this year attracted a 150,000 attendees to San Francisco’s Moscone Center.

Every year sees the company – which now holds the title of the world’s fourth biggest software company – and its CEO, Marc Benioff, defining the direction of the company in the face of a rapidly changing market. Despite being a pioneer in cloud computing, the company is as vulnerable to disruption as anyone else in a rapidly changing marketplace.

This year, the focus is on analytics and automation along with a strong leaning towards the Internet of Things and app development on the Lightning platform they announced last year.

With the Thunder platform, Salesforce is offering a service that allows businesses to connect devices onto their platform where users can build up rules based business automation. One notable part of this is the integration with Microsoft Office 365, another example of Microsoft’s reaching out to previously hostile companies.

For Automation, Salesforce is building upon its RelateIQ acquisition from last year, now branded as SalesforceIQ. The company says “Relationship Intelligence technology that utilizes advanced data science to analyze company relationships and drive actions.”

The Wave analytics service, which was also announced at last year’s Dreamforce, is a key part of the the business automation and IoT services in providing the insights into the data being collected. In many respect, Wave is going to be the glue that holds most of the products being announced this year.

Complementing the Wave, Thunder and SalesforceIQ products is the Lightning platform, again announced last year, that allows users to use the company’s AppCloud to quickly build business applications.

For Salesforce, the direction being laid out from this Dreamforce conference is in making helping customers deal with the masses of data coming into the enterprise. As Tod Neilsen, the company’s Executive Vice President of the App Cloud says, “we’re look at making the data usuable for spreadsheet users.”

As businesses struggle to manage and understand the masses of data flowing into their organisations, this may well be a powerful selling point for Salesforce.

Paul travelled to Dreamforce 2015 in San Francisco as a guest of Salesforce

Avoiding the next wave of tech carnage

Today’s high growth businesses could be in tomorrow’s deadpool

“From the EMC boardroom you can see the carnage of the mini computer industry – Wang, DEC, Data General – you can see their buildings from the headquarters,” said VMWare’s CEO Pat Gelsinger during an interview this morning.

Gelsinger’s point is well made, those companies were victims of the last major computing shift which saw the minicomputer fall out of favour and be replaced with workgroup servers largely running Windows.

For VMWare, those Windows based servers were the basis of their successful virtualization product and the company was one of the winners of the shift to Personal Computers.

Shifting to the cloud

Now a shift to the cloud, something that Gelsinger sees as a bigger and more fundamental change than the one that dispatched companies like Wang, DEC and Data General to the deadpool in the 1990s, threatens to do the same to the companies that did well in the PC era.

That shift is seeing VMWare repositioning their business to their “unified hybrid cloud”, Dell shifting away from being primarily a PC manufacturer and Microsoft rethinking its entire existence. All of these companies are deeply threatened by IT’s move to the cloud and mobile services.

Watching for unicorpses

It isn’t just today’s incumbents that are threatened by shifting markets, a few of the current crop of today’s billion dollar unicorns will almost certainly become ‘unicorpses’ warns Nick Bilton in Vanity Fair.

That some of today’s seemingly untouchable tech startups may also join venerable older companies in the history books may surprise some but the risks are high, the shifts are great and the successful business strategies are not always obvious early in a technology shift.

One clear point is that size is no barrier to eventual failure, as we see with once untouchable giants winding up after technology and markets move against them it’s only the fast moving and flexible thinking that will survive.

The Age of Rattling the Cage

We’re in a time where when taking risk is the lowest risk in business says VMWare CEO Pat Gelsinger

“It’s no longer the big beating the small, it’s the fast beating the slow,” says Eric Pearson, CIO of the InterContinental Hotels Group.

Pearson was quoted by VMWare CEO Pat Gelsinger in his five imperatives for digital business keynote at the VMWorld 2015 conference being held in San Francisco this week.

The five are an interpretation of the trends in a radically changing business environment where the barriers to entry have fallen dramatically, industries are globalised and the time to market for new products has collapsed.

Put together, Gelsinger believes established businesses have to be more nimble as market and industry forces are going to punish those who are too slow to adapt.

Elephants must learn to dance

Gelsinger’s initial point is the world of business is now asymmetric – incumbents have everything to lose in the face of new businesses where upstarts have nothing to lose.

Part of that asymmetry comes from the world of shared resources, which gives startups and smaller businesses access to tools that were once only available to large organisations.

An obvious example of this are the cloud computing services that is concentrating VMWare’s minds, however another good example of how shared resources will change industries is the self driving car where Gelsinger cites vehicle utilisation will go from 4% to 71%.

Gelsinger points out using a car on a pay for use basis will change the structure of our cities which in turn changes the economics of living in suburbia and the business models built around it.

Standardising the cloud

Cloud computing is at the end of its formative, experimental phase and entering into a professional era where different types of services are going to have to work together.

“We have the private cloud which is focused on IT as we know it today, pulling out costs, slow and complex applications but also has powerful governance and does what I need it to do while meeting compliance purposes,” said Gelsinger. “On the the other side we have the public cloud which is fast and is able to scale effectively but has weak governance.”

In a perverse way, it’s Edward Snowden’s revelations that are driving many businesses to maintain their own private cloud networks due to concerns about foreign powers tapping their information flows and the sovereignty of data.

The consequence of a range of different cloud environments mean they are all going to have to get along with open standards becoming more important as businesses ‘mix and match’ their requirements.

Meeting the security challenge

As the Snowden affair shows, IT Security is difficult, complex and messy and becomes more so as workers start using their mobile devices and data is pushed around the cloud.

Gelsinger sees the online security sector as being the one of the biggest opportunities for startups and one of the fastest growing costs for business, “the only thing growing faster than the spend on security is the cost of security breaches.”

While Gelisinger’s focus is on VMWare’s security proposition, the security mindset is going to have be adopted by all business people. As the Target and Ashley Madison breaches have shown, the damage that can be done by a security lapse can be crippling and is a tangible business risk that senior managements and boards need to be across.

Proactive technology

Artificial intelligence has been through a thirty year gestation and Gelsinger told of his early days as a computer engineer working on AI projects in the late 1980s. Those early days of AI were a failure as the results as the time didn’t live up to the hype.

Gelsinger sees this as the next wave of computing as it moves from being reactive to proactive as systems become able to anticipate actions based on the data they are seeing.

While this has major ramifications for the computer industry, it also promises to change management and the role of many professions.

“This is going to change human experiences,” says Gelsinger however there will be challenges as businesses strike a balance between creepy versus convenience and invasive versus valuable.

Welcome to the age of rattling the cage

Half of the firms on today’s Tech 100 list will be gone within 10 years, was the warning in Gelsinger’s final point and he focused on the need for businesses large and small to break out in order to stay relevant.

“Welcome to the age of rattling the cage,” stated Gelsinger. “A time when taking risk is the lowest risk.”

Paul travelled to VMWorld 2015 in San Francisco as a guest of VMWare

Dealing with an app driven world

The challenge of dealing with a app driven, mobile workforce isn’t just one for technology companies.

“It isn’t easy to create apps for the real world,” is the opening line of this morning’s VM World conference in San Francisco.

That line encapsulates the challenge facing almost every company, not just tech companies like VMWare, in the face of shifting marketplaces and technologies.

One of the biggest business shifts is the move to mobile technologies. This isn’t just changing marketing and user experiences but also changing companies’ operations as staff increasingly use their own smartphones and tablets to work.

Managing a shifting market

That shift though is not simple, as ZD Net reports Facebook’s move to ‘mobile first’ was a tough path in the words of the company’s senior engineer Adam Wolff.

“I think everyone would say it was worth it, but it was extremely painful,” Wolff admitted, explaining each sub-team was building in their own ways because there was no one to crossover with necessary knowledge.

Facebook has probably been the most successful company is dealing with the mobile shift and their difficulties despite their massive resources show just how difficult it is for companies to change not just their technology, but their business processes and in many cases the entire mindset of the organisation.

Those pain points in transitioning between ways of doing business is where opportunities lie, for VMWare they are seeing IT departments struggling with the development and deployment of apps along with the security risks of staff bringing their own mobile devices.

Happy coincidences

For VMWare, this is a happy coincidence in that their main business of computer virtualisation is as much at risk from the shift to cloud computing and mobile applications as any other business. By offering the tools for companies to manage that shift, they can retain their place in the market.

The threat though is this space has many other contenders – not least Facebook itself with its open source React platform the company developed out of its experiences in developing its mobile product.

One of the strengths VMWare has is being an incumbent, which is why they are pushing their ‘hybrid cloud’ offerings where companies use both their own data centres along with the public cloud providers such as Amazon and Microsoft.

Stuck with sunk costs

For large corporates with huge sunk costs in their own infrastructure and those with security or operational reasons for keeping some of their functions in house that hybrid strategy makes sense as it’s unlikely any board or CIO is going to happily burn their existing systems and process down and go to a ‘pure cloud’ or mobile strategy.

While catering to that market is lucrative for the moment, the longer term risk is that the next wave of large corporations – and today’s high growth businesses – are pure cloud companies.

For the companies catering to the old ways of doing business, for the short term there’s profits to be made in the pain points from an evolving marketplace but in the long term it’s how well businesses are placed for the world the end of that transition that will guarantee their survival.

The process facing software companies like VMWin dealing with as business shifts is a challenge faced by almost all industries, the question is how to adapt to a very changed way of working.

Why do we still use fax machines?

Fax machines were once a standard form of business communication, today they are a superseded transition effect. Why do still use them?

If you’re in the ABC Canberra area at 4.05pm, I’ll be talking about this with Adam Shirley. Listen live here.

One of the most frustrating statements in modern business is “you’ll have to send a fax.”

Facsimile machines, once the pinnacle of 1980s business communications although they were first invented in 1843, started to die once the internet became common and email became the dominant messaging system.

Once dial up modems started becoming standard on computers, receiving faxes electronically became feasible and for while businesses struggled with the notoriously unreliable software to receive facsimile messages without the hassle of paper.

Eventually however they passed away as most business found there was no need for faxes and anything requiring a signature could be electronically signed or a scan of the original document sent.

Some industries and sectors – particularly the legal world and some government agencies – still hold out the need to send an ‘original’ by fax, party under the fallacy a facsimile copy is more secure, reliable and legally more valid than an email or electronically lodged document.

During the ABC Canberra program one listener pointed out the medical industry is dependent upon the older technologies, “we couldn’t operate without them” she told the producers. In a time of connected medical equipment and electronic data interchange, the medical industry has little justification in using outdated manual methods but habits die hard in a very conservative industry.

None of the myths around the reliability of fax are true and the reality is details sent by fax are just as easily intercepted by nefarious employees or third parties as emails. In many respects a fax is less secure than electronically interchanged data.

If you do have the need to send or receive a fax though all is not lost, services like eFax will still send or receive messages and then, ironically, email them onto you.

However there is a downside with these services, as one harried PA whose organisation still receives faxes due to its dealings with the legal profession described, the vast bulk of messages they receive are junk messages mainly offering cheap deals on office supplies.

The fax machine is another example of a transition effect where a stop gap product was effective for a short period as businesses adapted to new technologies, the SMS is going through a similar process now. Neither will be the last example of this.

Learning the tools of online business

Accountants are faced with a great opportunity, but they have to learn the tools of online business

The accounting and professional services industries are uniquely positioned as the economy goes digital, while their own sectors are undergoing radical change so too are their clients.

Given the changes facing the accounting industry, the invitation to host last week’s CPA Australia Technology Accounting Forum‘s second day in Sydney was a good opportunity to see how the profession and its clients are dealing with major shifts in their industry.

The accounting profession has been one of the big winners of the Twentieth Century’s shift to a services economy. Last week’s story on how the workforce has been changing illustrates this with a chart showing how the occupation has grown over the past 140 years.

In many respects accountants should be well placed to benefit in a data driven economy given the training and skills they posses. The big challenge for existing practitioners is to shift with the times.

The transition from what’s been lucrative work in the past will be a challenge for some in the profession. Many of the manual tasks accountants previously did are now being automated with direct data links increasingly seeing operations like reconciliations and filing financial returns being done in real time without the need for any human intervention.

In private practice, the shift to cloud computing and direct APIs has stripped out more revenues with useful earners like selling boxed software petering away as services like Xero and Saasu arrived and established players like Intuit, Sage and MYOB moved to online models.

Shifting to the cloud

That shift has already happened with the presenter in one breakout session asking the audience how many practitioners used exclusively desktop software, purely cloud service or a hybrid of the two. Of the twenty in the room, the vast majority were using a combination with three being purely online and one sole operator still stuck with a desktop system.

For accountants the message from all of the sessions was clear; the future is online and businesses based around paper based models are doomed. The question though for them is how will they make the transition to being professional advisers.

Strangely, the big challenge for accountants in private practice may be their clients. A number of panel participants pointed out small business owners are slow to adopt new technologies and this holds both them and their service providers back. Divorcing tardy customers may be one of the more difficult tasks facing professional advisors.

The Technology, Accounting and Finance Forum showed the potential for accountants and professional services providers to be the trusted advisors in an online world, the task now is for practitioners and their clients to learn and understand those tools.

Category: cloud computing

Avoiding the next wave of tech carnage

Shifting to the cloud

Watching for unicorpses

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