Decoding the new economy

How much did Vista really cost Microsoft?

Microsoft Vista’s failure hurts Microsoft today.

Microsoft Vista was the company’s despised stepchild – released way past schedule, clunky, slow and disdained so much by the market that PC manufacturers started offering “downgrades” to Windows XP to attract customers.

Despite the embarrassment, Microsoft retained its position as the world’s leading software company and does so today. But Vista certainly did hurt Microsoft and today’s marketplace shows the deep, long term effects of that damage.

Research website Asymco earlier this week looked at the ratio of Windows PCs sold to the sales of Apple Macs over the last 30 years. The ratio peaked at 56 to 1 in 2004.

Today that ratio is 18 and when phone and tablet sales are added in, the ratio is approaching 1:1. Apple has caught up.

It’s no accident 2004 is the peak of the Windows-Apple ratio. In 2004 Windows XP had matured after three years on the market, the older computers running Windows 98 or ME (another hated operating system) were being retired and a new version of Windows – codenamed Longhorn – taking advantage of newer technologies and with improved security was due to be released.

On August 27, 2004 things started to change with Microsoft’s announcement Longhorn would be delayed two years. This effectively broke the product roadmap that underpinned the business models of Microsoft and their partners.

To make matters worse, Apple were back in the game with their OSX operating system well established and a steady stream of well designed new products coming onto the market.

For consumers and businesses one of the advantages Windows systems had over Apple was the cost difference. The “Apple Tax” started to be eroded by the company’s move to Intel CPUs which delivered economies of scale coupled an aggressive program of tying up the supply chain with key manufacturers.

Then Longhorn – now known as Microsoft Vista – was released.

Despite the cheerleading of the Microsoft friendly parts of the technology media, consumers weren’t fooled. The product was slow and buggy with a new interface that confused users. Making matters worse was Microsoft’s ongoing obsession with multiple versions offering different features, something mocked by Steve Jobs, which further confused the marketplace.

Vista languished, customers decided to stick with Windows XP or to look at the faster and better designed Apple computers, and Microsoft’s market share started to slowly erode.

By the time Windows 7 was released Apple had clawed back their market position, launched the iPhone and caught the shift from personal computers to smartphones.

Probably the biggest embarrassment of all to Microsoft was the launch of the iPad, the market had been gagging for good tablet computer since the late 1990s and Microsoft’s partners had failed to deliver, partly because Windows XP, Vista and 7 didn’t perform as well as Apple’s iOS on the tablet form factor.

Microsoft’s completely blowing a decade’s lead in the tablet market is almost certainly due to the misguided priorities and feature creep that dogged Vista’s development. This is now costing the company dearly.

Asymco’s conclusion of Microsoft’s new market position is stunning and accurate.

The consequences are dire for Microsoft. The wiping out of any platform advantage around Windows will render it vulnerable to direct competition. This is not something it had to worry about before. Windows will have to compete not only for users, but for developer talent, investment by enterprises and the implicit goodwill it has had for more than a decade.

It will, most importantly, have a psychological effect. Realizing that Windows is not a hegemony will unleash market forces that nobody can predict.

Vista’s cost to Microsoft was great, it meant the company missed the smartphone surge, the rise of tablets and – possibly most dangerous of all to Microsoft – the move to cloud computing.

A lot hangs on Microsoft’s next operating system, Windows 8. Another Vista could kill the company.

Leaping seconds, new millennia

The leap second brings back memories of the Y2K frenzy

Along with a storm disrupting cloud computing services, last weekend also saw computer networks being disrupted by the leap second.

Servers needed to rebooted, websites froze and – as usual whenever there’s a technical glitch – airline check in systems fell over causing chaos for thousands for travellers.

It’s all very reminiscent of what we thought would happen with the Y2K bug. While sensible people didn’t think planes would fall from the sky, dams collapse and the world financial system grind to a halt (we had to wait another eight years for that), we did think there would be a lot of dumb little things to irritate us over the first few days of the year 2000.

That no real disruption happened, not even the airlines check in systems failed or tried to check in people for 1901, was credit to the entire IT industry. It a shame that the success in dealing with the complex unknowns of what was called the Y2K “bug” – which wasn’t really a bug but a feature – ended up being portrayed a scam by the entire IT sector.

A couple of years ago I was talking to a finance guy who claimed “the whole global financial crisis was a scam, just like Y2K.”

That view overlooks how the IT industry knew it had a problem and dealt with it, as opposed to the banksters and their friends in government who denied there was a problem right up to the moment it happened.

Of course it’s easy to ignore your business or industry has a problem if you know your friends in government will make sure your bonuses, holiday homes and private school fees will be guaranteed by the taxpayer, the taxpayers’ children and the taxpayers’ grandchildren.

Last weekend’s leap second and the cloud computing outage teach us that technology isn’t infallible and that things do go wrong.

For most of us when they do go wrong, we won’t have the government to bail us out.

This isn’t anything new. In any complex society, the unexpected can disrupt our comfortable way of living in ways we don’t expect. It’s something all of us should occasionally think about.

Is the Virginia storm outage bad news for cloud computing?

A disaster or an opportunity for the cloud computing industry?

On the eve of the US Independence Day holiday weekend, the last thing you need is a storm taking out your services. Unfortunately a storm across Virginia did exactly that to one of Amazon’s key data centres, taking with it popular social media sites like Instagram and Pinterest along with the Netflix movie service.

Having a key data centre going down and knocking out the services that rely on it surely exposes one of cloud computing’s greatest weakness – or does it?

Last week I spoke to Eran Feigenbaum, Director of Security for Google Apps, who made the point “not all cloud providers are created equal”. The Virginia outage illustrates this.

Netflix, Pinterest and Instagram all made choices to solely rely on one data centre for key parts of their services leaving them exposed should a storm, earthquake or tsunami affect that location.

Eran introduced me to a term I hadn’t heard before – “shared fate zones” – a good example of which would be putting all your servers in Virginia where they can be knocked out by a storm, in California or Japan where an earthquake can disable them or solely around the Indian Ocean where a tsunami like that of 2004 could know them all out.

All the major cloud providers have the facility to spread loads across the globe for exactly this situation. The services affected by the Virginia storm chose not to do this and they eventually were caught out.

Events like this aren’t just an issue with cloud computing, or even technology in general. Storms, earthquakes, fires and many other natural or man made disasters are a fact of life which can disrupt business. If an earthquake hits your town, the question is how quickly can your business and customers get back to normal.

Distributing services is actually the cloud’s strength, it means we’re not tied to one office or location so we can get back to normal a lot quicker than those who have lost everything.

Computer networks being knocked out is nothing new, we’ve seen this plenty of times over the last fifty years as squirrels have chewed cables, technicians have pressed the wrong button or natural disasters have disabled data centres. By spreading the load, cloud computing services should make networks less prone to problems.

A lot of people will say in the next few days that Amazon’s outage illustrates the unreliability of cloud computing, it’s actually the opposite.

Is Microsoft’s Surface Tablet Vaporware?

Will we see the Microsoft Surface released this year?

In the early 1990s the term “vapourware” appeared, it was born out of big software vendors announcing mythical products with a whole new bunch of features which the opposition already had.

Usually that next great product never appeared; it was just a ploy to stop customers defecting to the competition’s superior product.

There were a number of ways to spot vapourware – the lack of a working prototype, vague release dates and no firm pricing being just three.

Earlier this week, Microsoft brought tears to the eyes of grizzled IT industry veterans who missed the days of regular vapourware announcements with the “launch” of their Surface tablet computer.

After springing the event at short notice on the tech media, forcing the poor petals to travel to Los Angeles rather than their usual haunts of Silicon Valley, Manhattan or Texas and then starting the event late, Microsoft added insult to injury by not even letting the journalists play with a working version of the Surface, let alone take one home to play with.

One of the impressive things about vapourware are the specifications and this is true with the Microsoft Surface. The specifications of the base model Windows RT are about the same as the base model iPad with the added benefit of a keyboard, USB and Micro SD ports.

Looking past the hype, it’s clear Microsoft are having trouble with their strategy of a unified operating system across smartphones, tablets and traditional PCs, which has forced them to announce two different versions of the Surface, running different operating systems on different chipsets.

Having potentially incompatible products makes it even more important for tech journos and early adopters to play with the new devices to see how well they work – that version one of any new product doesn’t work well is another lesson from the 1990s IT industry.

In the spirit of vapourware, Microsoft hasn’t mentioned what either version of the Surface will cost, which probably indicates they don’t know what the final sticker price will be either.

Despite being funny, there was a serious side to vapourware – in the 1990s businesses often held off purchasing decisions or upgrades as they waited for promised products or features to arrive.

While eager customers waited for products that never arrived, their productivity slipped and technologies that should have been adopted earlier ended up coming late to the office desktop.

For Microsoft investors, the nature of the Surface announcement should be disturbing as the vapourware business tactic only works for incumbents in a strong market position and the software giant is anything but strong in the tablet computer market.

While it would be good to see a credible competitor to the iPad, it’s going to be difficult to take Microsoft seriously until we see some working versions that we can play with.

The lessons from the 1990s computer industry are clear – don’t fall for vapourware and buy what works for your business today.

Bringing your own device and business change

how the Bring Your Own Device philosophy is changing the businesses operate.

Two years ago I realised that the management trend of staff bringing their own computers to work – BYOD – was more than a fad when I noticed executives were bringing the then new iPads to meetings.

Most of these executives worked in organisations where IT departments had waged war on employees connecting their own equipment to the corporate network, so this was a serious development in the computing world.

In many ways employees had been bringing their own technology devices to work for years. It was, and still is, quite common to see public servants and those working for other bureaucratic organisations arriving at meetings with an underfeatured work supplied handset and their own smartphone.

IT managers hated this as they saw those private devices as a security risk and another headache for their overworked staff to deal with.

When the iPod was enthusiastically adopted by the executive suite, the game was over for those IT managers. Suddenly they had to deal with these devices and the issues involved.

At a seminar run by systems integrator Logicalis earlier this week looked at some of the issues around BYOD for companies. What was striking in their presentations were the need for HR and legal departments to be part of the process for adopting this philosophy.

The BYOD philosophy is a big jump for organisations as it means relaxing controls on employees and for many managers that is the biggest challenge.

Part of that challenge is controlling the organisation’s data on devices that could be going anywhere and doing anything.

While companies like Logicalis and Citrix address this with remote desktop applications that create a virtual Windows desktop on the employee’s device, networking giant Cisco offer their ISE devices to run “identity services” that set up rules controlling what staff can access and where they can access it from.

Cisco Australia’s Chief Technology Officer Kevin Bloch gave a good round earlier this week up of where they see BYOD driving business. To Cisco, the move to mobile devices is irresistible as shown in their Global Mobile Data Traffic Update.

Interesting both Kevin and the Logicalis speakers see BYOD as being part of the recruitment process. Increasingly younger workers expect they will be able to use their own devices rather than relying upon employer issued workstations and mobile phones.

According to Kevin, Cisco’s research is finding many employees would trade salary for the right to bring their own device which is something that should grab the attention of budget constrained managers.

This also ties into other employer trends such as Activity Based Workplaces where companies provide hot desks and staff are expected to store their items away at the end of each workday.

Ross Miller of the GPT Group described how this is another trend driving the paperless office as staff using hot desks find packing away files and paperwork each day is an unnecessary hassle.

What we’re seeing with businesses adopting BYOD policies is a big change in the way places operate and this has consequences for all divisions of an organisation from HR and legal through to marketing and corporate affairs. It’s a genuine game changer.

How the BYOD philosophy is changing business is good example of technology driving our habits and work practices in ways we don’t always anticipate.

One thing is for sure, the workplace of the future is far more autonomous and diverse than those we’ve been used to for the last hundred years, the businesses who don’t adapt are those being left behind.

Monetizing the Masses

How do social media services make a profit?

Monetization is a horrible word.

The term is necessary though as many online business models are based upon giving away a service or information for free. For those businesses to survive, they have to find a way to “monetize” their user base.

When Google were floated in 2003, the question was how could a free search engine “monetize” their users. The answer was in advertising and Google today are the world’s biggest advertising platform.

Facebook’s Inital Public Offering (IPO) announcement raises the same question; how does a company valued 99 times earnings find a way to justify the faith of its investors?

Advertising is the obvious answer but that seems to flattening out as the company’s revenue growth is slowing in that space. The AdWords solution tends to favour Google more than publishers as most advertising supported websites have found.

Partnering with application developers like the game publisher Zynga is another solution. Again though this appears to be limited in revenue and Zynga itself seems to be having trouble growing its Facebook user numbers.

So the question for Facebook is “where will the profits come from?”

There’s no doubt the data store Facebook has accumulated is valuable but how the social media service can “monetize” this asset without upsetting their users is open to question.

For Facebook the stakes are high as the comparisons with Friendster and MySpace are already being drawn.

We’ll see more partnerships like the Facebook Anti-virus marketplace, but these seem to be marginal at best.

In the next few months things will get interesting as Facebook’s managers and investors strive to find ways to make a buck out of a billion users who don’t pay for the service.

While “monetization” is an ugly word, it is one that every online company thinks about.

Every web based businesses will be watching how Facebook manage their monetization strategy closely as the entire industry struggles with the faulty economics of providing services for free.

Category: computers

Is Microsoft’s Surface Tablet Vaporware?

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