If you want some time off and want to try out some challenging brain teasers, check this.
Month: June 2004
Beyond the Rich Client
Tim Oren writes:
It should be clear that timesharing has been reborn in new clothes. Now we call it ‘salesforce.com’ and ‘Google’. The 3270 of old is now an HTML or XML browser. This interface has absorbed most of the new values of the communications function: Web, blogs, increasingly e-mail. The genre of the Internet are evolving to fit the limits of the browser, for better or worse. The business models are subscription, fee for service, or advertising. With the foundational layers of server software increasingly commoditized, investment flows towards value added services, and once again toward complex calculations – analytics, ad targeting, etc.
The rich client is struggling. In retrospect, the attempt to introduce 3D to the browsing interface in the mid-90s looks like a prelude to its descent. In the end, users wanted simplified access to information more than a ‘richer’ tool that introduced its own set of problems. The same fate has met most attempts to create ‘rich’ client dependencies, often in the service of advertisers. The only domain in which the full client platform is exploited and pushed is gaming. A growing business, but not one on which to balance the whole Windows franchise.
Elsewhere, the client side is stagnant and investment stays away. Though Microsoft apparently recognizes many of the information management problems that the combination of PC and Internet has created for users, its solution – Longhorn – keeps slipping out in time and losing relevance. GMail and other net-borne palliatives are already arriving.
I am not forecasting the death of the PC. Larry Ellison already tried that once. It will be with us for a long time to come, due to its overwhelming scale economies. It will still run all of the tools that we use to create information: Word, Photoshop, Powerpoint and the rest. It will be a terminal for the new timesharing, and a conduit for the Internet as medium. But it is no longer the location of new investment and innovation, and Microsoft’s ability to extract revenue, margins, and strategic advantage must fade accordingly. Joel’s right: The heart of the Windows franchise is rotting.
Web-based Aggregators
Red Herring has an interesting point about Newsgator’s VC funding by Mobius Venture:
It seems, based on conversation with [Newsgator CEO] Greg Reinacker, that the key to his company’s success in winning funding is not the $29 client software it has developed over the last 18 months. Rather, the recent introduction of a Web-based aggregator service that feeds RSS content into email clients has captured the imagination of VCs. This suggests that a new form of portal is evolving, a collection point for information that is delivered to the customer’s computer in a “personalized” stream.
Newsgator’s Web service is priced for significant margins. From $5.95 a month for individual users who want to track a few RSS feeds up to a $49.95-a-month service for business users who wants to track up to 50 keywords on in the universe of RSS feeds and receive up to 50 “premium” RSS feeds. Presumably, if customers want more tracking capabilities there is a price plan for that, too.
Fuel Cells
Dana Blankenhorn writes about Toshiba’s small fuel cell:
Fuel cells last longer between charges than batteries, and they can be recharged with new fuel rather than new batteries, fuel that might be available where batteries are not.
Now Toshiba has entered the technology side of this market. That is the most promising point of the story, not the specifics of what they’re offering.
The fact is this is Toshiba, this is a big company that doesn’t do things halfway. They see opportunity here. So should you.
Toshiba’s play is with a direct methanol fuel cell. The fuel is a form of alcohol, and the cell right now is replaced rather than being recharged. Samsung and NEC are also in the piece of the market Toshiba is targeting. That’s fine.
The point is that the fuel cell market will have many niches, many fuels, many standards and many opportunities. It’s going to evolve very, very rapidly.
Forbes writes about MTI MicroFuel Cells, a division of Mechanical Technology:
[The company] announced plans to push a fuel-cell concept it calls Mobion that can be used in handheld electronic devices like PDAs and smartphones. The result, the company says, will extend the length of time such devices can run on a single charge by three to ten times, compared with a battery of equivalent size.
The basic idea behind a fuel cell is fundamentally different from that of a battery. Batteries store energy using chemicals. Fuel cells instead use chemical reactions to create electricity. MTI builds a type of fuel cell called a direct methanol fuel cell, or DMFC, which mixes methanol and water on one side and air on the other, separated by a membrane.
The problem is the water. In most cases, the water in the process must take a circuitous route in order to be circulated around the power cell where it is mixed with methanol. Moving the water around requires using some complicated pumps that increase the overall size of the power cell and hobble its overall efficiency. MTI’s approach, dubbed Mobian, uses a proprietary method that internally manages the flow and entirely dispenses with the need for pumps.
When the DMFC runs out of power, instead of plugging it in to recharge, you’ll replace it much like you would typical batteries, only less often.
Open Source Paradigm Shift
Tim O’Reilly has an excellent overview of the change and opportunity that the new world of open-source software is bringing. He discusses three key trends:
– The commoditization of software
– Network-enabled collaboration
– Software customizability (software as a service)
He writes: “I like to say that we’re entering the stage where we are going to treat the Internet as if it were a single virtual computer. To do that, we’ll need to create an Internet operating system.” This is what we need to think of in India to make computing a utility.
India: The New Land of Opportunity
Om Malik visited India recently. His article in Business 2.0 captures his views on the changing country and the opportunities: “Thanks to low interest> rates, deregulation, and an influx of 785,000 new jobs at call centers and programming houses, Indian consumers are buying up everything from imported computers and software to cell phones and clothes. According to some estimates, 487 million middle-class Indians will spend an additional $420 billion during the next four years. There are other tantalizing hints that India will become even more attractive as an emerging market for U.S. businesses.”
TECH TALK: Tech Trends: 3. TCO Focus
As spending on IT has increased in enterprises, there has been an increasing attention being paid to the total cost of ownership (TCO) of technology. It is not longer just the upfront cost paid for hardware and software that needs to be taken into account, but the overall cost that goes into administration of the systems deployed. As growth has slowed, increasing attention is being paid to the TCO of technology in organisations.
The four primary costs are hardware, desktop and infrastructure software, business applications and management overheads. This is where three developments can play a significant role:
Open-source software
While open-source applications have done very well on the server, attention is now turning to the desktop. A recent story in the Wall Street Journal wrote:
Open-source software not only is relatively inexpensive, it may require less-powerful PCs for some applications. Frederick Berenstein is chairman and chief technology officer of Xandros Inc., a New York company that sells open-source desktop software. He says one hotel customer installed his company’s desktop software on 150 reservation clerks’ aged PCs at a cost of $5,100. He says the hotel estimated it would have had to spend more than $20,000 to upgrade to Windows XP software and $115,000 for new hardware that could handle it. He declines to name the customer.
Michael Silver, a desktop software analyst at Stamford, Conn.-based research and consulting firm Gartner Inc., says that some of his company’s large corporate clients think Linux desktops could save them substantial money and work fine for certain classes of users who don’t need the full range of desktop applications. For example, he says, Linux desktops can serve as a cheap alternative for employees who only need PCs for functions like e-mail and for checking their company’s Web sites — workers in call centers, say, who need to check product information and communicate online in-house, but who don’t create documents, spreadsheets or presentations. For these employees, compatibility issues are minimal.
Linux also has gotten a boost over the past year from some large computer and software sellers that initially viewed it as suitable only for the back office. Among them are HP, which is starting to install Linux instead of Windows on some of the PCs it builds, IBM, and software makers Novell and Red Hat Inc., which have set themselves up recently as providers of Linux desktop programs.
Companies and independent programmers that work on improving Linux desktop applications have made big strides in making the software look more like Microsoft’s applications, as well as in improving compatibility. With some open-source software, for example, a user has a choice between saving files in an Open Office format or saving in a Microsoft format with the familiar .doc or .xls file extension. That feature means that a Microsoft Word or Excel user can open a file created on open-source software without trouble.
If anything, the use of open-source software across the organisation is only going to grow, especially in emerging markets where piracy and non-consumption have been the solutions so far.
Tomorrow: Utility Computing
Entrepreneur’s VC Pitch
Brad Feld lists questions by Chris Wand that entrepreneurs seeking venture capital should answer:
1) WHAT IS YOUR VISION?
– What is your big vision?
– What problem are you solving and for whom?
– Where do you want to be in the future?2) WHAT IS YOUR MARKET OPPORTUNITY AND HOW BIG IS IT?
– How big is the market opportunity you are pursuing and how fast is it growing?
– How established (or nascent) is the market?
– Do you have a credible claim on being one of the top two or three players in the market?3) DESCRIBE YOUR PRODUCT/SERVICE
– What is your product/service?
– How does it solve your customers problem?
– What is unique about your product/service?4) WHO IS YOUR CUSTOMER?
– Who are your existing customers?
– Who is your target customer?
– What defines an “ideal” customer prospect?
– Who actually writes you the check?
– Use specific customer examples where possible.5) WHAT IS YOUR VALUE PROPOSITION?
– What is your value proposition to the customer?
– What kind of ROI can your customer expect by using buying your product/service?
– What pain are you eliminating?
– Are you selling vitamins, aspirin or antibiotics? (I.e. a luxury, a nice-to-have, or a need-to-have)6) HOW ARE YOU SELLING?
– What does the sales process look like and how long is the sales cycle?
– How will you reach the target customer? What does it cost to “acquire” a customer?
– What is your sales, marketing and distribution strategy?
– What is the current sales pipeline?7) HOW DO YOU ACQUIRE CUSTOMERS?
– What is your cost to acquire a customer?
– How will this acquisition cost change over time and why?
– What is the lifetime value of a customer?8) WHO IS YOUR MANAGEMENT TEAM?
– Who is the management team?
– What is their experience?
– What pieces are missing and what is the plan for filling them?9) WHAT IS YOUR REVENUE MODEL?
– How do you make money?
– What is your revenue model?
– What is required to become profitable?10) WHAT STAGE OF DEVELOPMENT ARE YOU AT?
– What is your stage of development? Technology/product? Team? Financial metrics/revenue?
– What has been the progress to date (make reality and future clear)?
– What are your future milestones?11) WHAT ARE YOUR PLANS FOR FUND RAISING?
– What funds have already been raised?
– How much money are you raising and at what valuation?
– How will the money be spent?
– How long will it last and where will the company “be” on its milestones progress at that time?
– How much additional funding do you anticipate raising & when?12) WHO IS YOUR COMPETITION?
– Who is your existing & likely competition?
– Who is adjacent to you (in the market) that could enter your market (and compete) or could be a co-opted partner?
– What are their strengths/weaknesses?
– Why are you different?13) WHAT PARTNERSHIPS DO YOU HAVE?
– Who are your key distribution and technology partners (current & future)?
– How dependent are you on these partners?14) HOW DO YOU FIT WITH THE PROSPECTIVE INVESTOR?
– How does this fit w/ the investors portfolio and expertise?
– What synergies, competition exist with the investors existing portfolio?15) OTHER
– What assumptions are key to the success of the business?
– What “gotchas” could change the business overnight? New technologies, new market entrants, change in standards or regulations?
– What are your companys weak links?
Decentralisation
Fast Company blogs a talk by Thomas Malone at Supernova:
Decentralization is the next stage in a progression of human organization that’s been going on for thousands of years.
New technologies allow us to have the economic benefits of large organizations as well as the human benefits of small organizations. The reason that’s possible is that technology is reducing the cost of communication to such a level that everyone in even huge organizations can have all the information they need about the big picture to make decisions without waiting for someone above them to tell them what to do. What will change things, though, is not the technology. It’s what people want. We need to think more deeply about what we humans really want.
Let me give you a couple of examples. The first example is the Wikipedia, an open content encyclopedia that anyone in the world can look at for free. But anyone in the world can also change it. How could that possibly work? The way it works is that there’s a list of recent changes, and frequent contributors are always watching that list. If people think a change is wrong or questionable, they immediately flag that page. Over time, it gets better and better. It’s probably not as good as the Encyclopedia Britannica, but it’s very, very good. This illustrates the themes of freedom and scale. Freedom because anyone in the world can contribute, but there’s also global scale in the pool of people contributors can draw upon.
You may be thinking, what does this strange little encyclopedia that’s not a business and doesn’t make money have to do with business? Let’s look at another example: Ebay. What most people don’t know is that 150,000 of its sellers make their full-time living on Ebay. If those people were employees of Ebay, it’d be one of the largest employers and retailers in the world. But they’re not employees. They’re independent store owners, and they have all the freedom independent store owners have. Coupled with that, they also have global scale.
Why do these examples mean this is going to happen in more places? This is the next logical stage in a very common pattern in the evolution of human organizations. This pattern happened first in the ways humans organized their societies. People made their living hunting and gathering, and they lived in small, decentralized, egalitarian groups called bands. Then we saw the rise of larger and larger human societies ruled by centralized leaders called emperors and kings. Then, 200 years ago, with the American Revolution and the French Revolution, we saw the emergence of democracy.
What explains this change? There are lots of factors involved, but surprisingly, a single factor can explain all three stages: the declining cost of communication. When communication was expensive, the only thing you could do was have small, face-to-face decision making groups. With the development of the first information technology, writing, it became possible to organize people in larger groups. It took another information technology, the printing press, to make the third way of organizing societies feasible.
There are three main ways large groups of people can make decentralized decisions: loose hierarchies, democracies, and markets.
Kevin Werbach adds: “We need to get back so people are in the center. The challenge of technology is to get to this end point, where people feel like they’re in the center but they are always connected. Specifically, layers might be a model. They explain the deep structure of the content of this conference. At the bottom, you’ve got the communications infrastructure. Then there’s a logical layer of directories and identity. Above that is software. Then an interface layer, the APIs and semantics. And then there’s the content itself: Media and information. All of these layers are facing decentralization.”
When Telephony Becomes Software
Fast Company blogs a speech by Niklas Zennstrom, CEO and co-founder of Skype:
One key factor is that when telephony becomes a software application, it will live on the edges of a network. There will be no centralized control. Telephony development cycles are still very long. But their carriers’ services are very much commodities, and there isn’t much differentiation.
When we can change telephony to an application, we’ll be able to change the economics of it. That will increase software innovation, new products, services, features. And that will be in the hand of small, nimble, software development companies. There will be higher competition, and the services will live on the Internet.
Another issue is peer-to-peer vs. client-server-client. What you will see is that virtually all voice over IP systems will look alike. And there will be incremental costs for managing the networks. Computing will move to the users, and we will see several benefits. We will see different economic models. If we look at ourselves as software developers rather than carriers, our marginal costs will be close to zero and we can provide these services for free. In the future, we will not be able to charge for telephony over the Internet. You will have to find other revenue sources. That could be anything: value-added services or advertisement.
There will also be increased robustness. If you have a switch go down or a gatekeeper, that’s not a problem to the end user. They can go to the Internet and find another route of communication. That will not be a problem for a decentralized network. A third benefit will be increased quality. If I can to call Germany using an American provider, it would go to a server in America and then one in Germany. That means there would be latency. If it’s a decentralized system, the call would go a shorter path between end points.
And another benefit would be privacy. End users will feel more safe. If you call them up using a decentralized server, who provides the service will not be able to record the conversation or calling patterns for any reason.
What are the implications for the telecommunications market? Before, services were integrated in the network. Now they become a software application. Before, we have an “intelligent network” even though it’s not that intelligent. After, the network would be dumb and all intelligence would be at the end points. In the telephony world, because services define the network, it becomes a commodity. Telecom companies acquiring customers need to spend a lot of money to convince people their services are better or cheaper. Decentralized systems bring low or no acquisition cost. It’s very easy for users to recommend services to their friends. We don’t spend anything on marketing.
In the old network, voice is the main traffic voice. Now, voice can be marginalized in terms of volume. There will be other kinds of traffic. Now, we have regional players. With a global network, there will be truly global competition. The players don’t need to be like AT&T. They can be very companies with very few people. And the last thing, which is most important, is that it will move from a provider-driven market to a customer-driven market.
Economically, value will shift to more productive areas. Disruptive innovation has to be good for the economy. That does not mean that the segment you’re operating in will grow. The market may shrink, but there may be other opportunities. Today, voice represents about half of the revenue. As voice becomes free, it could be good for telecom operators because we could grow broadband penetration. As a telco, you can provide new services. There are other segments that will develop. On top of all that, there is the voice over Internet segment, which is not part of the voice segment. You don’t make money on minutes. Voice over IP will be significantly smaller. It has to be, or the innovation did not serve any purpose.
I want to talk a little about regulation. Decentralized voice over IP has an implication on regulation. The regulators have been trying to regulate this saying it’s the same service, but it’s not. You regulate a market that is subject to monopoly. You want to make sure consumers are protected. There is no such monopolist in voice over IP. Traditional telecom regulations will not help the market grow, will not help consumers, and will not drive regulation. You should not and you cannot apply regulations designed for network operators to software providers.
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