NYTimes writes about a new service being launched by TiVo:
The Internet, in jumping past the personal computer and into the living room television set, is starting to give viewers the possibility of bypassing traditional cable and satellite services.
TiVo, the maker of a popular digital video recorder, plans to announce a new set of Internet-based services today that will further blur the line between programming delivered over traditional cable and satellite channels and content from the Internet. It is just one of a growing group of large and small companies that are looking at high-speed Internet to deliver video content to the living room.
The new TiVo technology, which will become a standard feature in its video recorders, will allow users to download movies and music from the Internet to the hard drive on their video recorder. Although the current TiVo service allows users to watch broadcast, cable or satellite programs at any time, the new technology will make it possible for them to mix content from the Internet with those programs.
“This is the fourth electronic video service, and it is an alternative to cable, satellite and broadcast television,” said Tom Wolzien, an analyst at Bernstein Investment Research and Management. Those traditional services, Mr. Wolzien said, “have been the monster gatekeepers, but this is a way for content providers to get past them.”
In the new world of Internet-connected television, viewers will not have to worry about when a show is scheduled or from where it comes.
News.com also has a story on TiVo’s plans.
That is the lesson, according to WSJ, of the disclosure that Microsoft and SAP held merger talks recently.
Continued sluggishness in sales of corporate information technology is beginning to break that logjam. The emerging standard-setters — Microsoft, Oracle, SAP and International Business Machines Corp. — now are considering deals to solidify their positions in the technology infrastructure and application programs needed by businesses large and small.
The smaller companies, some analysts say, need to figure out how they fit in those major camps, including considering takeover possibilities. In one indication that slowing sales growth is prompting change, investors are starting to reassess how they value software companies in the stock market, paying less attention to sales of new software licenses and more to the recurring streams of income that companies receive from existing customers. That is akin to how investors view, say, cable-television companies.
“If you are not IBM, Microsoft, Oracle and SAP, you are going to have a hard time competing,” says Jason Maynard, an analyst with Merrill Lynch.
The financial pressures — only now easing — of the long slump in corporate tech spending have made more tech buyers dig in their heels about paying for new software. So software companies change their business models, gradually adding more services and subscription schemes for existing products.
As a result, the tally of new software sales has become less useful for forecasting a company’s performance. Instead, some investors are looking at software companies in much the way they look at cable-TV and wireless-service providers — valuing them for the stable revenue stream they receive from existing customers rather than their potential to sign up new ones.
For software companies, such revenue comes in the form of “maintenance” fees, annual payments for software updates, bug fixes and other product support. Maintenance fees generally range from 15% to 25% of the original license fee.
Goldman’s Mr. Sherlund goes so far as to say that for many software companies, “they would be better off if they forgot about new customers and concentrated on profitable maintenance revenues.”
Adds Fred Wilson: “Each layer in the technology stack is slowly getting mature and commoditized. We’ve finally gotten to enterprise software. Ten years ago, it was the sweet spot of technology venture capital. Now it’s a mature business in consolidation mode. This doesn’t mean that all enterprise software is slow growth. But clearly the big sectors that developed over the past fifteen years are mature. And so we need to move on to new areas in search of growth in the technology business.”
Tim Draper answers the question: “When you look at the Internet, what would you say are the top three impacts its had in our lives?”
I think Hotmail is one of themHotmail, Yahoo Mail, all the free mail providers. Now Google Mail. What these services have done is make it so that everyone in the world can communicate with one another. I take issue with the idea of a digital divide, because actually the digital world has made us all communicate better. Theres a digital connection, and a lot of that started with Hotmail. I think Hotmail has had as big an impact on the world as anything in the Internet. E-mail connects people; it allows us to have a network which we would not have otherwise.
The other thing that Hotmail did is open up a new kind of business, which was in effect free marketing. Hotmails marketing budget was almost zero, but it reached 11 million people in 18 months. And it grew from there to (now under Microsoft) 200 million Hotmail users. Thats free marketing for Microsoft. And thats quite valuable, because marketing tends to be 20% of your sales in most cases. So Id say thats the biggest impact.
The second biggest impactwell, I wouldnt put these in any particular orderI think search is really important, because now were able to find information, products, services, that we never could have found without the Internet. And it is really exciting! I tend to buy creative presents for people for Christmas, and I can find things on eBay, or Amazon, or Google, or Overture, whatever, that I never could have imagined finding before.
Same with services. I mean, you can find services on the Web that are just extraordinary, and you couldnt find those before. So I think search is the second category.
The third impact hasnt really happened yet, not in a big way. And thats Internet telephony. I think that free calls over the Web are going to be one of the greatest things that has happened to the world. Its going to be yet another great communication device. And then beyond that, were going to have voice and video over IP; were going to be able to see each other when we talk over the Web, and that is going to have another very large impact. And I think that companies like Santa Cruz Network, which is one of ours, and a few others, are going to really benefit from that happening.
Sanjay Anandaram of JumpStartUp Fund writes about how the current Silicon Valley startup ecosystem is likely to be disrupted:
Markets outside the United States could provide invaluable product and design inputs rather than the other way, as has been the traditional case. For example, SMS messaging on mobile handsets, long a communication method in Europe and Asia, is picking up in the United States. Interesting product variations from overseas markets could get launched in the United States (for example, Nokia’s cell phone with a built-in flashlight for the India market). In other areas, viz. fuel cells and healthcare (intra-ocular lenses, hearing aids, prosthetics) and the need for low-cost, long-lasting solutions in markets like China and India could change the economics of offerings of similar products in the United States.
India is the world’s youngest country, with over 150 million people in the age group 18 to 25. A significant number in this group is influenced the same way as their peer groups in the United States: this opens up huge market opportunities for a two-way exchange. There are interesting possibilities at the intersections of pharma and IT (drug discovery, clinical trials, and the like) as well.
All consumer electronics products and mobile handsets are now manufactured in Asia. The two biggest markets in China and India are waiting to happen. The next frontier is convergence of communications and computing in the home. China and India are the fastest-growing wireless markets. Isn’t there a huge opportunity for creating appropriate convergence solutions for these markets?
The “Golden Triangle” of Silicon Valley, India, and Greater China will be the engine of growth for the world’s technology business. Silicon Valley is in no danger of losing its position as the epicenter of global innovation, but it will increasingly be connected to China and India via an intricate mesh of capital, talent, and markets. Many VCs, entrepreneurs, and others in the business of folding future scenarios into current business plans are already well on their way to leveraging the Golden Triangle.
Rewind history a quarter century, to the early ’80s. What we now call IT (information technology) was still called MIS (management information systems). Outside corporate walls, personal computing was an interesting hobby. Inside corporate walls, it was an oxymoron. Computers that mattered were mainframes and minicomputers, which lived in ventilated rooms on raised floors, tended by a priesthood of professionals. The working synonym for computing was “data processing.” Workstations were called “terminals.” While terminals came in “smart” and “dumb” breeds, none were personal.
Vendors dominated and defined enterprise computing. An MIS department was an IBM, Digital Equipment Corporation, Control Data, Honeywell, Bull or NCR “shop.” It used not only central-processing hardware from those vendors, but also disk drives, terminals, networking hardware, cabling and nearly everything else. Even the third-party “compatible” peripherals in hardware and software were generally designed to work only with one vendor’s breed of computer system its “platform.”
Looking back, it’s easy to see that customers have always wanted compatibility and interoperability between platforms, along with extensibility of the platforms. The history of IT has been a slow war of liberation a struggle toward independence for users as well as for professionals.
Each of our buzz-concepts, from object-oriented to client-server to open source to Web services and service-oriented architectures, has been a step on the path to independence one in which increasingly modular, transparent and easily manipulated components let people build the systems they want. Rather than design applications, the professionals in the priesthood will eventually build modules and tools that users can assemble and manipulate. . .not to build applications, but to perform tasks and processes.
In the construction industry, this kind of independent and self-reliant activity is called DIY, for do-it-yourself. For the computer industry, we’ll call it DIY-IT.
Doc Searls had a backgrounder on it in Linux Journal: “Over the past year I’ve spent a lot of time looking into the growing independence of IT shops from vendors and the growth of DIY-IT, or Do-It-Yourself IT. While the DIY-IT trend involves growing independence from vendors, it also involves two other developments: 1) healthier relationships with vendors that understand and embrace Linux and open source; and 2) new products, by both vendors and independent Open Source communities, that provide interoperabilities that some vendors–for example, Microsoft with Exchange–don’t always welcome.”
In what could have been called Technology Management 101, Cusumano argues that software companiesthe focus herecan choose from three business models: They can be a products company (Microsoft); they can be a service company, providing consulting, systems integration and maintenance (Cap Gemini Ernst & Young); or they can be a hybrid, providing both products and services (IBM).
Nothing more basic than that, right? Then why do so many software companies get it wrong? One reason, Cusumano argues through case studies of companies ranging from AT&T to Toshiba, is that firms migrate, without sufficient thought, from one model to another in an attempt to capture more sales and earnings, all the while failing to staff up appropriately when their focusor lack of itchanges. If you think this central thought is too basic, give yourself exactly 60 seconds and see how many failures you can name in the $600 billion software industry.
Cusumano’s preferencelike that of most people who help fund start-up software venturesis the product approach: It’s easier to manage and has the possibility of becoming much more profitable. He is quick to point out, however, that one business structure is not inherently better than another.
When it comes to business models, the issues are twofold. First, you need to know what kind of company you want to be so that you can allocate resources effectively. Product companies need to organize in teams that focus on producing the best offering for a clearly defined market. Software service companies need to create relationships with their customers. As Cusumano writes, software service companies should “build technologies that look like products, or can be packaged in some way, but generally they cater to the needs of their individual clients.” Second, you need to realize that it is all well and good to change your customer mix over time (if that’s where the profits are), but your business model needs to change as well.
At the end of the book, Cusumano looks ahead: Firstly, we should always remember that bubbles are just that bubbles. They expand and then burst. It follows that good times for technology-based companies must return. The question is when and at what level, not ifSecond, history provides some guidelines for thinking about the futureMost new opportunities for software entrepreneurs comes with new hardware or computing platforms and niche applications, often for new platforms. This observation tells me to watch for new software opportunities at the forefront of hardware innovation and platform evolutionFinally, there is another chasm for software companies to cross. That chasm is the truly novice user the 5 billion or so people in the world who do not own a computer.
In these few sentences, Cusumano captures the next set of opportunities in the world of software: creating next-generation computing platforms for the worlds emerging markets. Can India be the home to the worlds next Microsoft? The book has plenty of ideas for entrepreneurs in what still remains the worlds most exciting and fascinating industry.