Looking Ahead to 2005

Fast Company peers ahead and comes up with 101 ideas. “It may be convenience or transparency or a new way to think about strategy. We think you’ll see ideas that will help you change the way you work or how your company does business. In some cases, you may just be able to adopt the concept itself. In others, you may be inspired by the soul of it.”

75. Software Becomes a Utility

Imagine if we all had to pump our own water and generate our own electricity. Primitive! Yet that’s what we do every day with our computer infrastructure. Every business re-creates the wheel every time it has to tie its financial software to its customer software. Now it’s time to turn everything into a service. Leading companies pursuing this idea are Softricity and Grand Central Communications. Grand Central, founded by CNET and Vignette founder Halsey Minor, promises “integration on demand” for Web-based services by creating a shared infrastructure that everyone can tap into. Sure sounds like the power company, but considering that it’s taken five years for companies to get comfortable with Web-based applications for sales and support, only the bold need apply.

Best Buy’s Customer Analysis

WSJ writes:

Brad Anderson, chief executive officer of Best Buy Co., is embracing a heretical notion for a retailer. He wants to separate the “angels” among his 1.5 million daily customers from the “devils.”

Best Buy’s angels are customers who boost profits at the consumer-electronics giant by snapping up high-definition televisions, portable electronics, and newly released DVDs without waiting for markdowns or rebates.

The devils are its worst customers. They buy products, apply for rebates, return the purchases, then buy them back at returned-merchandise discounts. They load up on “loss leaders,” severely discounted merchandise designed to boost store traffic, then flip the goods at a profit on eBay. They slap down rock-bottom price quotes from Web sites and demand that Best Buy make good on its lowest-price pledge. “They can wreak enormous economic havoc,” says Mr. Anderson.

Best Buy estimates that as many as 100 million of its 500 million customer visits each year are undesirable. And the 54-year-old chief executive wants to be rid of these customers.

Mr. Anderson’s new approach upends what has long been standard practice for mass merchants. Most chains use their marketing budgets chiefly to maximize customer traffic, in the belief that more visitors will lift revenue and profit. Shunning customers — unprofitable or not — is rare and risky.

Mr. Anderson says the new tack is based on a business-school theory that advocates rating customers according to profitability, then dumping the up to 20% that are unprofitable. The financial-services industry has used a variation of that approach for years, lavishing attention on its best customers and penalizing its unprofitable customers with fees for using ATMs or tellers or for obtaining bank records.

Rules of 126 and 111

Indexed Forever links to a Bain Capital Ventures report on successful software companies. One of the points mentioned is that a new software company should focus on the rule of 126 – $100 million in revenue, 20% EBIT margins in 6 years.

That presumably would apply to companies with a licencing model. Indexed Forever offers a rule of 111 for “software as a service” companies: $100m, 10% EBIT, in 10 years.

Taking on Cisco and Lucent

[via Frank McNeill] Forbes writes about Simon Lok’s plans:

Simon Lok is brash and brilliant and intense, a 26-year-old computer scientist with a teensy company and big, conqueror dreams. He has developed an elegant little networking box that shuts out intruders and costs 80% less than the gear hawked by the giants he despises–Cisco, Lucent, those guys.

Anyone who has had to run a data network, he says, knows exactly how he feels. That frustration drove him to start his own company, Lok Technology, which now targets the next big wireless market–Wi-Fi and a new wave of WISPs (wireless Internet service providers) that offer Net access over free airwaves and charge people for the ride. The firm’s Airlokdevice handles most of the core chores of running a network, signing up new users, checking passwords, routing traffic and, most important of all in this leaky, insecure age, protecting networks from hackers and viruses.

Desktop Linux – The Final Hurdles

Tom Adelstein offers a shortlist:

1.Windows Network Neighborhood visibility and UNIX/Linux visibility in the same panel.
2.Active Directory password management which includes single sign-on and password expiration policies.
3.Interoperability with Exchange 5.5 and Exchange 2000.
4.Font compatibility with Microsoft Office and Openoffice.org and/or StarOffice.
5.Windows Terminal Server clients using RDP out of the box for home grown applications and special Windows applications.
6.Ability to click on a file in a Windows or Samba share and initiate the associated application.
7.Device management for hardware compatibility.
8. Compatible Windows Media player Codecs.

TECH TALK: CommPuting Grid: LAN-Grid

How does one go about building a public computing grid? Lets start with the smallest workable solution and then work up from there.

Ill start with our own office. We have a staff of about 45. For the past two years, we have been using network computers (thin clients) on the desktop with all computing and storage taking place on two thick servers. Each of the servers can handle about 30 users, and cost us about Rs 75,000 implying a per-user capital expenditure of about Rs 2,500 ($55). The servers have plenty of memory, RAID disks (which automatically mirror data), and run a Linux distribution with Linux Terminal Services (LTSP). All applications run on the servers, and every users home directory secured by password is also on the servers. The thin clients cost about Rs 6,000-10,000 ($130-$220) depending on the configuration and newness. They can either boot directly off the network, or have a small footprint of the OS locally. Users get a Linux desktop on their display.

(Note: It would have possible to create a similar server-centric computing platform with Windows also using Microsofts Windows Terminal Services or Citrixs Metaframe. It is just that the open-source equivalent is much cheaper!)

The benefits of an architecture like this is that not only does the user computer cost come down (even though there is some investment on the server-side), there is a dramatic improvement in manageability. The only systems that need to be managed are the two servers. In case one of the thin clients fails, users can just go to any other machine and start working their data is on the server. What users see on their desktops can be controlled from the server. This creates, in my opinion, a better managed environment. This is a small start towards addressing the twin issues of cost and complexity.

So, what are the per user costs in a set-up like this? The server costs about Rs 2,500 per user while the client costs about Rs 10,000 for a total of about Rs 12,500 per user. And then, there will be the software costs (in the case of open-source software, this will be near-zero). While one can argue that a regular thick desktop can come for as low as Rs 15,000 in India today, that is missing one of the key benefits of server-centric computing the manageability.

This is not to say that our current architecture does not have a problem there is now a single point of failure in the server. And that is the first challenge to overcome. How to create a LAN-grid for tens of users that is both scalable and reliable? Server hardware could be added as users grow, and in a manner such that even if one server is not available, the users data is available at all times. What this means is that data has not be mirrored across disks in different systems in near real-time. A storage area network (SAN) does exactly this, but can be quite expensive. The challenge is to do this via software using off-the-shelf commodity hardware.

Tomorrow: Net-Grid

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