June 3, 2005 – Emergic

Opening up Mobile Phone Platform

Walter Mossberg asks the cellphone carriers to stop acting like Soviet ministries:

In the U.S., the wireless phone carriers have used their ownership of networks to sharply restrict what technologies can actually reach users.

I call these cellphone companies the new Soviet ministries, because they are reminiscent of the Communist bureaucracies in Russia that stood athwart the free market for decades. Like the real Soviet ministries, these technology middlemen too often believe they can decide better than the market what goods consumers need.

Of course, the cellphone carriers aren’t Communists, and they aren’t evil. They spent billions of dollars to acquire and build their networks. They have every right to want to manage these networks carefully and to earn a fair return on their investments on behalf of their shareholders.

Also, these companies often subsidize the cost of the phones consumers buy, so they feel they have a right to decide what products reach consumers.

However, I believe that, in the name of valid business goals, the U.S. carriers are exercising far too much control over the flow of new technologies into users’ hands. In an ideal world, any tech company with a new cellphone, or with software to run on cellphones, should be able to sell it directly to users. These customers would then separately buy plans from the cellphone companies allowing those devices to work on the networks.

While it is a lot less so in India because of the use of GSM and the separation between cellphone purchase and service selection, Indian cellphone companies would do well to imbibe the positive lessons from i-mode a few years ago to build an open platform on which service providers can ride.

Enterprise Software Business Model

Brij Singh points to a post by Jeff Bussgang: “The enterprise software business model is dead. This is refrain many VCs are mumbling to each other lately. Price pressure is incredibly intense between open source, Microsoft moving up the stack, vendor consolidation, IT buying wariness, the ASP model, overfunding in interesting sectors and many other factors. It used to be that you could build a profitable enterprise software company at the $15-20M threshold. But with today’s pricing pressures and high cost of sale, it seems to have jumped to $40M, and it’s harder to reach that threshold quickly. VC appetite for standard enterprise software appears to be dwindling to nothing.”

Brij adds: “Enterprise software business is tough there is no doubt about this. High cost of selling, distractions with Sarbanes compliance, where-is-the-ROI concerns have made this sector very tough. Though the title is rhetorical, real deal is that the conventional budgeting process for enterprise software is dead. Now its much more diffused across offshoring, open source solutions, outsourcing, DIY-IT, and best-of-breed packages.”

Web and Tags

Ken Norton writes:

Tagging isn’t new; the web is full of tags. But they’re not in meta keywords, they’re in the links. The text of the links pointing to other web pages are simply the web publisher’s best effort to describe the page she’s linking to. And it turns out those links are some of the most valuable metadata we have to work with in search. And you know what? They’re subject to all of the flaws people say will doom tagging. Spammers lie. The spelling is atrocious. And there’s ambiguity everywhere. But given a huge population of links, you can begin to make sense of the madness. Why? Well, there are humans on both ends of the search rope. There’s a person searching, and there’s a person who’s written some content. The job of the search engine is to simply connect the two. Traditional software engineers, in their endless pursuit of the elimination of ambiguity, sometimes forget this. Search engineers embraced it.

Clay Shirky adds:

There are humans at both ends of the rope. It seems so simple, but technologies that can rely on this fact have a huge advantage, since the human brain is terrific at signal extraction in environments that consistenly defeat machine strategies. This is one of the reasons that semweb-flavored approaches to metadata attempt to express data in an unambiguous format if there is a machine at the other end of the rope, even slight ambiguities defeat the recipients interpretive capabilities. As the man said, time flies like an arrow, but fruit flies like a banana.

Once you have humans at both ends of the rope, though, even purely contextual tags that are unextractable from the tagged content itself, tags like cool and toread, become valuable. This is why attempts to improve tagging by making it less ambiguous are missing the point the ambiguity allows for a huge reduction of both markup cost and conceptual brittlenes.

Creative Creation

Steve Waite quotes from George Gilder’s new book “The Silicon Eye.”

Like the railroads that bankrupted a previous generation of visionary entrepreneurs and built the foundations of an industrial nation, fiber-optic webs, storewidth breakthroughs, data centers, and wireless systems installed over the last five years will enable and endow the next generation of entrepreneurial wealth. As Mead states, ‘the hardest thing I ever had to do in my life was to get a company going during the bubble. Now, Mead says, there’s space available; you can get fab runs; you can get vendors to answer the phone. You can make deals with people; you can sit down and they don’t spend their whole time telling you how they’re a hundred times smarter than you. It’s absolutely amazing. You can actually get work done now, which means what’s happening now is that the entrepreneurs, the technologists, are building the next generation technology that isn’t visible yet but upon which will be built the biggest expansion of productivity the world has ever seen.’

Some more quotes by Gilder in a Business Week blog:

Forget the telecosm. Get ready for the “planetary sensorium.”

By that, Gilder means a world dotted with billions of interconnected imaging sensors and radio frequency identification (RFID) tags. A camera chip in every dark alley. An RFID tag on every piece of merchandise. Data whizzing around the globe to be correlated with other data. No crime unseen. No movement of goods undetected.

Gilder believes ubiquitous chip-dom is about to materialize because of changes in the economics of the semiconductor business. “The old semiconductor industry was based on abundant power,” he says. “Now, we’re in an environment where power is the key scarcity. Every performance metric is governed by watts it consumes. It’s not bit per second. It’s bit per second per watt for everything.”

According to this new paradigm, RFID chips are “more powerful than a Pentium,” Gilder declares. Whereas the Pentium uses about 80 watts, an RFID chip uses microwatts to power a processor, memory, and radio transmissions. That’s quite a feat in a world where low power consumption determines value.

Tomorrow’s World

Dan Farber excerpts comments made by Paul Saffo, director and Roy Amara Fellow at the Institute for the Future, Craig Mundie, CTO, Microsoft, Farzad Nazem, CTO, Yahoo!, and Phil Wiser, vice president and CTO, Sony Corporation of America, at a Churchill Club panel:

Saffo: There is a shift from information to media and from mass media to personal media. The old media order really is collapsing.

Mundie: There will be some fundamental changes but they wont happen overnight. New technology wont arrive deus ex machinamost things needed to create change are already here and now its about reaching scale (e.g., high speed access). Planet-wide there are enough connected people and a young population to reach a tipping point. The biggest missing piece is the fact that the missing piece is not the same all over the world and the lack of cost effective broadband in the U.S. is frustrating.

Nazem: Grandma and the teenager should not see the same page in the same way. Personalization and relevance are key as people move their lives on-line. The missing pieces is low-cost broadband in the U.S. and the fact the Yahoos new music service doesnt work on all devices (iPod).

Wiser: The enterainment business, especially for consumer electronics, is about the quality of the experience. Personalization has to look at individuals interests and predict what they would want to do, which is not what traditional enterainment companies are good at. People who predict what would work well for consumers in the 25 hours a week they typically devote to entertainment will be winners. Some technologies, such as WiMax, may be disruptive to the content experience, and going into homes and delivering something out of band will change dynamics of entertainment market. Improved display technology is the next big driver for video content. Over the course of the next ten years, there will be an explosion of new brands. An open wireless broadband connectivity is needed for entertainmenta combination of wireless technologies and silicon so you can roam seamlessly.

TECH TALK: The Coming Age of ASPs: Looking Ahead

In this series, we have looked at the Application Service Provider (ASP) model in detail with special emphasis on the emerging markets. I have argued that even as globally ASPs are making a comeback and software-as-a-service seems likely to define at least a part of the industry, in emerging markets, the opportunity for both SMEs in Emerging Markets (SMEEMs) and the ASPs is significant. This is because of the lack of legacy infrastructure enterprises have simply not invested adequately in IT over the past decade because of issues like affordability (dollar-denominated pricing), desirability (lack of relevant applications) and manageability (not enough skills to manage technology). Now, with the ASP model, all of this can change. As businesses realise that they have to automate for growth, software vendors have an opportunity to fulfill this market need.

In fact, I believe that from the perspective of emerging markets, the ASP model of software-as-a-service is a disruptive innovation. The competition, for the most part, is non-consumption, as SMEEMs use only limited software for their business. The need in these markets is for ASPs and SME Tech Utilities. ASPs build the back-end and SME Tech Utilities provide the whole solution to the customer (thin clients, LAN-Grid, broadband connectivity, and perhaps, consulting to ensure that they can make appropriate use of the software).

One way to accelerate the process would be to build Tech 7-11s in business neighbourhoods. These multi-purpose Tech 7-11s can be the last mile bridge between the ASPs and the SMEEMs. In emerging markets, businesses will need greater hand-holding as they automate their businesses and this is where the Tech 7-11s can play a starring role. In addition, their physical presence will also reassure customers wary of dealing with faceless service providers.

SandHill.com quoted Amy Wohl as part of an article outlining the key trends in 2005: We are about to enter the age of the ASP where software – nearly any kind of software – is available as a service. Not a service you buy and pay for by the enterprise, by the year, but rather a pay for usage model, where a user can buy as little as a single picture or the one-time use of a special font – or budget software for his 20-person company for the next three months, extendable at will.”

The Age of ASPs is upon us. SMEEMs are the last frontier for technology companies. They have only used IT sparingly so far. They are also the engines of growth for their countries. As emerging markets develop, these enterprises will grow and need to leverage IT and best practices to ensure they are not the weak links in the real-time value chains of the large enterprises. Technology companies seeking growth will do well to look at SMEEMs and using the service model to delivery software to these enterprises. This is where the next Black Swan (a la Google) is waiting to be born.

Continue reading TECH TALK: The Coming Age of ASPs: Looking Ahead