Hans Hoffmann's Blog

With the passing of Steve Jobs yesterday at the age of 56 I felt it appropriate to revisit a post I did originally in March of 2010.  Steve Jobs always pushed the limits of the industry and brought it to new heights.  In many ways Microsoft owes Steve Jobs for introducing the graphical interface and pushing Microsoft to create Windows.  But maybe most importantly Steve Jobs is a comeback story that we all admire.  The industry is a little less today without Steve Jobs.  We all want to change the world but so few of us actually do.  Steve Jobs changed the world.  Thanks for everything Steve, you will be missed.

When I first started at Microsoft back in 1991 Apple was more or less a relic of what it used to be. Keep in mind it was still a cash cow for Microsoft as we owned the core application set for Apple, Microsoft Office for the Mac. However it was a company seriously lost in what it wanted to be and where it was going. the one thing Apple did have going for it was a fiercely loyal user base. Even though Microsoft was 90% of the market, Apple had 10% and it was going nowhere.

At the time the original founders of Apple, Steve Jobs and Steve Wozniak were not to be found. Jobs had been forced out by then CEO John Scully and was off trying to do the next big thing at NeXT computer. In addition he bought a small company from Lucas that became Pixar (it did pretty well). On the other hand Wozniak nearly was killed in a plane crash and not too long after would walk away from Apple (though he still is on the Apple payroll). In a lot of ways you can parallel Woz with Microsoft Co-founder, Paul Allen. John Scully grew Apple significantly after the release of the Mac, however, he was never able to generate the buzz and excitement around Apple that it deserved. Scully came from a successful career at Pepsi and was no doubt a talented marketer. However after 18 years in technology one thing I firmly believe in is if you are going to be a cutting edge technology company you need someone from the industry to guide you and set the vision for the future, to generate buzz, to generate excitement. I have always said the tech sector is more Hollywood than Wall Street. Technology leaders who cater too much to Wall Street, will ultimately doom the company.

For the next 5 years at Microsoft I watched as Apple went through various CEO’s and considered licensing the Mac OS similar to what Microsoft was doing with its OEM channel. I watched as they launched a Windows Virtual Machine so they could run Windows Applications. It always seemed like Apple was throwing darts at the board trying to find someway that something would stick. At one point Microsoft even made an investment in Apple, just to show we were good guys. Things would start to change in 1996 when Apple purchased NeXT Computer, bringing back Steve Jobs to the company he helped found. It ushered in one of the great comeback stories in the history of high-tech.

It used to be said in the industry that you can have a PC any color you want as long as it is beige. It was sadly very true. In addition to the giant CRT screens we had in the day it made for a very ugly desktop. One of the first things that was noticeable when Steve came back to Apple was the launch of Mac’s in color. The orange and lime green seemed to be favorites. Some of the best ideas in the tech industry are the simplest. In 1999 I remember Bill Gates showing off some new Dell PC’s that had some color to them and he mockingly said “We can do color to”. It is and will always be a challenge for Bill to understand the “hollywood” side of technology. Color was important because the beige was so ugly.

For those who remember around this time in the late 90′s a company called Napster became very popular. Napster did some things that Microsoft liked a whole lot. Mainly it allowed end-users to share music files over the internet. Thus promoting the power of the PC and leveraging the value of the internet. Now at this point I can only guess, but my feeling is that someone at Apple could see the real value here – which was that these PC’s had large hard drives that enabled you to store a lot of music, would it not be cool if it was mobile? You could put a hard drive in a little plastic case with ear phones and carry it with you. In October 2001 Apple launched something called the iPod and later a music service called iTunes. As we all know these have gone on to be gigantic success. Microsoft has partners doing their own MP3 players and I remember going into the Best Buy looking at some of them, then I picked up a iPod. At first I was not impressed with its DOS like interface than I started touching and trying to click the wheel, at first it did not seem that responsive. Then I took my thumb and made a semi-circular motion..cool! After that those other MP3 players were dust. The iPod was huge for Apple in the sense they were no longer the niche player the Mac, they were now the darlings of the every day end-user. As momentum continues Microsoft finally scrapped the partner model and came out with the Zune (I have had several). These devices work well, are cool and have the “wheel” like feel (apparently Apple forgot about the patent process). The challenge for any company is once a competitor has established a huge market lead, can you ever catch up? Not to mention on the advertising front I see Apple iPod ads everywhere, on TV, on Billboards. I cannot recall seeing one Zune ad. Another area that always has concerned me is what our response at Microsoft, while I was there, was to Apple. the typical, it is very proprietary. They really don’t work that well. As Steve B would say, “blah, blah, blah..” I would say, “who cares?” If end users like the experience and are happy with the $.99 price tag, they will continue to download songs from iTunes. As of this writing more than 10 billion songs have been downloaded from iTunes.

Then came the iPhone. At a time when the smart phone had yet to “realize its potential”. As the story goes Randall Stephenson, CEO of ATT Wireless (then Cingular Wireless) was in a meeting with Steve Jobs. Steve had just shown him a new mobile phone Apple had been developing. Randall just kept playing with the phone, fixated on its beautiful and responsive touch screen user interface. Steve Jobs is known as one of the toughest negotiators in the business. Randall was a long time telco guy who had net and negotiated withe th best. He also knew that what he was holding represented something bit, something that could turn the tables against some of ATT’s biggest competitors Verizon, Sprint and T-Mobile. Unlike most phones carried in a store which are in many cases subsidized by the manufacturer, Steve wanted it sold and all the revenue. ATT could get the voice and date plan revenue, but Steve wanted everything else. In the end the device was too good to pass up. Steve Jobs had just got an unprecedented deal in the wireless industry. This launched the march towards the delivery of one of the most “revolutionary” hand-held devices in the mobile phone industry, the Apple iPhone. I had a friend contracting at ATT at the time working on getting the online payment for mobility set up and all he would say was everything being done in Atlanta was geared towards the launch of the iPhone. This was a device with a serious amount of weight being thrown behind it.

The iPhone launched on June 29, 2007. As Bill Gates would say later on, “Microsoft did not set the bar high enough”. The iPhone was a huge success and that is an under statement. It did a number of things better than had ever done before. First was the touch screen. It was responsive. Very responsive. You could be up and doing something within seconds. Second the mobile browser experience was easy and the content you got back was readable. Every device I have ever had the mobile browse experience has been different with each device and very painful. Third it created a market for mobile applications. Prior to the iPhone making money on mobile applications was a dream more than a reality. Competitors will argue, again, Apple is a closed environment (for you non-technical folks – it’s Apple’s way or the highway). I will say again and again, that is the argument of technical people, if end users like the experience they support with their wallets and do not care about open environments versus closed. The iPhone will go down in history as a major technology milestone and another big hit for Apple and Steve Jobs.

Apple about a year ago launched yet a new device, the iPad. The orders are built up and Apple has done it again. Now the iPad was yet another attempt at the Tablet. Does anyone remember the Apple Newton? Microsoft Pen for Windows? The Microsoft TabletPC? I wrote a year ago “Will this time the idea of a usable tablet finally become reality? My view initially is that Apple is riding its wave of success to create yet another blockbuster in the industry”. THey did create a blockbuster. Then I wrote the following: In the latest issue of Wired Magazine they do raise the question of interaction with computers. If you think about how we as people interact with our technology it has not changed on over 20 years. We have a monitor, keyboard and mouse. I will say having been at Microsoft 18 years there were many efforts from the top down to drive the success of tablets. To change the interaction of user and technology. If Apple succeeds with the iPad it will be a huge psychological blow to Microsoft. Apples first attempt in over 15 years after the many attempts by Microsoft and it is a huge success? The success Apple has had with the iPad has led to a huge change in how people want to interact with technology and spurred a new wave of innovation. Not far behind has been Android which was quick to respond with their own Tablets. I cannot count the amount of emotional responses I hear from people with iPads “I Love”, “I adore”, “I treasure” . Not far behind are business ideas for their iPad. It is really quite amazing what can happen with success. It creates a force of gravity that cannot be stopped. A Wall Street dream.

Bill Gates has left Microsoft. Today Steve Jobs is the poster child of the technology industry. He is the rock star pumping out hit after hit. The movie star who cannot make a bad film. He is in the zone. From when I started to when I was let go at Microsoft the journey of Apple has been an interesting and amazing story to watch unfold. All tech stars rise and fall. The list is long WordPerfect, Lotus, Borland, Netscape, AOL, etc Apple certainly did this, but then to rise again bigger then what they were before has been a spectacle to behold. What they are doing now is not so much about how they are influencing technical innovation, but how they are impacting the global culture. The future can still be bright despite the illness that has removed Steve Jobs from day-to-day operations. In my view the next holy grail will be television and how we interact with our oldest of friends. AppleTV is a start but it is not there yet. GoogleTV is on their heals. But given their track record it’s dangerous to bet against Apple right now.

Good Night and Good Luck

Hans Henrik Hoffmann, October 6, 2011

I read today about the rising poverty levels in the United States to the highest levels since the great depression and how another 800,000 people were added to the list that do not have health care. In addition a local hospital, in Seattle, is laying off employees because of more uninsured patients, bad debts as people are unable to pay their medical bills, cuts in Medicaid at the state level and more cuts at the Federal level in both Medicaid and Medicare. We live in very worrisome times and I sense a lot of nervousness out in society these days. When will this economic decline subside? If I don’t have health care and my children get seriously hurt how will I survive? Are we an insurance policy decision away from ruin? I have spoken with many people who have jobs who would take less or move elsewhere, take time off, retire etc..but one thing holds them all back and its the same answer every time…Health benefits.

Make no mistake first and foremost the issue of health care elicits fear in society today.  The biggest reason is once you are trapped in the system due to an unforeseen illness or tragic accident the bills begin to come in.  It’s like lava flowing from the volcano you can only hope it stops otherwise it will burn everything down in its path.  Except with healthcare it burns down ones life.  At a recent family event I heard of the firefighter who retired in perfect health.  Shortly after he suffered cardiac arrest and now is $200,000- in debt.  As I talk with other family members in that line of work the challenge with the early retirement policy of the profession is the worry of health care, some who still have children to support.  Unfortunately when it comes to health care horror stories are not hard to find.  There are a lot of players that make up the system we have in place today each with their own unique interests

Let’s start with a benefit we worry about, the cost of insurance. Without insurance we are at risk.  We choose not to go to the doctor for fear it may lead to additional costs that we are not prepared for nor can we afford.  In addition as the costs of care rise so do insurance premiums, having an effect on corporate America and having an effect on individual Americans.  What are ways to get costs down?  I am sure an insurance company would say get rid of or charge higher premiums for risky patients.  They would do it in a  heart beat but that goes down a very slippery slope.  An insurance company may then start dictating lifestyles.  As much as I treasure individual liberties, seeing how some people treat their bodies, this may be a good thing.  Don’t get me wrong having worked at Microsoft where we had the best insurance policies on the planet (until recently).  When I had a medical issue I provided my card and that was it.  Everything was covered.  Having left I now understand the debate much better(though unwillingly).  At the end of the day insurance is a business and for them many people are just plain bad risks.

A primary driver of increased cots is the medicines we take. The medications we have to take are run by a giant industrial complex: The pharmaceutical companies.  Back in the seventies a pharmaceutical exec was asked about how do you grow markets and the reply was “I don’t just want to treat the sick, I want to treat everyone”.  Why limit your market.  Fast forward to today and we seem to be well on our way to that vision.  But the bigger concern is what is that doing to our overall costs?  The way big pharma works today is when the release a new drug they need to seek approval from the FDA.  Once approved they have a fifteen year window to “recoup” their research costs.  A good example is Lipitor.  By some estimates Lipitor was taken by 12 million Americans to aid with high cholesterol.  The cost was around $2 per day.  The drug companies have a monopoly for 15 years to recoup costs.  My dad had high cholesterol, but in those days the cure was simple, change your diet.  To be clear that does not work for everyone.  But in that window they will attempt to maximize profits by charging a high price.  Now whether that price is warranted or not is the subject of debate.  Another question is should we reduce the window?  How much are we willing to pay to fight corporate lobbyists?

Advances in medicine have also had an impact both positive and negative.  One problem is many of the advances allow us to treat illnesses and prolong life but not cure major diseases.  Cancer costs continue to increase, because we have the ability to prolong life but the cure is as of yet still illusive. By delaying the inevitable are we succeeding?  I think that is on a case by case basis.  But if we could find a cure for cancer that would be the most optimal and hopefully the most financially viable for everyone involved.  If I have a fear it is that we are, to my earlier quote from the Merck executive, so driven by profits that we are more interested in the treatment than the cure.  I can only hope that is not the case, but it does weigh on my mind.  We cured polio but of late cures seem hard to come by.  We seem more driven by quarterly revenues than moral revenues.

From a legal standpoint the values and virtues that created the United States also hurts us, in particular in health care. The US has always been great about protecting the rights of individuals.  It is why this country was settled in the first place, to escape the perceived tyranny of the monarchy in Great Britain.  When Jefferson wrote The Declaration of Independence and Madison wrote the Constitution they very much had the rights if individuals in mind.  In health care this, however seems to hurt more than it helps.  Every time a malpractice suit is filed it sets off series of cascading events which ultimately lead to higher costs.  The difference between healthcare and other industries, is that unlike a product where I have a choice whether I want to pay a higher price, my health ultimately determines if I have to buy or not.  We may protect the individual but in the end everyone pays individually.

Is there a fall back to help save you?  When you are 65 you qualify for Medicare, which is another issue.  Unlike Social Security, which I belive mathematically is a solvable problem.  Medicare is like an uncapped Gulf oil spill, except you just cannot pour concrete over the leak and fix it. There is no cap.  It’s a great deal, make no mistake.  Most health care costs come towards the end of life, which my own mother is at the that crossroads now.  Her monthly bill is $128.  If I could cover my whole family for $500 a month I would quit my job today and take time off.  But as we all know $128 would not cover the cots if my mom was hospitalized.  A couple of nights in the hospital, it would likely take a decade of her payments to cover those costs.  In the end Medicare covers those expenses, which means tax payers. Or we just print more money.  Still on the backs of working Americans.

The other area with age is as we get older we are forced into retirement homes.  They are a big piece of the end of life equation.  They are not cheap. I looked into this for my Mom.  Many have entrance fees ranging from $60,00 to $100,000, more now since I am quoting 5 years ago.  They do provide services for additional costs such as providing the daily medicines that many seniors need to take.  The monthly charges I can say since my Mom went into a home have risen from $2600 per month to $3500 per month.  Now if you do not have the money saved up what do you do?  This is where Medicaid comes in, a joint Federal and State program to help cover these costs.  But like Medicare this program has no cap it just keeps costing and costing.  When you look for a retirement home and have no money you have to find one that accepts Medicaid and has available space.  Once in though you are covered.  Crisis averted…for now.

When it comes to Medicare and Medicaid there are those who want to politicize these government services as entitlements and want to be true business professionals and say we cannot pay for these services and therefore we should just do away with them all together.  This was highlighted in one of the recent Republican debates in front of Tea Party supporters who booed anyone supported a government program and cheered when someone suggests they get rid of the programs all together.  I guess my question to them would be what would our country look like if we did get rid of Medicare and Medicaid and what new problems would we face?  The biggest concern here would be senior citizens who are the primary beneficiaries of these government sponsored programs.   If all of a sudden you could not afford for Mom or Dad to be in a retirement home would you be willing and able to take care of them?  What would happen when Mom and Dad’s money ran out and all of sudden the kids have to take in and support?  Would this put stress on your family when all of a sudden your government cannot help out and,your on your own? Some would have private industry supply these services and though I can understand the desire, how are they going to contain costs?  Private industry is there to make money not act as a charity.  Tea Party supporters have thought this through, obviously and have the answer.  They just seem unable to articulate it.

As  I look toward the future it seems apparent that we will be faced with some hard choices.  As we go back to where I started with so many people not having health care they can either hope ObamaCare takes care of them or they may simply just have to drop out of the heath care debate and accept their fate by not participating.  As a  country we have to make some choices as to what we can treat and what we can’t.  I will add in those countries that have socialized medicine they make these choices today as they do not have the doctors to cover certain forms of treatment (Denmark is a good example of this).  That may mean if you are at a certain stage of cancer unless you have the dough, you may just have to accept your fate.  A cruel answer but one I believe may play out to be very true.  I have seen the benefits of Medicare, but understand we cannot move this program forward without some better checks and balances.  It is just not sustainable. However what we don’t want to see happen is a system where some live because they can pay and others die because they are of low means.  It’s beneath us as a country, as a people, to accept such a future.

Good Night and Good Luck

Hans Henrik Hoffmann September 28, 2011

Recently at VMWorld. VM Ware CEO and former Microsoft President Paul Maritz stated that, “Steve Jobs said we are entering the post PC Era, we agree with that”. Strong words coming from the man who used to run the Windows division at Microsoft and played a large part in building the Windows empire.  To be clear, in my mind, the PC is not going away but it’s importance will be diminished as new devices and new use case scenarios come into the marketplace.  The Microsoft response has been rather predictable as they move to protect their cash-cow, with yet another new slogan – the PC + era. A world without PC’s is rather unthinkable or unimaginable in Redmond.  It’s a question of seeing the future versus trying to prevent it.  The former has a perfect record so far.  The future is inevitable.  Still maybe the more relevant question is not will it happen but how far off is it.    Maybe it’s already here.

Certainly trends both at the consumer level and enterprise level over the past few years tell us we are moving to a world where the PC is not the centerpiece of our technology universe.  Looking first at the universe of the consumer it seems readily apparent. If Steve Jobs did anything he introduced the iPhone that allowed us for freedom far beyond what we had before with a mobile device.  Did it end the need for a PC?  Am I writing this blog on a iPhone or a PC?  I will give you a hint, it would be a bit slow withe the iPhone.  Though I understand the defensive posture from Microsoft and even agree with it, we are most definitely moving into the post PC era.  One where we will be less tied to the idea of a keyboard.  We are in the connected universe .  It means we will see a lot of innovation in terms of device form factors – some will be single use devices like the Amazon Kindle, however even as I write (you read) this is morphing into a new Amazon Tablet.  It was not that long ago a Garmen GPS was hot, now I can do all that on my iPhone.  I believe that we will finally soon see these features introduced into day-to-day appliances – where on our stove or refrigerator we may have wireless access to provide us relevant information specific to the appliance.  Anything from recipes to repair instructions and support.  It’s one of those scenarios that have been talked about for years, but I think the technology has matured enough to make it a reality.  It’s also a scenario that does not require me to boot up my PC.

At the enterprise level it is really about cloud computing and allowing companies to offload a lot of their IT costs and focus back on their core business.  When I was covering News Corp I heard through the grapevine that Rupert Murdoch viewed IT as a necessary evil.  I think he speaks for a lot of companies who have had to invest in areas of support and services that are not core to their business. Over the years time and time again in the industry you would hear about companies who launched big IT initiatives which were to streamline the company and make them a more agile business, only to have those project fall into disarray and end up costing millions of dollars in cost over runs, and finally  to ultimately fail.  Cloud computing at a high level is an easy sale.  Let someone else worry about your IT infrastructure and get back to what your core competencies as a business are.  The move to the cloud starts in the data center and moves all the way down to the desktops and laptops.

When you think about desktops and laptops it may make you think we have returned to mainframes with dumb terminals. To a certain degree it has.  But I was listening to CNBC one morning and they were talking about Generation Y (those born 1980 or later) and how they use or do not use technology. This generation is the Tablet, Laptop and Mobile phone group. The idea of a desktop is not their thing.  They are also the generation that will feel more comfortable with using cloud based services.  In addition many things that were thought to be only available using the power of the PC are now readily available in the cloud and can be viewed through a web browser.  Think if all the mapping technologies we have available to us today.  We take for granted that all of that is being provided to us remotely and we are just consuming a  service.  We need a user interface to consume services but where those services reside is not relevant to the majority the world’s population.

In the industry we often talk about “tidal wave” changes that transform the industry and how we compute.  Some are obvious and others just happen.  The obvious would be the rise of personal computing, the internet etc..Others are less obvious – One I think would be the convergence of mobility.  One minute it was just a cell phone and the next it was a part of everything.  Our home, our coffee shop, our work etc…It just seemed to naturally happen over time.    The 90’s was the PC era.  The first decade of the new millennium was the software decade.  Now is the decade of the cloud as all we know get set free and is just available for us to consume, wherever and whenever we want.

We can choose to hold onto the past, it’s a natural human condition to do so.  To think of happier times.  Of times when everything seemed to go right.  But unlike humans businesses are not driven by fond remembrances of the past they are driven by the bottom line.  You can be nostalgic about your history but don’t do so at the risk of your future.  In the technology space that is particularly true because it is all about the future and things are meant to change.  The PC changed mankind and will be remembered as a defining moment, but like everything it was not infinite.  By its own creation only one thing was certain that it had to die.  Thanks PC you changed everything but the future awaits and you are not as relevant as you once were.  All revolutions end.  Welcome to the post PC Era and enjoy as in time it will just be a happy memory.

Good Night and Good Luck

Hans Henrik Hoffmann September 13, 2011