The App Store Craze

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I was at a family event and all my nieces had a iTouch. I had never played withe the iPhone or iTouch at this point so when handed one I gave it a drive. First I ran some YouTube videos. A soccer clip of at the time Manchester United player Christiano Ronaldo. Connected to the house wi-fi it performed really well, which was an eye opener compared to previous experiences on my Windows Mobile phones, which frankly you just did not try. then with the wave of my fingers I cruised around the iTouch software. Soon I landed on what I viewed as a boring feature “The App store”, then with a simple touch if my finger a new world was opened up.  At first I could not believe how fast I was moved from one screen to the next and then all the options available to me, either for free or for purchase.  The categories available, the large number of apps available was all very impressive and very different from my previous experiences with mobile applications.

Prior to the app store developing apps for mobile devices was painful and not very profitable.  The first problem was which mobile phone did you write to?  Symbian, RIM, Microsoft, etc..Then their was the carrier issue as each carrier wanted to own the ecosystem.  I had to choose between Verizon, T-Mobile, AT&T, Sprint etc..it was a real pain in the ass.  Not to mention that by the time you broke it all down there was not much of a market to go after.  Then ever if you did write the app the user experience of finding the app and loading it was long and painful.  Lastly the applications you downloaded were not very good or enjoyable, largely because there were not that many available.  It led to one conclusion writing, selling and running mobile applications was for the world of mobile geeks, other than that don’t bother.  Apple solved all three problems by owning the ecosystems, providing lots of applications and making it easy for everyone to get access, find and download what they wanted to.

Now it seems everyone is playing catch up with Apple – Apple has over 500,000 applications, Google has 200,000 – 300,000 and beyond that not a whole lot of applications or excitement for the other players in the space;  Microsoft, RIM, Nokia etc..Microsoft is already discussing Windows 8 and including an app store for the OS.  One  question is how many successful markets will there be?  It’s apparent for the foreseeable future there will be two but a third?  I will be interested to see what a Windows 8 store means.  We are talking about the desktop after all and will it mimic the Android or iPhone app store with a bunch of free and low-priced apps?  This would mark a paradigm shift for the desktop as traditionally you bought apps that costs into the hundreds of dollars.    What will the Windows 8 tablet look like and will it be successful?  Another burning question are Windows developers like their counterparts in the Apple and Google world. interested in low-priced slash high volume sales?  The one thing I think Windows 8 does have riding for it, is it can be different, since it’s legacy is the desktop.  For RIM it’s harder as they are targeting just a mobile platform and thus cannot differentiate.  For RIM the future I believe is only a painful one.  Then there is Nokia.  I have yet to see or hear what their plans are – will they just consume off of the Windows 8 app store, thus ceding the whole app store revenue stream to Microsoft? It seems there can be only one here.  But that it the downside of Nokia letting Microsoft be their primary partner for the mobile OS will deprive Nokia ownership of the ecosystem.  Nokia can claim what it wants but its survival is dependent on Microsoft’s ability to deliver in spades.  More so from a sales and marketing front than a technology front.

Is there another paradigm to be explored?  Something around the corner we have not seen yet?  Without question there is, but I think sometimes we think it is something not invented yet, when many times it is something from the past yet re-hashed and improved.  The mobility phenomena will continue to evolve. We are always connected but the experience will continue ti improve as 4G technology becomes more prevalent.  Before you know it we will be up to 5G and 6G (if it is still called that).  The traditional software pricing structure of 90% margins is being torn down and that will continue as new indirect revenue models take its place.  It is just beginning in the area of mobility.  Soon you will hear of huge revenues from mobile advertising used to subsidize software development.  Ray Ozzie at Microsoft discussed this in his first memo at Microsoft.   For some it is just hard to take the plunge.

The App Store craze is here for now and how long it will be is hard to say, but how we acquire our digital delights will move away from packaged software, similar to how we download music today or stream movies.  The winners will be those who committed and as we see in Apple’s earnings calls probably has already been determined.  The key to success will be creating an experience that us simple and useful.  There still is opportunity in the areas of the cloud, in particular in small and midsize business and the enterprise.  There are companies making their imprints, such as Salesforce.Com, Amazon and Rackspace, but the game is still wide open.  It’s interesting to note in the last decade how the cutting edge of technology has moved from the ivory towers to the hands of our teenage kids and the impact it’s had on traditional tech powers.  The days of home desktop productivity software at $500 are over as the app store has created a mass market shift in how we consume our software and how we expect it perform.  There are those who can choose to take the plunge into the deep or perish in the tidal waves that follow.

Good Night and Good Luck

Hans Henrik Hoffmann August 23, 2011

Apple vs Android

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I guess it’s time I offer up my comments on these two  behemoths battling it out. Right now Apple is king. It’s market share continues to rise, the number of apps available continues to grow at what at times seems an exponential pace, it is no longer confined to just ATT’s network. It’s a fast paced enjoyable story. On the other side you have Google’s “open source” OS Android. The one the press is hailing will  be king. It has developer panache. It’s market share continues to grow at a very impressive rate.  If you look at one of the latest surveys, Android in Q2 of 2011 amassed a startling 43.4 % market share in the smart phone markets .  On top of all this Google just decided to acquire  Motorola Mobility for $12.5 billion. Who will win?  Will there be a winner?  Does there need to be a winner?  Will others challenge the two dominant players? Each phone has advantages and disadvantages.

Nothing revolutionized mobility like the iPhone.  It was a titanic shift in how we use and interact with technology on a day-to-day basis. Within a short time frame it seemed everyone in the streets, in the mall, at sports events were doing something more than talking and texting on their phone.   They even got ATT to join in the fun , all 300,000 employees.  Then they did the double “whammy”.  They got people excited about the web on mobile devices and applications.  Before you knew it the mass audience of the whisper campaign was the mass audience of consumers.  Thanks to the iPhone and also Google, the idea of a Garmin GPS was pretty much thrown out the door.  Apple did not change phones, they changed mobility.  Phones were merely a by-product of their success.  The latest estimates for the iPhone 5 is total shipments of iPhones will hit 95 million by the end of 2011.  This would be cause for concern for some of the also ran’s, like RIM, Nokia and Microsoft.  At some point in time the gap between competition becomes so great that the bottom feeders will never catch up.  The success of Apple launched Apple into some new territory, namely with the success of applications on the iPhone, Apple was suddenly more attractive to developers on a large-scale.  As I have stated before  it goes to show all this talk of open versus closed environment’s is a load of crap.  Developers go where the market goes.  Like so many things it’s all about market opportunity and money.

It was not long after the release of the iPhone that rumblings in the valley started murmuring about a phone from Google. It was a smart campaign as it was decided early on that Android would be released on the web as an open source project.  If you are going to create an effective “whisper” campaign one thing that is a must is mass.  Google did something a bit different is that they really got developers on board in their campaign, initially not as consumer driven as Apple.  But what it did was through developers get the consumer base listening.  Since it was open source anyone who wanted to build a phone could participate.  Pretty soon you had Samsung, HTC, LG, Motorola etc all lined up to deliver their first Android phone.  Being open source it provided the hand set manufacturers a better ability to tweak and tune the mobile OS to the handset’s.  This enable Google to scale the available marketing budgets as the handset manufacturers had a stake in the game and were clamoring for something to compete against Apple.

New to this is the Google decision to acquire Motorola Mobility, which to me is simply about two thins: Patent protection and owning the user experience, head to toe.  Patents are the legal area, nit my core, but I do understand in technology you want to have a fairly large patent library to protect yourself from lawsuits.  From that standpoint I get why Google is doing this.  From the other side I understand the attraction of owning the hardware soup to nuts, but I don’t understand why Google is doing this.  The side I don’t understand is to date Google has pursued more of a Microsoft Partner model in getting companies to use their Android OS, with this acquisition they are now saying they will compete against them.  This does open an opportunity to the other provider of mobile OS software, Microsoft. My one piece of advice to my old friends is give the software away, there never was nor will there be a huge market for operating systems in the mobile space.  The real money will be in mobile advertising.  Maybe a light bulb will go off over in Microsoft mobility, it would go something like, “Bing”.  Maybe.

There has been talk among the smaller players about a third eco system.  It has not been very well vocalized, but rather just drowned out as a bunch of noise from “wannabe’s”.  A third way is nice but you have to create excitement.  The mobile space at its core is about lifestyles, about making people feel good about themselves.  It’s about handling an important call or email and then getting back to your beautiful view of the Grand Teton’s.  It is there to make us happy.  When potential competitors dumb it down to features, killers applications, etc..they are missing the point.  make no mistake it’s a very big hill they have to climb, and as I pointed out with the Google – Motorola acquisition it may take one of the big two to make a mistake.  Apple, for certain has made those mistakes before and as long as they continue to pay attention to history I do not see that happening in the imminent future.  Google at this point depends on how head to head they want to go with Apple.  If the Motorola acquisition is about patents, they should be fine.  As far as I am concerned the third eco system is more a “niche” play then about gaining significant market share.  Some circles discuss Microsoft buying RIM or Nokia.  If that is what it takes to get market share I think it will end up being a colossal waste of money.  Don’t buy market share, innovate.

In the foreseeable future we are going to see the battle taking place on two fronts – the iOS versus Android.  It’s not a battle of phones, it’s a battle for the soul of mobility.  The next innovations will remove us further from our dependency on hardware while making our devices seem more productive, like our old desktops, without the handcuff’s.  Don’t get me wrong I enjoy sitting down and typing these blog entries, and I do not do it on my tablet..yet.  It will change and it will change soon.  Just don’t thin of it as a physical keyboard.  To break the dominance of Apple and Android it will require yet another big breakthrough, like the one’s the iPhone introduced.  These type of titanic shifts do not happen that often – it could be in an area not related to software. such as alternative energies and longer battery life (I think we are all hoping for that one), or new virtual experiences.  In the meantime we can enjoy the battle as it is leading to new innovative technology and form factors that will enhance our life experiences.  At the end of the day we are human and we are designed to live.  Today that living is being done in two worlds, which is about all I can handle.

Good Night and Good Luck

Hans Henrik Hoffmann August 16, 2011

Is Apple a threat?

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As I a watch with a great amount of envy the success Apple is enjoying its always fun to hear the critics. It is always the same story about too much control, no flexibility, a single entity dictating everything, in short it’s about power. A glaring human weakness that these days is finding more comfort in big corporations rather than big governments. In the industry of technology it seems to take on a heightened significance.  After all technology is about defining the future based on what does not exist today.  Much like the classic tales by Jules Verne and H.G. Wellls, we peer into that future with a bit of foreboding and cynicism as it charts un-tread waters that threaten the soul of humanity.  Apple is enjoying a run of success that seems to be defining our future interaction with technology. It seems natural that those old fears would surface.  It seems the human soul is always threatened.

To retread some of history, before we move forward, this sence of doom is not new.  In the old days some 40-50 years ago the technology threat was IBM.  There was a time where IBM spoke and the whole industry just followed in their coattails. It led to many concerns and protests within the industry.  However the rest of the industry had a friend, I simply call the Department of Justice (DOJ).  While they spent many hours in court a new revolution took hold called the Personal Computer (PC).  In a twist of fate IBM would give the rights to the software operating system to a small company called Microsoft.  Before long Microsoft had 90% market share and the industry began to cry of too much power, a single company dictating to the masses, but once again the industry had a friend to turn to, the Department of Justice.  While millions of dollars were being tied up in court the industry did an interesting thing…it changed.  New things like ad driven revenues via search were created and the term mobility took a twist to mean more than just a mobile phone providing voice services.  Before we knew it Apple had returned from the dead and new names like Google, Facebook and Twitter, to name but a few were now the face of the technology industry.

Why do we fear control by a single company – that ability to define what the industry will do and when they do it?  In some instances it is misplaced.  A large part of the fear is not created by the market but by the industry insiders competing against the perceived leader.  There are a couple of areas to consider, one is the developer and two is the competitive landscape

Developer, rightly or wrongly, are the gods of the computing world. for ultimately they bring our imagination to life. There always seems to be this mood against locking developers into a single “stack” platform, what god would be locked into anything? .  Having spent a fair amount of time with developers, they go where the business is plentiful.  Code is code, whether the developer is using Visual Basic or C the difference is not great enough that the VB developer cannot learn C or Java.   The fact that Apple has an army of developers using Object C, which is rather ancient is a testament to Apple’s ability to generate end-user excitement, which then brings an army of developers to their camp.  SO the fact that they are writing in a language that is over 30 years old is not a relevant point.  They are chasing the money, which always seems to be a relevant point.

The competition certainly fears control as it minimizes them.  No one is talking Windows Smartphone, because at least for now there is no business.  Even when Microsoft or HP (remember they bought Palm) talks about a developer platform it is treated rather silently in the press.  When Apple talks it’s like EF Hutton (older folks remember those commercials).  The room goes quite and everyone listens.  Does Apple control the press to?  I am sure to some it may seem like it, but the press is smart and goes where the news is best.  In short they don’t.  It does leave the competition in a quandary.  Do they try to forge their own path, very hard to change perceptions.  Do they play along with the devil?  It could be profitable, but the flip side is it could be suicide.  The biggest fear I would assume is just the fear of being shut out of a very lucrative market.

Could Apple gain a position where they dictate to everyone what their technology experience will be?  Could they be in a position to tell partners and competitors who gets to play in their pen?  Perhaps as it’s an age-old fear.  I am sure some felt that way about the American big three automakers at some point in time – they controlled manufacturing, distribution etc..but does anyone feel that way now?  I am not a free market purist, but the market is efficient.  As long as Apple does not get to arrogant they could influence the market to think the way they would like them to.  I would say so far they seem to be doing a pretty good job of it.  Apple’s iTunes represent sa good example of Apple and the market holding the record labels in check.  The record labels would love to dictate to Apple the  terms of music pricing, but due to the popularity of the iPod they are more or less to listen and adhere to Apple’s pricing guideline.  The music labels make money (I have been told by one of the music labels they get $.20 of the $.99).  The labels would probably like to own the whole channel, but it gets way beyond their core expertise.

At times technology companies get to seem so powerful that they could control their destinies by sheer will power, but at the end of the day it’s people who choose where they want to spend their dollars.  If the fruit looks rotten we don’t want to eat it.  The consumer ultimately decides if a company like Apple is providing an experience they want to buy and participate in.  It’s also a very American condition to build up the big guy and then tear him down when we feel their ego and success has become too big for their own good.  Why do we all hate the Yankee’s and Red Sox? At the end of the day I don;t think Apple is a threat to the industry or society, but just in case we should keep our eyes and ears open, because if we don’t , well maybe then they will.

Good Night and Good Luck

Hans Henrik Hoffmann August 10, 2011

Microsoft = IBM

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When I started in the industry, sitting at my cubicle, reading email and trying to learn as much about the industry as possible there was a common joke that floated around: IBM. They were viewed as grey beards and very old school.  Where as Microsoft was defining the future with “A PC on every desktop and every home”, IBM were the guys who said, “Why would you want a computer in your home?”.  We were young, brash, cocky and arrogant.  We were the definition of your not worn down by life’s experiences and thing anything is possible, even the impossible.  The IBM guys, well frankly they needed a diaper change, in the old guy sense.  We seem to have come full circle since those days back in the late 80’s and early 90’s. In this down economy IBM just announced blow away earnings.  IBM seemingly over the past decade has rediscovered itself while Microsoft has become eerily kind of like IBM, going in a variety of disjointed directions.

For starters IBM back in the mid to late 90’s made a series of smart decisions under the direction of CEO  Lou Gerstner. There is a saying in the industry “No one was ever fired for hiring big blue”.  Lou understood this.  At the time IBM was involved in the emerging PC business and being looked at as the company to drive the industry vision forward.  the problem was that a lot of this “vision” involved consumers.  Consumers are not part of the IBM DNA.  IBM was an enterprise company.  It was after Lou did a speech on “The Network is the Computer” that Lou returned IBM to its roots.  Let IBM use technology to focus on where it can make in impact, the consulting business.  When Open Source  came along it was not a threat to IBM but an opportunity.  When Off shoring came along it was not a threat but an opportunity.  Anything that would require some type of consulting with cost savings, IBM could play.  For such a large company they have done a truly magnificent job.  Not getting caught up in technologies holy wars, just watching from the sidelines and seizing the opportunity.  Lou has since retired many moons ago but IBM keeps on moving forward.  In a complicated industry they have kept it simple and simply asked questions like, “Who are we” and “what do we do well”.

Microsoft, on the other hand, had pursued a path of complication.  A large part of that is Microsoft’s DNA is rather complex.  When Bill Gates was at the helm it was simple.  If there was a large opportunity that required a graphical user interface, that implied software and Microsoft had to play.  That is how they got into the phone business, the game business, television, the internet etc..  The challenge today is that the user interface has become rather pervasive.  It is everywhere and on all  the time.  It is in people’s home, at our schools, at work, where we shop,..it would be more difficult to name where it is not.  Microsoft has attempted to be everything to everyone, from Joe Blow on the street to the high-powered CEO in every Fortune 100 company on the globe.  It has led to a company stretched thin across the board.  When you look across the competitive landscape you have companies very well entrenched and defined as to who and what they want to be.  IBM is an enterprise company.  Oracle a enterprise software company.  Google wants to make information available anywhere at any time.  Nintendo does games.  Apple wants a soup to nuts consumer experience.  VMWare is about the enterprise and the cloud. Try making such an easy definition with Microsoft.

I believe Microsoft has entered its IBM moment and needs to rediscover itself so here is my list of what needs to be done:

  1. Kill the GE model:   SteveB really went into this hardcore phase of creating the Jack Welch GE model – which is essentially creating a bunch of silos where each division operates as its own entity and generates the next billion industry.  At the same time BillG was talking about integrated innovation.  This requires cross group collaboration. In the end it has created confusion  GE is not Microsoft and Microsoft is not GE.  Steve needs to find the Microsoft way.
  2. Unified Vision: Microsoft employees I talk with (and I talk to many) all have the same concern.  They can talk about their individual metrics but as to where the company is headed, in a meaningful way, they are being pulled by every new event.
  3. Create your own Events:  People get tired of one week it is Search, because search is hot, next week Cloud, because Cloud is hot, following week it’s Smartphones because Smartphones are hot – all the time following, all the time being late.  I rarely hear the discussion of the future  – it would be nice for Microsoft employees for a change to have Google or Apple chasing Microsoft.
  4. Think Big: The iPhone did not alter technology it altered our culture, that is simply how big the phenomena is.  the good news is it will happen again.  Windows 95 really ushered in the PC to the mainstream of day-to-day life, so Microsoft has a legacy of life changing technology.  People might say, the internet was the game changer.  they would be right.  But remember 90% of the world did it with Windows.
  5. Get Young and Focus:  Sorry Steve but if you want to compete leadership needs to change – starting at the top.  You know the industry but depending on what is decided it maybe time to have someone closer to the end customer.  It is time for a different viewpoint in et company.  That gets to my second point which is focus – Microsoft needs direction on what it wants to be and where is it going.  Can it be a consumer company?  An enterprise?  There are many more questions, and they all need answers.
These are tough issues to address because despite the problems and challenges you are still talking about a company that earned $62 billion in 2010.  My fear is with Apple seemingly on a straight line north and upward, will we have the quarter where revenues come in under and market share slips into the 80 percent range?  Microsoft’s IBM moment is upon them, is there a Lou Gerstner to ride in on his white horse and reinvent the company?  I believe we will see this sooner than anyone thinks.  I can only hope.
Good Night and Good Luck
Hans Henrik Hoffmann July 21, 2011

Facebook + Skype = Microsoft

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One minute you’re a villain and an idiot named Steve Ballmer and the next you are a saint and a genius named Steve Ballmer. That is the way the industry flows. This past week, Facebook CEO and boy wonder Mark Zuckerberg announced something he dubbed, “awesome” and then proceeded to unveil video chat for Facebook using Skype.  Today Skype is in the process of being purchased by Microsoft for the paltry sum of $8.5 billion.  For Microsoft this Facebook announcement would strike either of pure genius or luck.  In any case it raises a lot of eyebrows as there is a lot to think about from the future of technology to the survival of Steve Ballmer.

When I think about the future of communications and how we are evolving, Facebook is a great place to look and ingest what is happening with how interact as humans.  Several months ago my old alma matter, Sammamish High School,  had its 25th year high school reunion for the Class of ’85 .  It was a bad day that was chosen (no fault of the organizer), the Friday of Thanksgiving weekend, not many people went, for obvious reasons.  I would have liked to have gone, but it just was not going to happen with all my family commitments. Later in May a bunch of my old high school buddies got together for a weekend get together and as we were walking on the beach we started talking about the recent high school reunion.  My old high school buddy Mark made the astute observation that Facebook has killed the high school reunion.  That is true.  I don’t need a reunion to hear about people from that pasts lives, I see and read about them every day.  It’s both great and sad, but technology keeps evolving making these societal changes happen. Bringing us up to date with the new deal between Facebook and Skype we may finally be on the brink of a new communications paradigm that will see live video streaming reach the masses.  The deal for Skype is huge as it gives instant access to over 600 million Facebook users.  It will be global in scope as Facebook is growing faster outside the US than in the US.  It will give users an old fashioned way to communicate in a new paradigm: face to face.  I must admit in today’s world of email, text messaging and social networking I miss the dynamic of taking the time to get together and talk, freely.  However maybe to a certain extent maybe this paradigm shift will bring face to face communications, back but in a different physical medium.

What should be interesting is to see how this “new” communication tool is used.  Facebook is great for reaching out to old friends, but it also allows you to reach out to those high school classmates I did not know (and in some cases I did not really want to know).  In short Facebook could become like my own personal phone book in the cloud.  Some of the things envisioned in science fiction novels and film may now be on the verge of being reality.  What will be cool is as the quality of streams get better we will have this full screen – no more little windows on our desktop.  We should have instant – on capabilities, meaning the moment a user accepts my request (in old terms, “answers the phone”) the video stream will instantly commence.  Keep in mind as great as technology is there are somethings it still does not as well as the technology it replaces, case in point are old lan line phones.  I have no doubt that eventually performance will be better and the experience, as is already evident will be much richer.  There will be a large amount of excitement in this new paradigm.

A big winner here could be my old employer, Microsoft.  They invested early in Facebook and now their recent acquisition, Skype, has a deal with the world’s most popular social networking site.  This could be a “killer” app for Facebook (ok..I am getting so tired of the term “killer” app).  I would caution senior execs at Microsoft against re-branding this with the “Microsoft” name.  I can hear the arguments already, “Microsoft is one of the worlds most recognizable brand names, who wouldn’t want this brand plastered all over their site?”  But an interesting study might be how do younger audiences view the name?  It’s never the first question that gets you to your answer but the fourth or fifth.  This deal could help Skype get into the stratosphere of mainstream technology, to be our phone service of the future.  It should be interesting if other services like Twitter, follow suit.  Leave well enough alone is my final verdict on this one, but internal corporate politics I am afraid will get in the way.  It’s hard t change things in your DNA.

Finally there is Steve Ballmer, the long serving Microsoft CEO, who is in desperate need of a win.  Both externally and internally.  Externally he has had 10 years of a stock that besides a meager dividend, has provided little value back to shareholders.  Internally he is loathed for his inability to provide a vision and strategic direction to the company and its employees.  The Skype purchase was initially considered overpriced and a waste of money by Microsoft, for a bunch of technology they already had.  This announcement by Facebook, already has reduced the pressure,as in has provided a little “panache” to an increasingly stale company.   It remains to be seen if long-term this could be a turning point for Microsoft.  But at least in the in term they can breathe a little easier and maybe do something rare at Microsoft these days…smile.

Good Night and Good Luck

Hans  Henrik Hoffmann July 14, 2011