The Dangerous Road of Tech Legacies

Tim Cook was recently quoted on CNet about what separates Apple from Microsoft and he said, “I think it’s different. Part of the reason Microsoft ran into an issue was that they didn’t want to walk away from legacy stuff.” It is an interesting and insightful comment and having lived through much of it, not an inaccurate comment.  The article goes on to highlight many of the geniuses of Steve Jobs.  My favorite goes back to Walter Isaacson’s fantastic biography (apparently Apple does not think so) of Steve Jobs where he said, “If you don’t cannibalize yourself, someone else will”.  In the existing technology landscape you cannot expect a cash cow to go on forever.  If you do in all likelihood you are doomed.  The problem with cash cows is they are hard-core drugs, very hard to ween yourself off of.  It’s a problem with technology, which is based on developer code, this is not Coca-Cola and a secret formula.  Technology moves quickly and so do the business models that support it.  By nature it is a disruptive force.  If you live in your history you are doomed to become a part of its history.

There are numerous companies that serve as examples of either dead or dying entities as they struggle to reinvent themselves.  Since he spoke of them, lets talk about Microsoft. Microsoft is and always will be an industry legend, and deservedly so.  Bill Gates saw the value of software long before anyone else did, including Steve Jobs (as acknowledged by Jobs, in Walt Mossberg’s legendary interview of Steve Jobs and Bill Gates).  The problem came when Steve Ballmer tried to extend Microsoft’s legacy with the same tried and true formula of Windows and Office. However the computing experience was moving and changing quickly .  What Microsoft failed to understand was the computing experience was shrinking and becoming more fashionable.  It went from a big Personal Computer tethered to the wall with a power cord and network cable, to a smaller and more nimble laptop.  But it did not stop there.  When Apple launched the iPhone in 2007 the ability to be free from your office and your keyboard was significantly altered.  Microsoft desperately wanted that mobile experience to be a Windows experience, but the list of reasons as to why that has not happened are numerous and in the aftermath Microsoft is left trying to re-establish its relevance in mobility.  In the tech industry size-mic shifts happen and you can either embrace them and move forward or hang on to what you know and lag behind

Microsoft’s success initially came at the expense of another competitor, IBM. There was a time in history where IBM defined everything in technology.  They essentially created the standards that everyone followed, until a ill-fated meeting with Bill Gates where they gifted Microsoft the rights to the software in the PC.  What seemed like a new beginning for IBM with the PC ended rather quickly.  IBM became rather confused as it tried to compete with Microsoft,  when Microsoft split from IBM over OS/2 and decided that Windows was the future, they decided to go with OS/2 and make a run at Microsoft’s growing empire.  It ended almost before it had begun.  The new PC’s with OS/2 loaded never really went anywhere and IBM’s status as a leader in technology was significantly wounded.  In this case IBM would recover and focus on what it was good at by going after the enterprise.  It had to realize that it was an enterprise consulting company.  In this case IBM moved to a differnet playingfield, one that they understood

Sun Microsystems was interesting.  During the early part of the dotcom boom they raged supreme.  They had a lot of great talent.   They were vocal in the industry to the point of extreme arrogance (which often is not a bad thing in the industry).  They hated Microsoft, which was becoming fashionable. They were a company that did a lot of things.  They made hardware.  They had their own microprocessor, SUN Sparc chip, their own OS, Solaris, their own programming language, Java.  They were cheaper than their UNIX competitors primarily IBM AIX and HP UX.  With Java and J2EE they had a solution that corporate customers loved and needed.  They were am alternative to the almighty Microsoft.  Only problem with all this focus is that they were not paying attention to another rising force: Open Source.  As big a threat as Open Source was to Microsoft’s business model, the immediate threat was to the UNIX incumbents.  When the dotcom boom went bust, SUN Microsystems went with it.  SUN was a shooting star, it rose with Java but before they had much of a legacy they were gone, gobbled up for cheap by Oracle.  SUN was successful but failed to realize it had chosen the wrong battle.

What is always of interest to me, simply because I called on them as a sales rep at Microsoft and I worked for one, AT&T, for a year is the role of the telco’s.  These ancient dinosaurs born out of the mind of Alexander Graham Bell, do not fit the mold or mindset of tech giants.  And yet they have been indispensable in the creation of the digital highway.   through the traditional world of Lanline and more modern era of wireless, their role has been huge.  Yet after having spend a year I realize that they are thoroughly confused as to what to do next.  The traditional world of  digital pipes is being squeezed.  In the world of wireless, this last year, we saw Google steal the Starbuck’s account from AT&T, using their typical disruptive ad model to say to Starbuck’s, “Don’t pay us, we will pay you”.  I can only imagine at Starbuck’s the only discussion was around making sure Google was not screwing them by taking too much money.  It’s tricky when you have a cash cow to devise a plan to let it die while you focus on new and more lucrative services.  The biggest problem is risk.  Telco’s are in trouble as risk is not in their nature.  As we transmit more and more data through the air and no longer rely on fiber under ground it will be cheaper (still very expensive) for new entrants with new business models to enter the market  that was once exclusive to Ma Bell’s domain.

The times are changing quickly and companies that were once defined in nice little bucks as energy companies or consumer staples and did not overlap cannot feel so safe anymore.  Apple already has changed the music industry. When I look at Amazon I see a company that will tear down Wal-Mart and Target.  I see Netflix altering the Hollywood Studios machine.  The legacies are no longer limited to those companies we directly associate with technology, but those that operate outside and have grand traditions of their own in American history.  It will impact every industry from automotive’s to oil and gas to your day-to-day household items.  We are entering a time of robotics, quantum computing, artificial intelligence, Internet of Things (IoT), drones, big data, renewable energies all interconnected all digitally enabled.  The big change is just the velocity of business as empires rise and fall quicker than before. Woolworth’s created the modern department store, but towards the middle of the 20th century was already fading and now are but a footnote in history . Bill Gates created the modern technology company and many seem lie streamlined imitations of what Microsoft created.  In all instance though  the speed of change does not allow time to reflect on a glorious history, because if you do you will be gone.

 

Good Night and Good Luck

Hans Henrik Hoffmann April 6, 2015

 

Bing-ality

Microsoft Bing since its launch has been considered the primary competitor to the behemoth known as Google search. It is a valiant effort in a very lucrative market space. However despite the immense opportunity,the term success has so far eluded Microsoft Bing.  When you look at Search Engine market share the numbers continue to improve for Bing as it hit over 17% in April, however the revenues have so far failed to materialize.  In Q2 of Fy13 for Microsoft’s Online Services Division lost money, $283 million.  In Q1 Google generated over $11 billion in revenue.  Granted Microsoft’s OSD is not just Bing, but all the other online services such as MSN and Outlook Mail.  The flip side of course is we really don’t know how Bing as a stand alone business is doing, despite the market share increases.

The history of Bing some may say is one of failed opportunity.  I am not so sure it is so much that as it is understanding online reality.  Bill Gates and Steve Ballmer often have said they blew it on search and I have often said they would never have figured it out.  Even if they had I am not so sure they would have been willing to take the financial risk to challenge Google at the time (remember we are going back to the 2002/2003 time frame) .  In his short stint at Microsoft Ray Ozzie provided the best analysis of Google.  He stated that they were using their immense revenues to fund software development projects that would compete against Microsoft. It was an indirect model, where ad revenues funded software engineering.  As has been shown Google has a lot of revenue to fund these projects.  It was difficult for Microsoft to grasp as they for so long have lived off of volume license revenues.

In the past decade it took a long time for Bing to come to the forefront.  First Microsoft toyed around with  Live search.  It was not a well named product.  Certainly not as fun as saying, “Google”.  But globally it did ok and when you looked at the top 100 websites, Live did appear in the top twenty.  It just did not have an ad word business model set up that could compete with what Google was doing.  Microsoft was slow in understanding the competitive threat that Google posed, if not holistically, at least opportunistically.  My view is Microsoft viewed it as another software market to conquer rather than the threat it was to existing businesses, namely Microsoft Office and Microsoft Windows.   This is just another market space in which we are entitled to own.

As things progressed so did Microsoft’s desperation ending in an audacious bid to acquire its competitor Yahoo.  Luckily for Microsoft and many grad schools across America this would end in the ego of Yahoo founder Jerry Yang as he made every attempt to kill  the deal. In the end this may have worked out for the benefit of Microsoft as they entered onto a partnership rather than spending $40 billion on an acquisition that may have been doomed to fail. While Jerry Yang seemingly failed business 101 which is to increase shareholder value, not decrease it.  He is now a case study for business graduate school history.

What has happened as these events have unfolded  is that Google has systematically found other business opportunities to augment and promote its search business and increase revenues.  Namely using the mobile phenomena to launch Android.  This has led to great headway in the mobile phone business and the tablet.  In 2013 it is projected that there will be 800 million Android devices sold.  None of these devices will have Bing as the default search engine.  In addition there will be 300 million iOS devices sold in 2013, again none will have Bung as the default search engine.  I only wrote this to share with Steve  as he seems to be unaware of this fact, but hey, he is a numbers guy.

So what does Bing do?  For starters that Apple iOS number is key.  One of Steve Jobs last talks to the Apple faithful at their corporate headquarters was about the evils of its key competitor Google.  There is no question that there is no love lost between the two.  Apple has tried to compete with Google head to head.  The failed Apple Maps comes to mind.  In my opinion a rare case of me saying, “Whose stupid idea at Apple was this?”  Google owns that space and barring some catastrophe, I do not see them losing in that space.  So with all that hate and failure what if Bing was the default search engine for Apple iOS?  Instantly Bing would have access to 300 million users.  Granted this would be a bizarre twist of fate, but Microsoft is not in a position of power in this space and Apple would like nothing better than to hurt Google.  If Bing can meet Apple’s high quality standards they could have a very compelling play in this space and be considered attractive to Apple.

There is also a bigger question of “if Not Microsoft than who?”.  Competition  that is not challenged is a threat to the greater benefit of society.  They can dictate terms, which is never a good thing.  When we look at companies that are able to challenge Google there are few with the cash reserves to do it.  One of the few would be Microsoft.  And frankly they owe it to us all.  Fundamentally competition is a good thing and maybe Bing is competing, it’s just that Google is pushing their game to a higher place.  If that is true than Bing needs to set a higher bar, not just compete at parity.  Faster more accurate search is nice, but we are reaching a point where for the end-user it is becoming increasingly difficult. to distinguish in milliseconds.

Another factor is much of Bing’s success is tied to other products like Windows 8, Surface and Windows Phone.  To successfully get people to switch alla Coke versus Pepsi, is not so easy as there is a lot more tied to it than just switching a can. The effort Microsoft must put in will take years, which in technology is worlds away.    So far it has been slow in coming and market share has increased at a snail’s pace.  This may drain Microsoft’s cash reserves but the reward is high Once yo have been great there is always a thirst to be great again and I think that more than anything drives Microsoft.  To get there search will be a key cog in the engine.  Information rules the world and if Bing is not successful Google very well could rule that world.  Bing is in a tough place but it is a fight worth fighting.

Good Night and Good Luck

Hans Henrik Hoffmann July 10, 2013

GoogleZon

In 2007 this video began to go viral in the tech sector discussing the future of media and the role of a potential giant Googlezon. The potential merger of two giants of the internet age, Google and Amazon.  If you watch the video it’s interesting to listen to what a potential future with these combined giants of the internet age could potentially accomplish.   The video is very heavy in its tone and its predictions.  As is always the case the future always looks dark and scary. It is also interesting to ponder that what is discussed is not really that far-fetched but closer to reality than one could have imagined.  A future where machines play an increasing role it helping define who we are.

The main theme of the video is the algorithms  used by Google and Amazon can be used to customize any information to a specific individual.  That your daily news could be customized for you, without any human intervention.  The search engines could literally browse the world-wide web and stitch the content together to provide you with your daily news, with your daily view of the world.  In a world where so much of our information is consumed in a very narrow arena dependent on our tastes and political agenda I am not sure this has not already happened. But the notion that the content we desire can be created and pushed to us would take this to a new level.  Our own MSNBC as liberal as we want it or our own Fox News as right-wing as we want it.  It raises other concerns regarding the accuracy of the news information that we would receive.  In a society that already seems on edge with anger, is this a welcome development?

Social media will also play a role, though the video is interesting in its notable absences of Facebook (Apple is not really a part of this either, but the video was created in 2007, the year the iPhone launched).  Instead focusing on Friendster. Microsoft is mentioned as purchasing companies to stay a float in this arena and this has played true. It bought aQuantive and attempted to purchase Yahoo.  None so far has succeeded.  Social Media continues to play a large role in shaping and creating our online presence .  A presence that players like Google, Amazon and Facebook are only to happy to manipulate to better serve and better profit from their customers.  As the video aptly points out search is all about mapping users search patterns to meet customer preferences  in whatever it is they are looking for, whether it be news, music, or online shopping.  Today online stores based on user data can do user based pricing, knowing your shopping behavior and what you are willing to pay, a price can go up or down.  Gone are the days of a “price tag”.

The newspaper we have known for sometime is dying.  That the New York times would emerge as the last vestige of the traditional paper is not surprising, since they are one of the largest papers in circulation in the  United States.  I can only add that being a current subscriber to my local newspapers, The Seattle Times, I can only decry the lack of newsworthy content in the paper as I have watched through the years the paper dwindle while the costs have only gone up.   I like the idea of a paper as it requires me to spread out the paper and dedicate time to reading the news.  This  differs from the news on the internet, thought much more current, I find like many things in technology it is not dedicated time, but passing time while I multi-task across the web. The video ends with the prediction that New York Times will go offline and be available only top those wishing to pay a premium or to older generations.  This is not that far-fetched.  But I believe the end of the traditional newspaper in print form is inevitable at this point.  This is not news to anyone.

If you look at Amazon and Google today they are enormous giants in their respective arenas, arenas that seem to be converging with each passing second.  That being said the idea of these two companies merging at this point seems a stretch as their respective market caps are $111 billion for Amazon and $230 billion for Google.  It would be a huge merger.  In addition Amazon and Google are becoming competitors in some areas.  In tablets (though Amazon does use the Google Android OS for its Kindle Fire) and reports suggest down the road that Amazon will release its own SmartPhone.  Big mergers are challenging, but at this point n time given both companies track record of success this I believe would be an unwelcome merger not just for the market place, but society as a whole.  Probably the biggest flaw here is with tech giants like these the people at the top have colossal egos.

It is the “impact on society” comment that I spend the most time thinking about.  Technology is creating changes in society at break neck speeds.  If you think over the last ten years all that has happened, it has come quickly .  We had search and then we had a verb called Google.  We had friends then we had Facebook.  We had read printed books for centuries than all of sudden they were digital.  Alexander Graham Bell did not know about the iPhone when he created the first phone system in the United States.  Nor did Craig McCaw envision the mobile internet, but Apple followed up the iPhone with the iPad.  These significant cultural changes all happened in a tidal wave of excitement over the last ten years.  The next ten years will hold even greater change as we close in on the speed of light in how are daily lives change.

Will there be one or two companies that get out ahead of these changes, like the GoogleZon video predicted?  There will always be companies that manage to take a large lead in the tech sector.  Some stay and some disappear.  There was a time AOL was the king of internet access.  Lotus123 were the spreadsheet kings if you want to go way back.  However in the end it always comes down to a company having a strong leadership with a strong vision of the future.  In today’s world I think that vision has to start with understanding the younger generations as they adopt technology first to meet their lifestyle needs.  If you think about the great changes in the last decade it has been social media, smartphones, and search or the 3 S’ as I call them.  Looking forward despite it’s bad IPO I see Facebook playing a large role in the future primarily because starting at the top with Mark Zuckerberg they have the type of leader that understands the role technology plays to the younger audiences.  I also see that at Google with Sergei Brin and Larry Page.  Taking chances without a care for the results.Only focused on the future role if technology.

In the end will this take us down a path as ominous as predicted in the GoogleZon video?  There is no doubt technology has and will have a positive role to play in our lives that will save us and our country money (I am thinking healthcare when I think of the country).  It will make our days more efficient.  It will make businesses more efficient. However in a world where information is at our fingertips how that information is used and manipulated can have very negative results in how our society functions.  It is happening now and in ways that five years ago were not imaginable. When you view the video you get a sense of Big Brother being upon us.  That Orwell’s future is becoming reality, but it was not the communists that created Big Brother.  We created it all on our own entrepreneurial spirit.

Good Night and Good Luck

Hans Henrik Hoffmann December 28, 2012