Thanks to the gang over at VMblog.com for soliciting cloud computing predictions for 2010.
Here is a link to my attempts to discern the murky future: http://vmblog.com/archive/2009/12/30/2010-in-cloud-computing-game-on.aspx
Happy New Year
Thursday, January 07, 2010
Friday, June 12, 2009
Is the Cloud Ready for the Enterprise?
Absolutely!
Especially now that the "private cloud" has been deemed possibly real and useful by the cloud vendors.
The emergence of the private cloud is a major event in enterprise IT infrastructure. The argument against "private cloud" has been it may not be truly elastic, it may not be pay-as-you-go on a fine grained basis and has many discrepancies with how we are beginning to view public clouds.
In this case you have to look in the eye of the beholder, the enterprise IT exec. Most enterprise IT executives I know are pretty bright, and extremely realistic about the dysfunction that litters the corporate landscape. They know there are areas of activity they aren't good at, or are over-complicated, and usually even know why, but they can't necessarily change their organization. So when an enterprise guy says he "wants his own private cloud"...he is stipulating to the jury up front the following types of deformations in his environment:
My question is "Why are cloud land folks so pedantic on this point?" Putting in place one of the cloudy solutions available today and its associated loosely coupled automation infrastructures today gives that IT exec WAYYYY more bang for their buck than they get out of the big, over-complicated, baroque, metal provisioning solutions left over from the end days of the dot-com era.
My response is "good thinking guys, let's get you a private cloud and take it from there!"
Especially now that the "private cloud" has been deemed possibly real and useful by the cloud vendors.
The emergence of the private cloud is a major event in enterprise IT infrastructure. The argument against "private cloud" has been it may not be truly elastic, it may not be pay-as-you-go on a fine grained basis and has many discrepancies with how we are beginning to view public clouds.
In this case you have to look in the eye of the beholder, the enterprise IT exec. Most enterprise IT executives I know are pretty bright, and extremely realistic about the dysfunction that litters the corporate landscape. They know there are areas of activity they aren't good at, or are over-complicated, and usually even know why, but they can't necessarily change their organization. So when an enterprise guy says he "wants his own private cloud"...he is stipulating to the jury up front the following types of deformations in his environment:
- IT is a captive vendor to a captive customer
- IT is creating many "one of" products
- IT can't take on debt
- IT can't issue equity
- IT reports equally to multiple masters
- IT's multiple masters range from benignly ignoring each other to actively (and with mal-intent) attempting to damage each others operating division
- IT can't spend the total sum of money that its multiple masters ask it to spend
- IT is highly regulated and audited
- and more.......
My question is "Why are cloud land folks so pedantic on this point?" Putting in place one of the cloudy solutions available today and its associated loosely coupled automation infrastructures today gives that IT exec WAYYYY more bang for their buck than they get out of the big, over-complicated, baroque, metal provisioning solutions left over from the end days of the dot-com era.
My response is "good thinking guys, let's get you a private cloud and take it from there!"
Wednesday, June 03, 2009
Ongoing Cloud Rorschach
Is this cloudy? What do you see in the following images?*
The Announcement
The Call to Action
Notice in "tiny" print at the bottom - consult your Verizon Business representative - click on "Contact Us".
The Contact Form
No public docs. No visibility to features, functions, pricing.
Am I a public company, how big am I, parent legal entity, etc..
Certainly cloudy.
The Announcement
The Call to Action
Notice in "tiny" print at the bottom - consult your Verizon Business representative - click on "Contact Us".
The Contact Form
No public docs. No visibility to features, functions, pricing.Am I a public company, how big am I, parent legal entity, etc..
Certainly cloudy.
Thursday, May 21, 2009
Is Enterprise ready for the Cloud?
This is one of the questions being bandied about in the Cloud world. And this is different than "is the Cloud ready for the enterprise".
I look to the System Integrator market as a guide. For example, Japan traditionally has been an environment where very little proprietary or custom application development is done by enterprises themselves, it is done by "SIers". The enterprises that have the core competencies to do custom development don't keep it in house, they in fact create an SI business. This is why you run into SIs named after large industrial manufacturers.
Increasingly this is occurring in the US and Western Europe; enterprises depend on SI's for implementation and even process and governance in some cases.
What does this mean? It means that whatever the internal IT budget is, many organizations have a greater appetite for the use of IT to enable their business than they are willing or able to put directly into the hands of their IT department. I take from this, that the limit is not available funds for the IT department, it is the IT department either cannot (or is perceived to be unable t0) effectively utilize the funds. The SI becomes one of the key levers business management and the CIO have to expand capacity.
Prior to cloud computing, the SI still, for the most part, had to come back to the IT department/data center operations "hat in hand" to get the implementation of the project deployed. Now the SI's will have multiple cloud relationships or run their own cloud. This creates another lever the enterprise. And, it grows the prominence and footprint of the SI in their business relationship with the enterprise.
It even begins to make them more of a channel for other vendors goods and services than they are today. I am thinking "go long" some of the key SIs in your portfolio as the market rebounds. A lot of them are sitting on their hands right now, actually investing less than my company CohesiveFT does, to meet customers needs in the cloud. But some of them look ready to move with real resources behind real business plans.
I look to the System Integrator market as a guide. For example, Japan traditionally has been an environment where very little proprietary or custom application development is done by enterprises themselves, it is done by "SIers". The enterprises that have the core competencies to do custom development don't keep it in house, they in fact create an SI business. This is why you run into SIs named after large industrial manufacturers.
Increasingly this is occurring in the US and Western Europe; enterprises depend on SI's for implementation and even process and governance in some cases.
What does this mean? It means that whatever the internal IT budget is, many organizations have a greater appetite for the use of IT to enable their business than they are willing or able to put directly into the hands of their IT department. I take from this, that the limit is not available funds for the IT department, it is the IT department either cannot (or is perceived to be unable t0) effectively utilize the funds. The SI becomes one of the key levers business management and the CIO have to expand capacity.
Prior to cloud computing, the SI still, for the most part, had to come back to the IT department/data center operations "hat in hand" to get the implementation of the project deployed. Now the SI's will have multiple cloud relationships or run their own cloud. This creates another lever the enterprise. And, it grows the prominence and footprint of the SI in their business relationship with the enterprise.
It even begins to make them more of a channel for other vendors goods and services than they are today. I am thinking "go long" some of the key SIs in your portfolio as the market rebounds. A lot of them are sitting on their hands right now, actually investing less than my company CohesiveFT does, to meet customers needs in the cloud. But some of them look ready to move with real resources behind real business plans.
Wednesday, May 20, 2009
"What is a cloud" ruckus
Memo to everyone.
Dateline Chicago.
We are not going to end up with a uniform definition of "cloud".
We have been doing "open systems", "open standards" and "open source" for decades now - and we don't have a uniform definition of "open".
We have been "patching" software for decades and I can tell you there is no uniform definition around what a "patch" is, or what the behavior of "patching" actually entails.
We are developing a Rosetta stone of cloud-ish attributes. And I for one am ok with the Sun definition. I think Dave Douglas, Lew and company have done a good job of making it generally understandable without being overly proscriptive or prescriptive.
http://www.slideshare.net/kvjacksn/sun-cloud-chalk-talk-presentation
For my interests I have a subset of the Sun view.
Pat Cloud is:
Cloud User defines a workload
This is done manually or via automation. The workload is in the form of a "language module" (Java EAR, Java WAR, Python Egg, Ruby gem, Python-Django-AppEngine tar file).
Cloud User moves workload to cloud (either manually or via automation)
The workload uses resources
It dynamically accesses and consumes network, storage, processing, and possibly some value added services.
The Cloud has certain minimal attributes
It has an API.
It takes credit cards or PayPal.
It allows short time window usage (pay by the minute, hour, day, week?)
This works for me - and helps me get a lot of work done. Cheers.
Dateline Chicago.
We are not going to end up with a uniform definition of "cloud".
We have been doing "open systems", "open standards" and "open source" for decades now - and we don't have a uniform definition of "open".
We have been "patching" software for decades and I can tell you there is no uniform definition around what a "patch" is, or what the behavior of "patching" actually entails.
We are developing a Rosetta stone of cloud-ish attributes. And I for one am ok with the Sun definition. I think Dave Douglas, Lew and company have done a good job of making it generally understandable without being overly proscriptive or prescriptive.
http://www.slideshare.net/kvjacksn/sun-cloud-chalk-talk-presentation
For my interests I have a subset of the Sun view.
Pat Cloud is:
Cloud User defines a workload
This is done manually or via automation. The workload is in the form of a "language module" (Java EAR, Java WAR, Python Egg, Ruby gem, Python-Django-AppEngine tar file).
Cloud User moves workload to cloud (either manually or via automation)
The workload uses resources
It dynamically accesses and consumes network, storage, processing, and possibly some value added services.
The Cloud has certain minimal attributes
It has an API.
It takes credit cards or PayPal.
It allows short time window usage (pay by the minute, hour, day, week?)
This works for me - and helps me get a lot of work done. Cheers.
Monday, March 30, 2009
The Open Cloud Ruckus in verse (compliments of RoboPoem)
For those of you have missed the fuss over the Open Cloud Manifesto, a veritable Greek Tragedy, and are even less inclined to read the voluminous email trail of pronouncement, criticism, critique, hysteria, fear and even rational discourse (in some small amount), here are the events in 4 poems as the result of google cloud group texts cut-and-pasted, then translated to verse by the wonderful RoboPoem.
Note: I first did this last Friday night, but did not want to pile on Reuven Cohen anymore than was happening. We are both at the Cloud Computing Expo today and he assures me he will take no umbrage.
I. The Manifesto
Cloud providers must work together dot
That the challenges to cloud adoption chant grapeshot
Portability applicability
immeasurable applicability
Addressed through open collaboration puff
Appropriate use of standards dress rebuff
Providers must not use their market heady
Lock customers into their sate unsteady
And limiting their choice of providers snout
Providers must use and adopt though redoubt
Wherever appropriate the it foghorn
Invested heavily in escalade stillborn
And standards organizations there dought
Need to duplicate or reinvent clinch got
When new standards or adjustments to hemstitch
Are needed we must be judicious astrology deathwatch
II. The Backdrop of Events
I define cloud computing as elastic vein
Resources' with a value'added stack cell arraign
Providing ha linear reincorporate
Etc' a all accessed by a scum alleviate
In theory' apps running on the same cloud should be braids
Share americanization choroids
Have mentioned in the definition of cloud game
Done in today's data centers a data nan frame
Be elastic today infact quite a ravishing
Been working on grid/utility/on walk absorbing
Centers for atleast 10 years they are also nephrons
On a pay'as'you'go model' many course gridirons
Especially in the enterprise world have slurred
Scalability automatic disjoint cowherd
III. The Furor
Hi to all' i think this rooster
Getting nowhere fess blaster
Feel i must express my doom
Think the whole weighting showroom
Not really obeying
Whether chaffered displaying
Lead this thing in new york trig
He is the leader oat dig
What anybody has played
About it he started pope fade
Thing and he has my vote beech
Regarding the reside preach
With microsoft' the outdid
The way things are dye outdid
Why the secrecy i yore
Are at a warm sophomore
This industry where we twice
That open tent sacrifice
IV. The Apology
Dear friends' it is with an eye fireside
Open future that we bay eyed
Many apt criticisms sneak
The cloud computing nor relique
Ccif and the difficult shabby
Which this abolishers clubby
Itself' as the organizers of crew
We would like to make our scab blue
The following letter is feet
Edict or decree berth deceit
A heartfelt attempt to reach lapp
Our fellow ethyl overlap
So we might begin to move smear
Events and complied anywhere
Our options' an apology while sup
This week's metaphysical up
Well argued posts one expanse
To inevitability trance
This covers the gist of the events. You should now be up to date.
I for one, am getting back to work.
pk
Note: I first did this last Friday night, but did not want to pile on Reuven Cohen anymore than was happening. We are both at the Cloud Computing Expo today and he assures me he will take no umbrage.
I. The Manifesto
Cloud providers must work together dot
That the challenges to cloud adoption chant grapeshot
Portability applicability
immeasurable applicability
Addressed through open collaboration puff
Appropriate use of standards dress rebuff
Providers must not use their market heady
Lock customers into their sate unsteady
And limiting their choice of providers snout
Providers must use and adopt though redoubt
Wherever appropriate the it foghorn
Invested heavily in escalade stillborn
And standards organizations there dought
Need to duplicate or reinvent clinch got
When new standards or adjustments to hemstitch
Are needed we must be judicious astrology deathwatch
II. The Backdrop of Events
I define cloud computing as elastic vein
Resources' with a value'added stack cell arraign
Providing ha linear reincorporate
Etc' a all accessed by a scum alleviate
In theory' apps running on the same cloud should be braids
Share americanization choroids
Have mentioned in the definition of cloud game
Done in today's data centers a data nan frame
Be elastic today infact quite a ravishing
Been working on grid/utility/on walk absorbing
Centers for atleast 10 years they are also nephrons
On a pay'as'you'go model' many course gridirons
Especially in the enterprise world have slurred
Scalability automatic disjoint cowherd
III. The Furor
Hi to all' i think this rooster
Getting nowhere fess blaster
Feel i must express my doom
Think the whole weighting showroom
Not really obeying
Whether chaffered displaying
Lead this thing in new york trig
He is the leader oat dig
What anybody has played
About it he started pope fade
Thing and he has my vote beech
Regarding the reside preach
With microsoft' the outdid
The way things are dye outdid
Why the secrecy i yore
Are at a warm sophomore
This industry where we twice
That open tent sacrifice
IV. The Apology
Dear friends' it is with an eye fireside
Open future that we bay eyed
Many apt criticisms sneak
The cloud computing nor relique
Ccif and the difficult shabby
Which this abolishers clubby
Itself' as the organizers of crew
We would like to make our scab blue
The following letter is feet
Edict or decree berth deceit
A heartfelt attempt to reach lapp
Our fellow ethyl overlap
So we might begin to move smear
Events and complied anywhere
Our options' an apology while sup
This week's metaphysical up
Well argued posts one expanse
To inevitability trance
This covers the gist of the events. You should now be up to date.
I for one, am getting back to work.
pk
Friday, February 20, 2009
Something new in Elastic Server that I LOVE...
OK. So I am a total "homer" for our stuff at CohesiveFT. I don't know if any of the other systems out there that help you on-board to EC2 help you elegantly with AMI placement in S3 buckets. If they already do, they have my congrats.
Check this screenshot out.
This is part of our EC2 configuration screen. When Amazon launched their Europe data center at the end of last year - we went live about 8 minutes later with the ability to dynamically create custom AMIs and live deploy them to EC2 USA or EC2 EU.
Still, even after that cool addition, one artifact from the "early days" of Elastic Server, that we had never addressed, was S3 bucket creation, organization and maintenance. We put each of your AMIs into a bucket named the same as the AMI. Simple, but it lead to hitting the AWS "number of buckets" limitation and made sorting in ElasticFox kind of a pain.
BUT above you see how you can select your S3 bucket as part of your assembly instructions. Not only do you get a dynamically created AMI in minutes - but you choose how to organize in S3! Thanks team! This is great!
pk
Check this screenshot out.
This is part of our EC2 configuration screen. When Amazon launched their Europe data center at the end of last year - we went live about 8 minutes later with the ability to dynamically create custom AMIs and live deploy them to EC2 USA or EC2 EU.
Still, even after that cool addition, one artifact from the "early days" of Elastic Server, that we had never addressed, was S3 bucket creation, organization and maintenance. We put each of your AMIs into a bucket named the same as the AMI. Simple, but it lead to hitting the AWS "number of buckets" limitation and made sorting in ElasticFox kind of a pain.
BUT above you see how you can select your S3 bucket as part of your assembly instructions. Not only do you get a dynamically created AMI in minutes - but you choose how to organize in S3! Thanks team! This is great!
pk
Friday, January 23, 2009
Now this is parental control!
Ok - so I am a bad parent. I use Parental Controls on my children's iMac. Part of this is the white list of web sites they can visit.
However websites like Club Penguin sometimes go dark even though the domain is in the white list. Why? Well the service has lots of other server addresses that don't resolve to the domain - just plain old IP addresses.
How do you figure this out? Go to the Parental Controls preferences and look at the "Failed Web Sites Visits" tab? Nope - no such tab.
You fire up the terminal application and you "tail" the "/private/var/log/apache2/access_log". OKAY - now that is a form of parental control - keeping even techie parents young and on top of their command line game.
Thanks Apple.
Thanks kid.
Your controlled parent,
pjk
However websites like Club Penguin sometimes go dark even though the domain is in the white list. Why? Well the service has lots of other server addresses that don't resolve to the domain - just plain old IP addresses.
How do you figure this out? Go to the Parental Controls preferences and look at the "Failed Web Sites Visits" tab? Nope - no such tab.
You fire up the terminal application and you "tail" the "/private/var/log/apache2/access_log". OKAY - now that is a form of parental control - keeping even techie parents young and on top of their command line game.
Thanks Apple.
Thanks kid.
Your controlled parent,
pjk
Wednesday, June 25, 2008
The market "deserts" traditional middleware
Progress Software's acquisition of IONA Software today is one of the end game moves for "enterprise" middleware and the traditional enterprise sales model as we have known it. Open Source, Software as a Service, and Platform as a Service have won. And only the organizations with planetary momentum (inertia) like IBM, Oracle, SAP, HP, Sun have the staying power to survive under the blistering sun of the old enterprise model.
One of the great moments in film is the Lawrence character in Lawrence of Arabia determining to seize the town of Aqaba by crossing the uncrossable Great Nafud desert. As we are told the Nafud is the "anvil of God" where anyone who does not complete the crossing in 3? days and nights will die.
For many years now I have thought that the traditional Enterprise Software model has had its own Nafud - which is the amount of revenue you have to achieve to in order to be "safe". And for a long time I believed that number was 1 billion in revenues and reasonable profitability. Any number less than this was not a permanent place to be. Either you got to the billion or you were doomed to be dependent on coming out with "hit technologies" to stay relevant. If you succeeded at always being on trend - then you survived in the desert longer. But as soon as you missed - and didn't have a hit on your hands - you slipped down in revenues and relevance - because you were technology driven - whilst pursuing a business model strategy that requires you to be sales-driven; which you can only do with much larger revenues.
The Enterprise Nafud has grown. The BEA sell-out to Oracle made this ominously clear. Even with revenues in excess of $1 billion, with global infrastructure paid for by the dot-com era, and with an enormous amount of human capital - BEA looked at its self and its business model and decided that it couldn't grow its stock price a modest amount on a go-forward basis. The Oracle price was about a 30% premium. BEA had to admit that the decay in their core business model (traditional bag carrying enterprise sales reps) was far faster than any renewal they could create from their product lines and new innovative services.
What is the new benchmark - how do you survive as a vendor pursuing traditional enterprise business model? Easy, be IBM, SAP, Oracle, HP or Sun. Other than that you can consume smaller lifeforms wandering the desert with you, to sustain you a little longer. Progress gobbled up IONA's enterprise products and customers like a wanderer at a desert oasis. Refreshed, they will live a little longer.
Even among the remaining middleware players SUN, IBM, Oracle, etc., how much of their product line is actually open source components being aggressively innovated on by teams outside of their organization? Increasingly more parts of WebSphere have the word "Apache" scratched out and the word "WebSphere" written on the packaging in red crayon.
I am not saying that enterprises don't buy software. I am not saying that there can't be awesome software/service vendors who make less than $1 billion in revenue and thrive. I am saying that the traditional model has clearly ended. Equally as true, the ending will go on for quite some time.
So if you are an existing small vendor or a startup, how do you survive? How do you thrive? Don't enter the desert! Aqaba actually doesn't have to be taken. It is a big world with OSS, PaaS and SaaS customers waiting for the new generation of value-oriented, instant-on IT suppliers.
One of the great moments in film is the Lawrence character in Lawrence of Arabia determining to seize the town of Aqaba by crossing the uncrossable Great Nafud desert. As we are told the Nafud is the "anvil of God" where anyone who does not complete the crossing in 3? days and nights will die.
For many years now I have thought that the traditional Enterprise Software model has had its own Nafud - which is the amount of revenue you have to achieve to in order to be "safe". And for a long time I believed that number was 1 billion in revenues and reasonable profitability. Any number less than this was not a permanent place to be. Either you got to the billion or you were doomed to be dependent on coming out with "hit technologies" to stay relevant. If you succeeded at always being on trend - then you survived in the desert longer. But as soon as you missed - and didn't have a hit on your hands - you slipped down in revenues and relevance - because you were technology driven - whilst pursuing a business model strategy that requires you to be sales-driven; which you can only do with much larger revenues.
The Enterprise Nafud has grown. The BEA sell-out to Oracle made this ominously clear. Even with revenues in excess of $1 billion, with global infrastructure paid for by the dot-com era, and with an enormous amount of human capital - BEA looked at its self and its business model and decided that it couldn't grow its stock price a modest amount on a go-forward basis. The Oracle price was about a 30% premium. BEA had to admit that the decay in their core business model (traditional bag carrying enterprise sales reps) was far faster than any renewal they could create from their product lines and new innovative services.
What is the new benchmark - how do you survive as a vendor pursuing traditional enterprise business model? Easy, be IBM, SAP, Oracle, HP or Sun. Other than that you can consume smaller lifeforms wandering the desert with you, to sustain you a little longer. Progress gobbled up IONA's enterprise products and customers like a wanderer at a desert oasis. Refreshed, they will live a little longer.
Even among the remaining middleware players SUN, IBM, Oracle, etc., how much of their product line is actually open source components being aggressively innovated on by teams outside of their organization? Increasingly more parts of WebSphere have the word "Apache" scratched out and the word "WebSphere" written on the packaging in red crayon.
I am not saying that enterprises don't buy software. I am not saying that there can't be awesome software/service vendors who make less than $1 billion in revenue and thrive. I am saying that the traditional model has clearly ended. Equally as true, the ending will go on for quite some time.
So if you are an existing small vendor or a startup, how do you survive? How do you thrive? Don't enter the desert! Aqaba actually doesn't have to be taken. It is a big world with OSS, PaaS and SaaS customers waiting for the new generation of value-oriented, instant-on IT suppliers.
Thursday, July 19, 2007
Thank goodness for the FTCR?
An Infoworld story tells of the efforts of the FTCR (Foundation for Taxpayers and Consumers Rights) to get Apple to warranty the iPhone battery for the life of the iPhone.
Infoworld FTCR Story
Two quotes:
"Foundation for Taxpayers and Consumer Rights (FTCR) asked that iPhone battery issues be disclosed in all advertising, before retail sales close and during activation using iTunes "to ensure that no customers are misled concerning the performance and effective cost of the unit." The letter also urged Apple to provide replacement batteries free of charge throughout the life of the iPhone."
"The FTCR has history with Apple. In 2006, it filed a class-action lawsuit against Apple, accusing the company of not offering dissatisfied iPod nano buyers a full refund after its screen became scratched."
I have a general hope that they fail in the first endeavor, thus eliminating a long run on sentence being mindlessly repeated at every ATT and Apple store, "Thank you for coming to our store and thank you for your interest in iPhone. Do you realize that you are buying a disposable consumer device which, depending on use, may require you to get a new battery. We are telling you this because you might not have a web brower, or read online news, or read blogs, or have any sensory apparatus whatsoever - AND you might have assumed that you were buying unbreakable titanium tablets which you also hoped could be passed down to your granchildren's children's children. May I have your credit card please?"
So when I look at this proposal and the second quote about how, "gasp", Nano's plastic screens could be scratched, I wonder what is the "life of the product"? And I see the looming generation gap that breaks maybe between 35 and under, versus above?
"Life of the product" to a late gen-xer or gen-d person is somewhere between "I get tired of the color" and "there is a new version with enough new features that mine isn't new enough anymore". In most cases this product life is shorter than the average product battery life. (Now - I do agree that the original owner's little brother or sister, or the buyer at the church rummage sale might need to get a new battery, but hey that's the "long tail" of short life fashion products I guess.)
If you are a tweener or baby-boomer then I am sure you instantly bought a rubber sheath for your iPod or iPhone taking an elegant, stylish product and making it look like a Zune, only bouncy. But, the fact that you have cultural inhibitions which will make you keep the product long past its cultural life - whose responsibility is it to bear that cost?
FAIR DISCLOSURE: I have my original blue iPod mini which is now scratched after I took my bouncy wrapper off as a result of watching the under-25 crowd at work. I do have my original Nintendo yellow-screen GameBoy, and would have my Pong, but my sister dropped it.
Infoworld FTCR Story
Two quotes:
"Foundation for Taxpayers and Consumer Rights (FTCR) asked that iPhone battery issues be disclosed in all advertising, before retail sales close and during activation using iTunes "to ensure that no customers are misled concerning the performance and effective cost of the unit." The letter also urged Apple to provide replacement batteries free of charge throughout the life of the iPhone."
"The FTCR has history with Apple. In 2006, it filed a class-action lawsuit against Apple, accusing the company of not offering dissatisfied iPod nano buyers a full refund after its screen became scratched."
I have a general hope that they fail in the first endeavor, thus eliminating a long run on sentence being mindlessly repeated at every ATT and Apple store, "Thank you for coming to our store and thank you for your interest in iPhone. Do you realize that you are buying a disposable consumer device which, depending on use, may require you to get a new battery. We are telling you this because you might not have a web brower, or read online news, or read blogs, or have any sensory apparatus whatsoever - AND you might have assumed that you were buying unbreakable titanium tablets which you also hoped could be passed down to your granchildren's children's children. May I have your credit card please?"
So when I look at this proposal and the second quote about how, "gasp", Nano's plastic screens could be scratched, I wonder what is the "life of the product"? And I see the looming generation gap that breaks maybe between 35 and under, versus above?
"Life of the product" to a late gen-xer or gen-d person is somewhere between "I get tired of the color" and "there is a new version with enough new features that mine isn't new enough anymore". In most cases this product life is shorter than the average product battery life. (Now - I do agree that the original owner's little brother or sister, or the buyer at the church rummage sale might need to get a new battery, but hey that's the "long tail" of short life fashion products I guess.)
If you are a tweener or baby-boomer then I am sure you instantly bought a rubber sheath for your iPod or iPhone taking an elegant, stylish product and making it look like a Zune, only bouncy. But, the fact that you have cultural inhibitions which will make you keep the product long past its cultural life - whose responsibility is it to bear that cost?
FAIR DISCLOSURE: I have my original blue iPod mini which is now scratched after I took my bouncy wrapper off as a result of watching the under-25 crowd at work. I do have my original Nintendo yellow-screen GameBoy, and would have my Pong, but my sister dropped it.
Tuesday, July 03, 2007
Sproing!!!
My company, CohesiveFT, is launching a pretty cool beta today - for Elastic Server On-Demand. Elastic Server's are end-user configured (engineer, developer) middleware stacks that are dynamically built and delivered via download in virtualization-ready formats.
We are launching a private beta but opening it up over the course of the summer. You can always contact me for a signup code - if you are nice - I will get you one.
Why are we doing this? Simply put both ISVs and customers are having difficulty as the middleware market shifts from single-sourced, tightly-coupled, vertically integrated stacks to multi-sourced, loosely-coupled, vertically-aware stacks. We think we can help. We are not out to displace any particular choice or brand of middleware, rather we are working to make middleware accessible, manageable and affordable.
Elastic Server has its own blog here http://elasticserver.blogspot.com
We are launching a private beta but opening it up over the course of the summer. You can always contact me for a signup code - if you are nice - I will get you one.
Why are we doing this? Simply put both ISVs and customers are having difficulty as the middleware market shifts from single-sourced, tightly-coupled, vertically integrated stacks to multi-sourced, loosely-coupled, vertically-aware stacks. We think we can help. We are not out to displace any particular choice or brand of middleware, rather we are working to make middleware accessible, manageable and affordable.
Elastic Server has its own blog here http://elasticserver.blogspot.com
Wednesday, June 27, 2007
iPhone Update
I got some flak from friends on my original "Apple Impact" post. Most of the complaints regarding missing features in the iPhone and the "openness" or "closedness" of it.
I think overall reaction to the iPhone depends on whether one is using a microscope or a telescope. "What is is" vs. "what it means." I honestly don't care what it is - I am ridiculously confident in my assessment of what it means.
First and foremost, (not that Apple fully understands this), this is not the iPhone. It is an iPod that makes phone calls. I hope Apple doesn't blow this. You have to look the iPhone within the context of iPod product line and price points.
iPod Shuffle: $79
iPod Nano: $149 $199 $249
iPod (Video): $249 $349
Apple TV $299
//Pat's Conjecture:
iPod (Video, new formfactor, touch screen, no phone, no wi-fi) $349
iPod Video Wi-fi $399
iPod Phone small disk - $499
iPod Phone big disk - $599
End Conjecture//
Mac-Mini $599
Mac-Mini $799
If you splice in the prices of Apple TV or Mac-Mini you get a nice curve up to $1,000 by the time you have a monitor. Have you priced a Playstation Portable and necessary accessories? Every kid/teen you see walking around with PSP is down $1,000 bucks, and at that price they still own only a handful of games. So the whole argument that the price is too high is just not relevant here in the USA - where between affluence and credit card debt, $600 for a toy for self or teens just isn't an issue.
This is why "retail drives enterprise", or "consumerprise" or "prosumer" is such a big deal. If I am a large enterprise making billions off of the knowledge capital of my people, then of course $600 is too much. "Bob, we can't outfit sales with these, our revenue per head would drop from $1.5 million per head to $1,499,400 per head - can't do it!"
The whole success of this product will be driven by the fact that it is not a business product. Business products suck. In fact Generation D (Net Generation, Generation-G) will likely evaluate jobs by access to consumer technology vs. business technology.
Old Business vs. New Business
Vista vs. Mac OS X / Ubuntu
Laser Printers vs. Lots of cheap inkjets
PBX-based Phone vs. Skype
Nextel click to talk vs. iPhone
Enterprise Backup vs. Mozy Accounts
And more.
Closed? More closed than my lame phones? Can't be for long - not with a real web browser. Not with widgets. Not with a universe of hackers out there. One of my best friends rails against iTunes because it is "closed." If selecting a set of AAC drm-protected songs in iTunes and clicking the "convert to mp3" button in another application is closed - then I will take closed in the Apple Reality Distortion Field over any product shipped to date by Sony, Nokia, Ericsson, or Microsoft.
UPDATE TO THE UPDATE:
OK, Bill Gates did one more major Window's wing-ding after my post declared he was done. And - the product is being sold as iPhone, something I didn't believe would happen. However, I do stand by what I said, long run this is not an iPhone, it is an iPod that makes phone calls. Do we really believe as the news tells us that ATT/Cingular has a 5 year exclusive? Or is it a 5 year exclusive to the "iPhone" brand and by June 29th next year we will all be able to buy an iPod that makes phone calls for use with most major carriers? Fingers crossed.
I think overall reaction to the iPhone depends on whether one is using a microscope or a telescope. "What is is" vs. "what it means." I honestly don't care what it is - I am ridiculously confident in my assessment of what it means.
First and foremost, (not that Apple fully understands this), this is not the iPhone. It is an iPod that makes phone calls. I hope Apple doesn't blow this. You have to look the iPhone within the context of iPod product line and price points.
iPod Shuffle: $79
iPod Nano: $149 $199 $249
iPod (Video): $249 $349
Apple TV $299
//Pat's Conjecture:
iPod (Video, new formfactor, touch screen, no phone, no wi-fi) $349
iPod Video Wi-fi $399
iPod Phone small disk - $499
iPod Phone big disk - $599
End Conjecture//
Mac-Mini $599
Mac-Mini $799
If you splice in the prices of Apple TV or Mac-Mini you get a nice curve up to $1,000 by the time you have a monitor. Have you priced a Playstation Portable and necessary accessories? Every kid/teen you see walking around with PSP is down $1,000 bucks, and at that price they still own only a handful of games. So the whole argument that the price is too high is just not relevant here in the USA - where between affluence and credit card debt, $600 for a toy for self or teens just isn't an issue.
This is why "retail drives enterprise", or "consumerprise" or "prosumer" is such a big deal. If I am a large enterprise making billions off of the knowledge capital of my people, then of course $600 is too much. "Bob, we can't outfit sales with these, our revenue per head would drop from $1.5 million per head to $1,499,400 per head - can't do it!"
The whole success of this product will be driven by the fact that it is not a business product. Business products suck. In fact Generation D (Net Generation, Generation-G) will likely evaluate jobs by access to consumer technology vs. business technology.
Old Business vs. New Business
Vista vs. Mac OS X / Ubuntu
Laser Printers vs. Lots of cheap inkjets
PBX-based Phone vs. Skype
Nextel click to talk vs. iPhone
Enterprise Backup vs. Mozy Accounts
And more.
Closed? More closed than my lame phones? Can't be for long - not with a real web browser. Not with widgets. Not with a universe of hackers out there. One of my best friends rails against iTunes because it is "closed." If selecting a set of AAC drm-protected songs in iTunes and clicking the "convert to mp3" button in another application is closed - then I will take closed in the Apple Reality Distortion Field over any product shipped to date by Sony, Nokia, Ericsson, or Microsoft.
UPDATE TO THE UPDATE:
OK, Bill Gates did one more major Window's wing-ding after my post declared he was done. And - the product is being sold as iPhone, something I didn't believe would happen. However, I do stand by what I said, long run this is not an iPhone, it is an iPod that makes phone calls. Do we really believe as the news tells us that ATT/Cingular has a 5 year exclusive? Or is it a 5 year exclusive to the "iPhone" brand and by June 29th next year we will all be able to buy an iPod that makes phone calls for use with most major carriers? Fingers crossed.
Thursday, June 21, 2007
Future Has Arrived By Popular Demand
Dell's announcement to support Ubuntu, combined with the fact that they appear to be actually promoting and marketing it, is an industry bellwether.
Computers are so ubiquitous that the up-and-coming generation (Gen D - digital?, Gen-G - good enough?) don't care enough to support an OS near-monopoly like Microsoft. They care about their user experience - but they don't care about the details. They don't care about comprehensive platform strategies. Life is a platform. A computer is a disposable device to be consumed like so much Red Bull and Twizzlers. They want color, style, a browser, a way to find applications, a way to chat, and when feeling fey and ancient, an email program.
And they want a user experience that perhaps pretends it is there to serve them, rather than they, the user, are part of some larger commercial purpose. "There are unused icons on your desktop" anyone?
Remember when Dell first started building computers from a supply chain of component vendors (hard drives, disks, video cards, etc)? A significant number of the experts and business types gasped and said "how do you know where the parts come from?", "how will it work without a single vendor building the whole system top to bottom?, "I want a real computer from someone like (fill in blank DEC, NEC, Fujitsu, Data General, IBM) where they built all the parts themselves.
Linux/Ubuntu is a focal point of industry innovation and like Dell did with sourcing innovative high performance components for its hardware boxes, Dell now realizes that the OS is just another high performance component to be made part of the solution.
While you are at it, look at the Dell Servers page if you haven't in a while. The OS is a component; choices like Red Hat, SUSE, VMware, and I would believe XenSource XEN or Virtual Iron XEN sometime soon.
So remember the Ubuntu-Dell deal and then insert the appropriate William Gibson quote about the "future" here.
Sunday, January 14, 2007
The Apple Impact
Tuesday was a dramatic day which has the potential to be of greater direct economic impact than the release of the Macintosh. While the Mac release was of profound emotional impact to many people - its economic impact was tortuous and indirect: Steve's ouster from Apple, the rise of Windows, the slow incremental progress of Windows, and Mac OS X wandering the hinterlands under the alias of NextStep 1.0, 2.0 and 3.0.
The Apple Impact
Three things have just happened; here they are and thoughts on their implications in order of importance.
- Bill Gates is done representing the technology company known as Microsoft.
- The product never-to-be-named iPhone will be an incredibly disruptive economic force.
- The vaunted mobile economic deformity known as the "Walled Garden" just fell.
1. Bill Gates
One of the most tragic outcomes is what will now have been Bill Gates last major speaking event on behalf of Microsoft. I like Bill Gates. I have been fortunate enough to see him at multiple resolutions; room of 20 people, room of 200 people, room of 2000, satellite to 20,000, tv broadcast to millions. He has an equally compelling style, regardless of the resolution. Never as good as Steve Jobs at Moscone resolution - but consistently engaging. Good-bye Bill.
I have got to believe that at least 50 people in Redmond went packing after the Gates' CES speech and the Job's Keynote on Tuesday. The stark contrast couldn't have been greater. Not the contrast between the two men's styles but between what they "hath wrought".
I think a fly on the wall would have heard something to the effect of the following between Gates and Ballmer Tuesday night, "I didn't put you in charge of this company for me to be continually humiliated by its products. Have you ever installed a Macintosh application? Do you realize it takes all of about 2 seconds! Do you realize IE7 breaks more websites than it works with? And 2007 bring an unprecedented level of needless customer disruption with difficult Vista, SQL Server and Exchange Server migrations? And Zune, let's talk about Zune. If there was a massive market in imagined, archival technologies with consumers breathlessly awaiting the release of a product that looks like what an MP3 player WOULD have looked like if they were technologically possible in 1969, then it would be a hit.
I told the audience I was moving on to infectious diseases - and I am - but the one thing I can't cure is what ails this company. Good luck."
2. The iPod that makes voice calls is an incredible disruptive economic force.
First, it may not ever be called the iPhone really. Not because of trademarks, but because it makes the wrong point. I don't want my phone to play MP3's - that is just plain stupid and a waste of time. Now, on the other hand, if my iPod could make phone calls - that would be cool.
(Subordinate prediction - music playing is the new flashing clock in all devices. Whether they need to or not everything over the next decade will end up with an MP3-playing version as degenerate marketing types attempt to cash in on trends they don't understand. Microwaves, washers, refrigerators will all join the fray)
Anyone watch other stock prices besides AAPL during the keynote? RIMM was a fun one - down about $10. (For a contrary viewpoint which I have earmarked for future time-capsule opening comes compliments of Mr. Richard Windsor at Nomura Securities here http://us.ft.com/ftgateway/superpage.ft?news_id=fto011020071828370310&page=2)
Basically this device from Apple marks several beginnings of the end...
RIMM - big hurt
Palm - big hurt
Tivo - small hurt (To be fair this is "iTV" impact and appears to not challenge DVRs yet.)
TomTomGo - big hurt
Zune - sent even further to some zombie netherworld of imagined archival technology
Sony Mylo - dead
Nokia - equally expensive devices look like they were made up on boyscout jamborees in the "Get Smart phone shoe" contest.
Alright, maybe overly-dramatic but the "oh crap" factor at these companies has to be off the scale. Well except for my comments on Zune. And I am confident Nokia will continue to make lots of phones that are free with your new cellular contract.
3. The Walled Garden just fell - and no one is talking about it! (Mr. Jobs please bring down the wall.)
The most dramatic impact is the beginning of the end of the walled garden. Maybe not as quickly as the Berlin Wall since we have to get through FCC approval, outlast the Cingular exclusive, withstand first bugs, and wait for the first wave of volume effects to drop price. But to all the device makers and cellular service operators who somehow think they are value added service providers, content providers, platform providers, API providers, etc.. - TTFN. It is over, over, over. While you weren't looking, Cingular snuck down into the garden and unlocked the door to the passageway under the moat and guess who they let in? AAPL, GOOG and YHOO, which if my math is correct represent about 100 billion million google trillion dollars of market capitalization and 94.5% of the creativity in the world of consumer computing technology! (Actual market cap is $275bn, actual creativity percentage is 92%).
Real web pages on handheld devices. Real access to Google services. Real email access via Yahoo. Now look at the craplets that infest your handheld or phone today. Which do you want?
Crash.
Will all of this happen overnight? Of course not. See CNET for a list of all the question marks they have (http://crave.cnet.com/8301-1_105-9677208-1.html?tag=nl.e404) Will only Apple reap the reward of the Apple Impact? No. But, take note, Apple will not make the Mac user interface mistake again. They have patented their innovations to the bejeezus and will defend them to the fullest. So unlike last time the copycats will be creative as they aim to create, gain and retain market share.
Its been 23 years since 1984, isn't it time for some change?
The Apple Impact
Three things have just happened; here they are and thoughts on their implications in order of importance.
- Bill Gates is done representing the technology company known as Microsoft.
- The product never-to-be-named iPhone will be an incredibly disruptive economic force.
- The vaunted mobile economic deformity known as the "Walled Garden" just fell.
1. Bill Gates
One of the most tragic outcomes is what will now have been Bill Gates last major speaking event on behalf of Microsoft. I like Bill Gates. I have been fortunate enough to see him at multiple resolutions; room of 20 people, room of 200 people, room of 2000, satellite to 20,000, tv broadcast to millions. He has an equally compelling style, regardless of the resolution. Never as good as Steve Jobs at Moscone resolution - but consistently engaging. Good-bye Bill.
I have got to believe that at least 50 people in Redmond went packing after the Gates' CES speech and the Job's Keynote on Tuesday. The stark contrast couldn't have been greater. Not the contrast between the two men's styles but between what they "hath wrought".
I think a fly on the wall would have heard something to the effect of the following between Gates and Ballmer Tuesday night, "I didn't put you in charge of this company for me to be continually humiliated by its products. Have you ever installed a Macintosh application? Do you realize it takes all of about 2 seconds! Do you realize IE7 breaks more websites than it works with? And 2007 bring an unprecedented level of needless customer disruption with difficult Vista, SQL Server and Exchange Server migrations? And Zune, let's talk about Zune. If there was a massive market in imagined, archival technologies with consumers breathlessly awaiting the release of a product that looks like what an MP3 player WOULD have looked like if they were technologically possible in 1969, then it would be a hit.
I told the audience I was moving on to infectious diseases - and I am - but the one thing I can't cure is what ails this company. Good luck."
2. The iPod that makes voice calls is an incredible disruptive economic force.
First, it may not ever be called the iPhone really. Not because of trademarks, but because it makes the wrong point. I don't want my phone to play MP3's - that is just plain stupid and a waste of time. Now, on the other hand, if my iPod could make phone calls - that would be cool.
(Subordinate prediction - music playing is the new flashing clock in all devices. Whether they need to or not everything over the next decade will end up with an MP3-playing version as degenerate marketing types attempt to cash in on trends they don't understand. Microwaves, washers, refrigerators will all join the fray)
Anyone watch other stock prices besides AAPL during the keynote? RIMM was a fun one - down about $10. (For a contrary viewpoint which I have earmarked for future time-capsule opening comes compliments of Mr. Richard Windsor at Nomura Securities here http://us.ft.com/ftgateway/superpage.ft?news_id=fto011020071828370310&page=2)
Basically this device from Apple marks several beginnings of the end...
RIMM - big hurt
Palm - big hurt
Tivo - small hurt (To be fair this is "iTV" impact and appears to not challenge DVRs yet.)
TomTomGo - big hurt
Zune - sent even further to some zombie netherworld of imagined archival technology
Sony Mylo - dead
Nokia - equally expensive devices look like they were made up on boyscout jamborees in the "Get Smart phone shoe" contest.
Alright, maybe overly-dramatic but the "oh crap" factor at these companies has to be off the scale. Well except for my comments on Zune. And I am confident Nokia will continue to make lots of phones that are free with your new cellular contract.
3. The Walled Garden just fell - and no one is talking about it! (Mr. Jobs please bring down the wall.)
The most dramatic impact is the beginning of the end of the walled garden. Maybe not as quickly as the Berlin Wall since we have to get through FCC approval, outlast the Cingular exclusive, withstand first bugs, and wait for the first wave of volume effects to drop price. But to all the device makers and cellular service operators who somehow think they are value added service providers, content providers, platform providers, API providers, etc.. - TTFN. It is over, over, over. While you weren't looking, Cingular snuck down into the garden and unlocked the door to the passageway under the moat and guess who they let in? AAPL, GOOG and YHOO, which if my math is correct represent about 100 billion million google trillion dollars of market capitalization and 94.5% of the creativity in the world of consumer computing technology! (Actual market cap is $275bn, actual creativity percentage is 92%).
Real web pages on handheld devices. Real access to Google services. Real email access via Yahoo. Now look at the craplets that infest your handheld or phone today. Which do you want?
Crash.
Will all of this happen overnight? Of course not. See CNET for a list of all the question marks they have (http://crave.cnet.com/8301-1_105-9677208-1.html?tag=nl.e404) Will only Apple reap the reward of the Apple Impact? No. But, take note, Apple will not make the Mac user interface mistake again. They have patented their innovations to the bejeezus and will defend them to the fullest. So unlike last time the copycats will be creative as they aim to create, gain and retain market share.
Its been 23 years since 1984, isn't it time for some change?
Saturday, November 18, 2006
Consumerization Again
Clearly I have not been updating this blog at all. A year has gone by and Gartner has made "consumerization" an even stronger emphasis at their annual symposium.
Here is an editorial on that topic by Eric Lundquist at Eweek: http://www.eweek.com/article2/0,1895,2033437,00.asp
And here is an article from the same issue on the symposium: http://www.eweek.com/article2/0,1895,2034629,00.asp
Here is an editorial on that topic by Eric Lundquist at Eweek: http://www.eweek.com/article2/0,1895,2033437,00.asp
And here is an article from the same issue on the symposium: http://www.eweek.com/article2/0,1895,2034629,00.asp
Wednesday, January 04, 2006
Gartner Has Named "IT"
It's official. "Retail Drives Enterprise" has an official name. In what Infoworld called an "unusually brief and cryptic" research note from Gartner analyst David Mitchell Smith, the topic was dubbed "Globalize IT Through Consumerization".
Here is the Infoworld blurb.
http://www.infoworld.com/article/05/10/28/44OPanalysts_1.html?STORAGE%2520HARDWARE
Here is the Infoworld blurb.
http://www.infoworld.com/article/05/10/28/44OPanalysts_1.html?STORAGE%2520HARDWARE
Wednesday, October 05, 2005
Retail Drives Enterprise
Welcome to my first post after leaving the position of Borland’s Chief Technology Officer. Assuming I haven’t been excised from the Borland site you can get a flavor of my thoughts about the tech industry and its impact on Borland’s business at http://blogs.borland.com/pjkerpan.
Why is it that retail technology from Best Buy or online sites is better than what many people have at work?
This is an effect that appeared to have begun in the early 90's. Sometime in the preceding years retail technology began to drive business technology, not the other way around. If there is a canonical example of the old model it is the facsimile machine. It wasn’t until enough businesses bought these that competition drove the price down into the range of the home office user.
Personal computers followed this arc until the early 90s. In the 91-ish timeframe I met with one of the heads of Hewlett Packard’s PC group with me bemoaning the poor design style of their product which we referred to as having a “babyshit brown design center”. We told them we would buy 4000+ Intel boxes if they could come up with some other color – to which the HP manager responded “But how would the users recognize they were computers?”
Since then the major PC vendors have continued the practice of having their “business computer” which is characterized by having lower performance and old components. In exchange for this a business is supposedly buying “stability”. Simultaneously of course the vendor is selling 10x of their retail/home/gaming computers. Buying the business computer is kind of like ordering the special stew at a restaurant – which is clearly made up of this week’s left over entrée ingredients.
So if there is a lesson to be drawn from today’s world is it “Businesses are stupid and consumers are smart”?
On the one hand consumer’s are ruthless adopters of technology to enable their personal lives; Fast PC’s, iPods, nearly free inkjet scanners/printers, photo printers, Tivos, xBoxes, Ultima Online, Ebay, Amazon, Gmail, etc.. They either have the wherewithal to go get Trillian or they just run 3 or 4 different IM’s – doesn’t matter. Alternatively, “business people” burn things off the asset register, use crummy computers handed down from R&D and Sales, to Marketing to G&A. To roll out a new software package takes anywhere from 1 to 3 years to install, migrate and train the users.
Meanwhile those same people go home and on the weekend switch photo sharing services, sell their “Hammer of Thor” in one online gaming environment for enough hard currency to buy the “Cerulean Plasma Rifle” in another, sell some things on Ebay, buy some things in zSHops, transfer their address book from Cingular to T-Mobile, and compare Orbitz, Priceline and Hotwire for vacation deals – personally besting most supercomputers at the traveling salesman problem.
What’s up with that?
The ease of access to information, the accessibility of new computing, networking and storage capabilities in the consumer market, the remote control and intelligent agency of Tivo, Orb Networks, Sling etc. will drive the business systems of tomorrow. Retail technology will continue to be the pace car in setting user expectations for their business capabilities.
Why is it that retail technology from Best Buy or online sites is better than what many people have at work?
This is an effect that appeared to have begun in the early 90's. Sometime in the preceding years retail technology began to drive business technology, not the other way around. If there is a canonical example of the old model it is the facsimile machine. It wasn’t until enough businesses bought these that competition drove the price down into the range of the home office user.
Personal computers followed this arc until the early 90s. In the 91-ish timeframe I met with one of the heads of Hewlett Packard’s PC group with me bemoaning the poor design style of their product which we referred to as having a “babyshit brown design center”. We told them we would buy 4000+ Intel boxes if they could come up with some other color – to which the HP manager responded “But how would the users recognize they were computers?”
Since then the major PC vendors have continued the practice of having their “business computer” which is characterized by having lower performance and old components. In exchange for this a business is supposedly buying “stability”. Simultaneously of course the vendor is selling 10x of their retail/home/gaming computers. Buying the business computer is kind of like ordering the special stew at a restaurant – which is clearly made up of this week’s left over entrée ingredients.
So if there is a lesson to be drawn from today’s world is it “Businesses are stupid and consumers are smart”?
On the one hand consumer’s are ruthless adopters of technology to enable their personal lives; Fast PC’s, iPods, nearly free inkjet scanners/printers, photo printers, Tivos, xBoxes, Ultima Online, Ebay, Amazon, Gmail, etc.. They either have the wherewithal to go get Trillian or they just run 3 or 4 different IM’s – doesn’t matter. Alternatively, “business people” burn things off the asset register, use crummy computers handed down from R&D and Sales, to Marketing to G&A. To roll out a new software package takes anywhere from 1 to 3 years to install, migrate and train the users.
Meanwhile those same people go home and on the weekend switch photo sharing services, sell their “Hammer of Thor” in one online gaming environment for enough hard currency to buy the “Cerulean Plasma Rifle” in another, sell some things on Ebay, buy some things in zSHops, transfer their address book from Cingular to T-Mobile, and compare Orbitz, Priceline and Hotwire for vacation deals – personally besting most supercomputers at the traveling salesman problem.
What’s up with that?
The ease of access to information, the accessibility of new computing, networking and storage capabilities in the consumer market, the remote control and intelligent agency of Tivo, Orb Networks, Sling etc. will drive the business systems of tomorrow. Retail technology will continue to be the pace car in setting user expectations for their business capabilities.
“Should you encounter God on your journey” (Borland blog)
As some of you may know this is my last BDN post as a Borland employee. I have completed an 8 year journey that began in May of 1997 when I left my position as Managing Director at Canadian Imperial Bank of Commerce and started a small software company, Bedouin. That ended 16 years on the “buy side” of information technology and began an 8 year trek focusing predominantly on software development productivity. It led to the Starbase acquisition – my running of the StarTeam and CaliberRM business unit to the point that they clearly became integral to Borland’s future. After that came my tenure as CTO working to evolve both Borland’s integrated “ALM” offering and the evolution towards Software Delivery Optimization.
Enough about me, let’s talk about me. It became clear to me early this year that two things had happened. One, the back of my mind was filling up with “mad science experiments” that were clearly outside the bounds of any foreseeable Borland business model. Two, I was no longer in the minority of people in the company at large, nor R&D who understood the needs of the enterprise customer and could align their needs with our product agenda. I was an important part of the team but perhaps somewhat less critical than in prior years.
Likewise, I enjoyed the entrepreneurial experience of Bedouin and it is something I am interested in doing again. So I am off to tease mad science experiments out of the back of my mind into perhaps a few front-of-mind commercial possibilities. To keep track with these I invite you to occasionally check in at pjktech.blogspot.com.
Now let’s talk about Borland. Borland is chock full of engineering talent. We have established the Office of Chief Scientists as a voice for the engineering team that regularly connects with executive management. Here is the one thing you need to know about Borland’s Chief Scientists, they are so smart that their brains have brains. We have a head of engineering for a good part of the ALM products who is A) The best engineering manager I have ever had work for me. B) The best engineering manager I have ever heard of. C) The best engineering manager I could dream up. D) All of the above. (The answer is “D”.)
For Delphi we have Danny, Alan, Eli and others. We have a walking encyclopedia (database?, Diamond Age Ractive?, one-man hive-mind?) of software – David I. He has voluminous knowledge of the past, a canny sense of the present and deep insight to the future. We have systems engineers who make a career of walking around the planet and kicking the heck out of IBM Rational. (SIDENOTE: It is amazing – the acquisitions that Atria – Pure – Rational did – and multiple years into the IBM stewardship customers are confronted with essentially LAN-based products in an exploding world of distributed development.) Our St. Petersberg team is not “offshore, low cost programmers” – they are a legitimate R&D team contributing mightily to the state of the art in tooling for Model Driven Development and Model Driven Architecture. Which reminds me – some of the Togethersoft guys in the United States are treasures; R.S, R.G, D.M, C.K. Who’s going to beat them – Telelogic? Serena VDM? No way.
I could write initials and cute hints for pages about R&D and still not have yet gotten to the relatively new and improved marketing team now in place which is arming a better educated direct-sales force, better than ever.
My management peers? You won’t find better people. They are honest, driven people committed to the success of the company. Does the management team I have been a part of make mistakes? Of course it does – we are unfortunately all too human. Do they castigate themselves; self-critique themselves to a depth greater than any of the outside critics – certainly. What could they do better? Be more ruthless. The products are good – the team is good – the market is huge – go for it guys. Stomp the also-rans like Telelogic and Serena.
My message for the company and friends I leave behind, for the people who I hope will live on in my IM list forever …
“Should you encounter God on your journey, God will be cut."
-Hattori Hanzo, Kill Bill Volume 1
Enough about me, let’s talk about me. It became clear to me early this year that two things had happened. One, the back of my mind was filling up with “mad science experiments” that were clearly outside the bounds of any foreseeable Borland business model. Two, I was no longer in the minority of people in the company at large, nor R&D who understood the needs of the enterprise customer and could align their needs with our product agenda. I was an important part of the team but perhaps somewhat less critical than in prior years.
Likewise, I enjoyed the entrepreneurial experience of Bedouin and it is something I am interested in doing again. So I am off to tease mad science experiments out of the back of my mind into perhaps a few front-of-mind commercial possibilities. To keep track with these I invite you to occasionally check in at pjktech.blogspot.com.
Now let’s talk about Borland. Borland is chock full of engineering talent. We have established the Office of Chief Scientists as a voice for the engineering team that regularly connects with executive management. Here is the one thing you need to know about Borland’s Chief Scientists, they are so smart that their brains have brains. We have a head of engineering for a good part of the ALM products who is A) The best engineering manager I have ever had work for me. B) The best engineering manager I have ever heard of. C) The best engineering manager I could dream up. D) All of the above. (The answer is “D”.)
For Delphi we have Danny, Alan, Eli and others. We have a walking encyclopedia (database?, Diamond Age Ractive?, one-man hive-mind?) of software – David I. He has voluminous knowledge of the past, a canny sense of the present and deep insight to the future. We have systems engineers who make a career of walking around the planet and kicking the heck out of IBM Rational. (SIDENOTE: It is amazing – the acquisitions that Atria – Pure – Rational did – and multiple years into the IBM stewardship customers are confronted with essentially LAN-based products in an exploding world of distributed development.) Our St. Petersberg team is not “offshore, low cost programmers” – they are a legitimate R&D team contributing mightily to the state of the art in tooling for Model Driven Development and Model Driven Architecture. Which reminds me – some of the Togethersoft guys in the United States are treasures; R.S, R.G, D.M, C.K. Who’s going to beat them – Telelogic? Serena VDM? No way.
I could write initials and cute hints for pages about R&D and still not have yet gotten to the relatively new and improved marketing team now in place which is arming a better educated direct-sales force, better than ever.
My management peers? You won’t find better people. They are honest, driven people committed to the success of the company. Does the management team I have been a part of make mistakes? Of course it does – we are unfortunately all too human. Do they castigate themselves; self-critique themselves to a depth greater than any of the outside critics – certainly. What could they do better? Be more ruthless. The products are good – the team is good – the market is huge – go for it guys. Stomp the also-rans like Telelogic and Serena.
My message for the company and friends I leave behind, for the people who I hope will live on in my IM list forever …
“Should you encounter God on your journey, God will be cut."
-Hattori Hanzo, Kill Bill Volume 1
Tuesday, September 06, 2005
All Hail the Red Queen... (from my Borland blog)
“Now here you see it takes all the running you can do, to keep in the same place. If you want to get somewhere, you have to run at least twice as fast as that”
- Red Queen – “Alice Through the Looking Glass”
I spoke at BZ Media’s EclipseWorld last week about the impact of “the Eclipse Effect” and the challenges and opportunities it presents both Enterprise IT and ISV’s as they build out their next releases of products. After the keynote, a theme that came up in multiple discussions is the acceleration of how often companies need to re-consider their competitive positioning and their differentiable value. It seems like this was once a generational question for software companies and IT departments that arose every 8-10 years. Now one needs to manage “differentiable value” more like a series of cash flows used to value a financial instrument. Your product portfolio’s feature sets are a bucket of these value flows that need to be assessed independently and on an ongoing basis. This creates a “net differentiable value” which can be used to determine product creation priorities and go-to-market strategy.
Every few years it seems like someone comes up with another thing to apply financial derivatives mathematics to. My bet is determining optimal commercial differentiable value and the use of open source will be two more of them. Hey, any of my old friends from O’Connor, Swiss Bank or CIBC, want to take a crack at it? Give me a call.
So where has this acceleration come from? What were the pre-conditions? I have two themes I think are part of it that I will write about in subsequent posts: “Cyberphysics” and “The Kids are Alright”. Stay tuned.
UPDATE ON THIS POST: After my previous Borland posts and then this one the core of people whose rabid concern was the future of Delphi and Borland C++ began to emerge. The main complaint being that my Borland blog should be used to pretty much talk about release schedules, features and futures. Unfortunately for those folks I didn't see that as the role of CTO, and now with time in retrospect, I still don't agree with them. Borland had over 100+ people involved in the development, marketing, support and management of these products - their words and messages should be sufficient. Another thing I noticed in the comments was a refusal to accept (not understand, but accept), that officers of public companies cannot reveal specific about product plans without doing so in a careful, planned, and legal way. Regardless, below this update I include a response to one of the comments longer than the original post. And in a single comment by "Anonymous" here - I have put all of the critiques.
My response to one of the critics:
A couple comments in response.
Yes this is a “BDN” blog sponsored by Borland Developer Network. That said I really can't provide any specifics on product direction for any Borland product that has not already been publicly stated. In my handful of blog postings as you can see I focus on the trends or themes I see in our enterprise customer base – trends and themes which I believe will ultimately have an impact on enterprise developers, if only as a result of organizational behavior, as well as their technological effect.
In this post I was ruminating without conclusion on one of the things I am seeing our customer’s struggle with as well as our ISV partners; what is a company’s differentiable value? I still don’t have conclusions – but here is some of the underlying thought in process.
In prior generations before open source, you looked at competitors and customer demand. If a competitor had a feature you were for the most part expected to counter it with your own variant. This is “me too”. In order to have differentiable value you had to think up and implement customer-desired features before your competition, “me first”. So determining product features was a “me too” vs. “me first” balancing act. Hard to be good at, but the dimensionality of the problem didn’t make your head explode.
Given the advent of (to name a few):
Internet connectedness as a force to:
- focus the accumulation of intellectual capital
- provide planetary scale development on relatively small problems
- Growing enterprise acceptance of open source
- The “API-ification” of almost everything
How does this change “me first” vs. “me too”. It introduces, to oversimplify, “should I ever”, “who else”, and “along with”.
“Should I ever” – means “is this a capability that I believe will have a valid commercial life before commonly understood and implemented in open source?”
“Who else” – is what are the other sources of components for my integrated product – probably an order of magnitude more complicated as a result of independent open source contributions, foundation open source contributions, and corporate open source contributions”, as well as partner and community contributions via the “api-ification” effect.
“Along with” is perhaps a combination of your contributions to community and open source initiatives, as well as your investments into the api-ification of your product lines.
All of these are new dimensions which potentially require one to BELIEVE something about the future, which in my book means you need to start reviewing all of this probabilistically to get some sense of what your expected outcomes are.
Once you are into “probabilistic, expected outcome” you ought to start thinking about standard techniques used everyday in other domains to help you. Look at Borland’s CaliberRM, one of the most compelling features is the use of Monte Carlo simulation on industry standard historical data and company-specific historical project data to provide a probabilistic estimate of project success given the time, budget, staff, etc.. Does this probabilistic approach guarantee anything? If all the inputs are completely wrong then it does nothing. If the estimates are close – it gives you some sense of the possible outcomes.
So as I think about the granularity of major feature areas of all of a vendor’s products with respect to “me first”, “me too”, “who else”, “should I ever”, and “along with” – combined with the fact that all of these judgments require some belief about an inherently exactly unknowable, albeit estimable future, it turns my thoughts to the techniques used in derivatives analysis.
As an over-simplified primer here are two pointers. Modern financial mathematics got its jump start when Fischer Black (U of C) and economist Myron Scholes (MIT) collaborated on the concept that option pricing was essentially the same as the thermal conduction law of classical thermodynamics. Also, (thanks to Peter Hoadley) play around with option pricing graphs at http://www.hoadley.net/options/optiongraphs.aspx .
Notice the impact of “volatility” which is your probability estimate. Notice sensitivity to “time to expiration”.
This calculator is for a relatively simple set of cash flows, which in some ways can be thought of as probability flows. Complex financial instruments require you to analyze thousands of future cash flows, with future beliefs about potentially numerous cross rates, interest rates, inflation rates, credit ratings, etc.. At that level of complexity, with that many guesses of the future, it is necessary to know maximal risk exposure depending upon numerous probability paths.
SO…since option theory is increasingly used in other domains to understand types of probabilistic risk exposure I was wondering if it is about time to have a more formal, statistical approach to product management given what I believe is the increasing dimensionality of that problem. Does this affect developers directly? If I am wrong and we live in the simple world of “me too” vs. “me first”, then certainly not. On the other hand, maybe it is worth a thought with respect to the products one is making human and financial commitment to – whether products built or products bought.
And, because of my “give a moose a muffin” type thought processes I also wonder how did we get here? How did this acceleration start? Why are there so many people willing to work in a collaborative way to solve problems like an open source OS, open source appserver, etc..? Where did they come from? What are the generational or cultural shifts that have caused the acceleration of openness, api-ification, and collaborative connectedness? Which as I said, I will post some gobbledygook about in the future.
Thanks for the comments.
pk
- Red Queen – “Alice Through the Looking Glass”
I spoke at BZ Media’s EclipseWorld last week about the impact of “the Eclipse Effect” and the challenges and opportunities it presents both Enterprise IT and ISV’s as they build out their next releases of products. After the keynote, a theme that came up in multiple discussions is the acceleration of how often companies need to re-consider their competitive positioning and their differentiable value. It seems like this was once a generational question for software companies and IT departments that arose every 8-10 years. Now one needs to manage “differentiable value” more like a series of cash flows used to value a financial instrument. Your product portfolio’s feature sets are a bucket of these value flows that need to be assessed independently and on an ongoing basis. This creates a “net differentiable value” which can be used to determine product creation priorities and go-to-market strategy.
Every few years it seems like someone comes up with another thing to apply financial derivatives mathematics to. My bet is determining optimal commercial differentiable value and the use of open source will be two more of them. Hey, any of my old friends from O’Connor, Swiss Bank or CIBC, want to take a crack at it? Give me a call.
So where has this acceleration come from? What were the pre-conditions? I have two themes I think are part of it that I will write about in subsequent posts: “Cyberphysics” and “The Kids are Alright”. Stay tuned.
UPDATE ON THIS POST: After my previous Borland posts and then this one the core of people whose rabid concern was the future of Delphi and Borland C++ began to emerge. The main complaint being that my Borland blog should be used to pretty much talk about release schedules, features and futures. Unfortunately for those folks I didn't see that as the role of CTO, and now with time in retrospect, I still don't agree with them. Borland had over 100+ people involved in the development, marketing, support and management of these products - their words and messages should be sufficient. Another thing I noticed in the comments was a refusal to accept (not understand, but accept), that officers of public companies cannot reveal specific about product plans without doing so in a careful, planned, and legal way. Regardless, below this update I include a response to one of the comments longer than the original post. And in a single comment by "Anonymous" here - I have put all of the critiques.
My response to one of the critics:
A couple comments in response.
Yes this is a “BDN” blog sponsored by Borland Developer Network. That said I really can't provide any specifics on product direction for any Borland product that has not already been publicly stated. In my handful of blog postings as you can see I focus on the trends or themes I see in our enterprise customer base – trends and themes which I believe will ultimately have an impact on enterprise developers, if only as a result of organizational behavior, as well as their technological effect.
In this post I was ruminating without conclusion on one of the things I am seeing our customer’s struggle with as well as our ISV partners; what is a company’s differentiable value? I still don’t have conclusions – but here is some of the underlying thought in process.
In prior generations before open source, you looked at competitors and customer demand. If a competitor had a feature you were for the most part expected to counter it with your own variant. This is “me too”. In order to have differentiable value you had to think up and implement customer-desired features before your competition, “me first”. So determining product features was a “me too” vs. “me first” balancing act. Hard to be good at, but the dimensionality of the problem didn’t make your head explode.
Given the advent of (to name a few):
Internet connectedness as a force to:
- focus the accumulation of intellectual capital
- provide planetary scale development on relatively small problems
- Growing enterprise acceptance of open source
- The “API-ification” of almost everything
How does this change “me first” vs. “me too”. It introduces, to oversimplify, “should I ever”, “who else”, and “along with”.
“Should I ever” – means “is this a capability that I believe will have a valid commercial life before commonly understood and implemented in open source?”
“Who else” – is what are the other sources of components for my integrated product – probably an order of magnitude more complicated as a result of independent open source contributions, foundation open source contributions, and corporate open source contributions”, as well as partner and community contributions via the “api-ification” effect.
“Along with” is perhaps a combination of your contributions to community and open source initiatives, as well as your investments into the api-ification of your product lines.
All of these are new dimensions which potentially require one to BELIEVE something about the future, which in my book means you need to start reviewing all of this probabilistically to get some sense of what your expected outcomes are.
Once you are into “probabilistic, expected outcome” you ought to start thinking about standard techniques used everyday in other domains to help you. Look at Borland’s CaliberRM, one of the most compelling features is the use of Monte Carlo simulation on industry standard historical data and company-specific historical project data to provide a probabilistic estimate of project success given the time, budget, staff, etc.. Does this probabilistic approach guarantee anything? If all the inputs are completely wrong then it does nothing. If the estimates are close – it gives you some sense of the possible outcomes.
So as I think about the granularity of major feature areas of all of a vendor’s products with respect to “me first”, “me too”, “who else”, “should I ever”, and “along with” – combined with the fact that all of these judgments require some belief about an inherently exactly unknowable, albeit estimable future, it turns my thoughts to the techniques used in derivatives analysis.
As an over-simplified primer here are two pointers. Modern financial mathematics got its jump start when Fischer Black (U of C) and economist Myron Scholes (MIT) collaborated on the concept that option pricing was essentially the same as the thermal conduction law of classical thermodynamics. Also, (thanks to Peter Hoadley) play around with option pricing graphs at http://www.hoadley.net/options/optiongraphs.aspx .
Notice the impact of “volatility” which is your probability estimate. Notice sensitivity to “time to expiration”.
This calculator is for a relatively simple set of cash flows, which in some ways can be thought of as probability flows. Complex financial instruments require you to analyze thousands of future cash flows, with future beliefs about potentially numerous cross rates, interest rates, inflation rates, credit ratings, etc.. At that level of complexity, with that many guesses of the future, it is necessary to know maximal risk exposure depending upon numerous probability paths.
SO…since option theory is increasingly used in other domains to understand types of probabilistic risk exposure I was wondering if it is about time to have a more formal, statistical approach to product management given what I believe is the increasing dimensionality of that problem. Does this affect developers directly? If I am wrong and we live in the simple world of “me too” vs. “me first”, then certainly not. On the other hand, maybe it is worth a thought with respect to the products one is making human and financial commitment to – whether products built or products bought.
And, because of my “give a moose a muffin” type thought processes I also wonder how did we get here? How did this acceleration start? Why are there so many people willing to work in a collaborative way to solve problems like an open source OS, open source appserver, etc..? Where did they come from? What are the generational or cultural shifts that have caused the acceleration of openness, api-ification, and collaborative connectedness? Which as I said, I will post some gobbledygook about in the future.
Thanks for the comments.
pk
Thursday, May 05, 2005
Billions in Bits (from my Borland blog)
As Borland’s SDO vision evolves, one of our stated areas of interest and investment is how to unlock the value of the business information embedded in our integrated ALM solution. Clearly this will involve features and functions of, and integration to, the emerging world of enterprise governance solutions such as Mercury ITG, Niku and others. Seeing this trend as the “next big thing” is perhaps bittersweet for thinkers like Paul Strassman whom have been highlighting the need for such approaches since the late 80’s. I have to admit I am a big fan of Strassman – and in this posting highlight some pointers to his work on this topic from the late 90’s. His multi-decade quest has been how to value the entrusted information capital that resides in our organizations.
To illustrate the massive impact of information capital to an organization’s value, look at the value of Google. Just shy of $3 billion in assets, it has a market capitalization of over $60 billion. In financial reporting, the gap between these two numbers is never formally recognized unless the assets are sold. Upon sale, the gap between asset value and sales price would be stuck into the accounting catch-all of “goodwill”. Though intangible, these assets hold real — and obviously significant value – to the marketplace. What are these hidden assets? Why does the stock market recognize $57 billion in intangible assets? Part of this number is the market’s present value for future earnings on existing and new revenue streams. However, that is still not all. Many economists are quite comfortable ascribing the remainder of the hidden assets as the value of Google’s intellectual capital.
Accepting that a significant component of a company’s economic value is the intangible asset of its staff’s current and future capabilities begs some significant questions about how companies and the people they employ are managed. I would like to highlight these questions and illustrate some key thoughts regarding the role of intellectual capital in companies; especially in the ever-burgeoning multi-billion dollar operating budget environment known as the “back-office”. First, I’ll say a little about what I call your corporate economy.
What is a Corporate Economy?
One of the traditional organizational breakdowns companies use is “front-office” and “back-office”. Another popular concept is “profit center” versus “cost center.” Unfortunately, these segmentations suffer from a number of issues. Within many organizations they have become politicized or become pejoratives. (How terrible to be one of the “costs” of the organization, but not part of the value!) Even worse, in light of emerging thoughts on the value of intellectual capital, these traditional distinctions may not be optimally useful in determining corporate strategy.
I think a useful dividing line is between staff that are intimately involved in customer transactions (transactional staff), and the staff that provides the services which enable those transactions (service teams). This categorization seems especially poignant in companies whose profitability stems from transactions of intangible products (interest rate swaps or foreign currency options, insurance policies, DNA sequences, information models of distribution networks, etc). With this as a definition of your corporate economy, there are three questions - when asked, and well answered - give structure to your corporate economy.
What is the nature of my relationship with my clients? This is answered in part by your business transaction systems which tell you what you sold, to whom, for how much. The emergence over the last decade of customer management systems indicates that the transaction systems are only part of the answer, and companies are searching for the other half of the answer.
What is the nature of my relationship with my competitors? To the extent I can legally know - what are they selling, to whom, for how much? But also, what are their product plans, business emphases, and keys for continued success. Software to help companies answer these questions is just beginning to emerge under the loose category of “competitive intelligence”.
And finally, what is the nature of my relationship to my internal service sector? What are the key activities of my “service teams” that support my “transactional staff”? Which services are most needed in order to produce more, higher quality, customer transactions? Today’s crop of Project Portfolio Management systems and Enterprise Corporate Governance systems are attempting to provide software systems to help answer the third of these questions. These systems are evolving to help business management know and evaluate its service sector, and equally as important, allow business management to evaluate its effectiveness in using the corporate service sector.
How is the value of intellectual capital defined?
Barron’s defines intellectual property as “a special type of intangible property, arising from the creative endeavors of the human mind.” If intellectual property is the end product, then it can be inferred that the “equipment” asset used to create the product is the human mind.
Paul A. Strassmann, a 40-year veteran of the information technology business in both the government and commercial sectors, defines information capital, or to use his trademarked term Knowledge Capital®, as forming when “employees think or talk about how they are delivering goods and services. This usually occurs when workers are engaged in overhead tasks, not when they’re actually delivering goods or services”. The delivery of goods and services is usually considered a “front office” (transactional staff) function; overhead tasks are usually considered the realm of the “back office” (service teams).
Looking at the Google example suggests that in a world divided into front and back offices, the excess market capitalization widely recognized as the intellectual capital value of the company, is wholly attributable to the “front office”. But could this be true? It is unlikely. Some value must occur in the “back office” to enable the transactional staff to be productive in generating revenue. Once the concession is made that a company’s service sector staff have an impact of millions to billions on corporate stock market capitalization, then it is time for a change.
The ability to leverage service sector intellectual capital takes the stage, displacing the overly simplistic cost management approach commonly and broadly applied to large segments of the company. Organizations that treat intellectual capital as “out of sight, out of mind” are left wondering how the competition seems to make great gains “out of nowhere” or “from nothing.”
How is intellectual capital measured?
It is widely understood that the cost of acquiring knowledge and the profit-generation potentials of such knowledge are unrelated. The value of intellectual property is in its use, not in its costs.
— Paul A. Strassmann
Intangibility is attributed as the reason intellectual capital is difficult to measure. Intellectual capital deviates from traditionally-noted sources of capital, because instead of being implemented to accomplish a defined task and then depreciated over time, it can expand its original role or be a form of innovation in new areas (for example, NASA innovations which work their way into consumer products). Knowledge assets, unlike what we traditionally consider capital, have infinite potential. Yet, as seen with many skill sets, particularly technological, intellectual capital can also depreciate – making it all the more important to understand, control, and capitalize on how your information resources are used. How and whether the potential is reached will increasingly be the advantage or downfall of any knowledge-driven company.
The Google example illustrates how intellectual capital assets are valued by traditional accounting with an organization’s other, more tangible assets. The consensus as to whether or not knowledge capital should be accounted for and with what measurement methods is about as tangible as the asset in question. What follows are three different approaches used for valuing intellectual capital. They are good examples of the approaches that exist; it is hard to say which is the most appropriate for an organization to use.
Approach #1:
Customer relationships & growth-in-value
Skandia Inc., a Swedish insurance company, is the only company in the world I know of which has reported intellectual capital value in tandem with its financial reports. The inconsistency that occurs when valuing intellectual capital was in the past acknowledged on Skandia’s Internet site: Many Swedish companies on the Stockholm Stock Exchange are valued at 3 - 8 times their book value, i.e., the financial capital. This implies that there will be huge hidden values in companies, which are not visible in traditional accounting, yet increasingly larger investments are made precisely in these hidden assets. Such investments concern, [for example] customer relations, information technology, networks, and competence. Skandia has “long maintained that our truly sustainable earnings are derived from the interaction between our intellectual capital and financial capital.” Their synthesis of this relationship was first published as a supplement to their 1994 annual report.
Approach #2:
Intellectual capital is calculable
Strassmann has conducted extensive research toward defining intellectual capital as a calculable number. Strassmann conducted a study of 359 U.S. industrial companies which revealed the collective intellectual capital of these organizations was valued at $1.7 trillion, or 217% of their net financial assets. Strassmann reports that at the end of 1995, Standard & Poor's 500 companies (about 70% of all publicly traded companies) had a combined $1.12 billion fixed assets, and a market value of $4.5 billion. When categorized as overhead, intellectual capital is typically charged against profits. Some argue that this is inaccurate because while a cost to acquire intellectual capital may exist, writing it off as an expense does not consider the on-going value the intellectual capital has. Strassmann’s calculations are a means of quantifying the value of intellectual capital, which as mentioned earlier, is only captured in the sale of a corporate entity, and then only captured within traditional accounting as “goodwill”. Redefining intellectual capital investments with calculable benefits can better reflect its proportion of market value. For those interested in his actual calculations see http://www.strassmann.com.
Approach #3:
“Stick to the basics”
Strassmann and other information experts have created intellectual capital valuation formulas (primarily based on traditional accounting and economic equations) and organizational theories which illustrate their perspectives on information capital. This terminology helps separate and frame the uniqueness of this intangible resource. However, the art and science of accounting has made it 500 years without these innovations and there are those who question its formal introduction onto the corporate balance sheet. It is interesting to note that Microsoft, perhaps one of the most iconic examples of a balance sheet rich with intellectual capital, does not believe such measures should be formally introduced.
Microsoft’s previous chief financial officer Mike Brown said during his tenure that sticking with the basics is the best way to thrive in constantly changing and complex business environment. By focusing on the extremes —at the individual level and the big picture — Microsoft vigilantly manages resources at the immediate level while “keeping internal financial statements simple and meaningful.”
Regardless of the approach, perhaps the takeaway point is that having an inventory of your knowledge assets and analyzing how those assets are invested toward your organization’s success is critical. Whether done with Strassman’s relatively simple balance sheet ratios, or Skandia’s detailed profiles, or just good people management - the exercise requires a shift in perspective from how organizational assets typically are viewed.
What is the source of my information capital?
Take my assets, but leave me my organization and in five years I’ll have it all back.
— Alfred P. Sloan
As a manager you are already responsible for optimal utilization of your intellectual capital, but the tools or approach may not effectively account for information capital performance. The right tools and approach, incorporated into your organization’s daily heartbeat, can help you act on knowledge which enables your intellectual assets to perform at organizational expectations and beyond. Studying changing valuation approaches and accounting methods helps us gain an understanding of how all organizations are part of the knowledge economy, not just those whose end products are obviously knowledge products, such as Google. The companies that not only lead, but define their industry or product, have as a core competency the ability to effectively and immediately evaluate the effective use of their human capital.
The approaches, methodologies, and even service providers to assist you with these evaluations are diverse and the list is exploding. Every organization’s objectives and environment is different; you should select the thought process that is most comfortable for you and best accommodates your needs.
Recognizing knowledge as a strategic resource is the first step, but to manage knowledge as a valuable asset requires evaluating where (and in whom) the knowledge value lies. PPM/Governance tools are specifically designed to collect information about people, their time and their actions for strategic analysis, making them the ideal springboard for whatever overall solution you implement.
Focus on intellectual capital and intellectual continuity may pay-off!
The knowledge society will inevitably become far more competitive than any society we have yet known — for the simple reason that with knowledge being universally accessible, there will be no excuses for non-performance.
— Peter F. Drucker
This Drucker quote clearly was a harbinger of the recent “world is flat“ discussion. Perhaps nurturing the human spirit is not untrue to the bottom line. Thoreau’s comment on the majority of people leading “lives of quiet desperation” may not be specific to vocation or level of visibility, but perhaps indicates the universal need for self-value. If so, giving employees an understanding of their role in value creation is a truly empowering move. And in the emerging era of competition, maybe a rational, justifiable, capitalist strategy.
After years of inconsistent motivation and recognition programs, employees risk becoming jaded and leery of anything that purports that an organization “cares” about them as human beings. To recognize humans as value contributors, versus wage-earners-detracting-from-profits emphasizes what is uniquely human: the ability to reason beyond the boundaries of pre-defined formulas.
This rebellion against pre-fabbed idea boundaries and support of self-motivation is often evident in “Generation X” or “D” co-workers. We seem to have this mixture of awe and disdain for these employees; a twenty-four year-old who was considered an arrogant maverick in one environment becomes a young billionaire in another, bringing to the picture nothing other than himself. That “nothing” sometimes represents over two-thirds of the organization’s assets. That nothing can magically accelerate a sleepy organization in a few short quarters into a market leader. Invoking this financial magic from nothingness has created business practices for consulting firms everywhere. PPM and Governance isn’t magic. It requires involvement and commitment to achieve real results. But, as a tool and as part of an evolutionary process, it can work with the magic that is already within your organization: your environment, your processes, your culture ... and your people.
To illustrate the massive impact of information capital to an organization’s value, look at the value of Google. Just shy of $3 billion in assets, it has a market capitalization of over $60 billion. In financial reporting, the gap between these two numbers is never formally recognized unless the assets are sold. Upon sale, the gap between asset value and sales price would be stuck into the accounting catch-all of “goodwill”. Though intangible, these assets hold real — and obviously significant value – to the marketplace. What are these hidden assets? Why does the stock market recognize $57 billion in intangible assets? Part of this number is the market’s present value for future earnings on existing and new revenue streams. However, that is still not all. Many economists are quite comfortable ascribing the remainder of the hidden assets as the value of Google’s intellectual capital.
Accepting that a significant component of a company’s economic value is the intangible asset of its staff’s current and future capabilities begs some significant questions about how companies and the people they employ are managed. I would like to highlight these questions and illustrate some key thoughts regarding the role of intellectual capital in companies; especially in the ever-burgeoning multi-billion dollar operating budget environment known as the “back-office”. First, I’ll say a little about what I call your corporate economy.
What is a Corporate Economy?
One of the traditional organizational breakdowns companies use is “front-office” and “back-office”. Another popular concept is “profit center” versus “cost center.” Unfortunately, these segmentations suffer from a number of issues. Within many organizations they have become politicized or become pejoratives. (How terrible to be one of the “costs” of the organization, but not part of the value!) Even worse, in light of emerging thoughts on the value of intellectual capital, these traditional distinctions may not be optimally useful in determining corporate strategy.
I think a useful dividing line is between staff that are intimately involved in customer transactions (transactional staff), and the staff that provides the services which enable those transactions (service teams). This categorization seems especially poignant in companies whose profitability stems from transactions of intangible products (interest rate swaps or foreign currency options, insurance policies, DNA sequences, information models of distribution networks, etc). With this as a definition of your corporate economy, there are three questions - when asked, and well answered - give structure to your corporate economy.
What is the nature of my relationship with my clients? This is answered in part by your business transaction systems which tell you what you sold, to whom, for how much. The emergence over the last decade of customer management systems indicates that the transaction systems are only part of the answer, and companies are searching for the other half of the answer.
What is the nature of my relationship with my competitors? To the extent I can legally know - what are they selling, to whom, for how much? But also, what are their product plans, business emphases, and keys for continued success. Software to help companies answer these questions is just beginning to emerge under the loose category of “competitive intelligence”.
And finally, what is the nature of my relationship to my internal service sector? What are the key activities of my “service teams” that support my “transactional staff”? Which services are most needed in order to produce more, higher quality, customer transactions? Today’s crop of Project Portfolio Management systems and Enterprise Corporate Governance systems are attempting to provide software systems to help answer the third of these questions. These systems are evolving to help business management know and evaluate its service sector, and equally as important, allow business management to evaluate its effectiveness in using the corporate service sector.
How is the value of intellectual capital defined?
Barron’s defines intellectual property as “a special type of intangible property, arising from the creative endeavors of the human mind.” If intellectual property is the end product, then it can be inferred that the “equipment” asset used to create the product is the human mind.
Paul A. Strassmann, a 40-year veteran of the information technology business in both the government and commercial sectors, defines information capital, or to use his trademarked term Knowledge Capital®, as forming when “employees think or talk about how they are delivering goods and services. This usually occurs when workers are engaged in overhead tasks, not when they’re actually delivering goods or services”. The delivery of goods and services is usually considered a “front office” (transactional staff) function; overhead tasks are usually considered the realm of the “back office” (service teams).
Looking at the Google example suggests that in a world divided into front and back offices, the excess market capitalization widely recognized as the intellectual capital value of the company, is wholly attributable to the “front office”. But could this be true? It is unlikely. Some value must occur in the “back office” to enable the transactional staff to be productive in generating revenue. Once the concession is made that a company’s service sector staff have an impact of millions to billions on corporate stock market capitalization, then it is time for a change.
The ability to leverage service sector intellectual capital takes the stage, displacing the overly simplistic cost management approach commonly and broadly applied to large segments of the company. Organizations that treat intellectual capital as “out of sight, out of mind” are left wondering how the competition seems to make great gains “out of nowhere” or “from nothing.”
How is intellectual capital measured?
It is widely understood that the cost of acquiring knowledge and the profit-generation potentials of such knowledge are unrelated. The value of intellectual property is in its use, not in its costs.
— Paul A. Strassmann
Intangibility is attributed as the reason intellectual capital is difficult to measure. Intellectual capital deviates from traditionally-noted sources of capital, because instead of being implemented to accomplish a defined task and then depreciated over time, it can expand its original role or be a form of innovation in new areas (for example, NASA innovations which work their way into consumer products). Knowledge assets, unlike what we traditionally consider capital, have infinite potential. Yet, as seen with many skill sets, particularly technological, intellectual capital can also depreciate – making it all the more important to understand, control, and capitalize on how your information resources are used. How and whether the potential is reached will increasingly be the advantage or downfall of any knowledge-driven company.
The Google example illustrates how intellectual capital assets are valued by traditional accounting with an organization’s other, more tangible assets. The consensus as to whether or not knowledge capital should be accounted for and with what measurement methods is about as tangible as the asset in question. What follows are three different approaches used for valuing intellectual capital. They are good examples of the approaches that exist; it is hard to say which is the most appropriate for an organization to use.
Approach #1:
Customer relationships & growth-in-value
Skandia Inc., a Swedish insurance company, is the only company in the world I know of which has reported intellectual capital value in tandem with its financial reports. The inconsistency that occurs when valuing intellectual capital was in the past acknowledged on Skandia’s Internet site: Many Swedish companies on the Stockholm Stock Exchange are valued at 3 - 8 times their book value, i.e., the financial capital. This implies that there will be huge hidden values in companies, which are not visible in traditional accounting, yet increasingly larger investments are made precisely in these hidden assets. Such investments concern, [for example] customer relations, information technology, networks, and competence. Skandia has “long maintained that our truly sustainable earnings are derived from the interaction between our intellectual capital and financial capital.” Their synthesis of this relationship was first published as a supplement to their 1994 annual report.
Approach #2:
Intellectual capital is calculable
Strassmann has conducted extensive research toward defining intellectual capital as a calculable number. Strassmann conducted a study of 359 U.S. industrial companies which revealed the collective intellectual capital of these organizations was valued at $1.7 trillion, or 217% of their net financial assets. Strassmann reports that at the end of 1995, Standard & Poor's 500 companies (about 70% of all publicly traded companies) had a combined $1.12 billion fixed assets, and a market value of $4.5 billion. When categorized as overhead, intellectual capital is typically charged against profits. Some argue that this is inaccurate because while a cost to acquire intellectual capital may exist, writing it off as an expense does not consider the on-going value the intellectual capital has. Strassmann’s calculations are a means of quantifying the value of intellectual capital, which as mentioned earlier, is only captured in the sale of a corporate entity, and then only captured within traditional accounting as “goodwill”. Redefining intellectual capital investments with calculable benefits can better reflect its proportion of market value. For those interested in his actual calculations see http://www.strassmann.com.
Approach #3:
“Stick to the basics”
Strassmann and other information experts have created intellectual capital valuation formulas (primarily based on traditional accounting and economic equations) and organizational theories which illustrate their perspectives on information capital. This terminology helps separate and frame the uniqueness of this intangible resource. However, the art and science of accounting has made it 500 years without these innovations and there are those who question its formal introduction onto the corporate balance sheet. It is interesting to note that Microsoft, perhaps one of the most iconic examples of a balance sheet rich with intellectual capital, does not believe such measures should be formally introduced.
Microsoft’s previous chief financial officer Mike Brown said during his tenure that sticking with the basics is the best way to thrive in constantly changing and complex business environment. By focusing on the extremes —at the individual level and the big picture — Microsoft vigilantly manages resources at the immediate level while “keeping internal financial statements simple and meaningful.”
Regardless of the approach, perhaps the takeaway point is that having an inventory of your knowledge assets and analyzing how those assets are invested toward your organization’s success is critical. Whether done with Strassman’s relatively simple balance sheet ratios, or Skandia’s detailed profiles, or just good people management - the exercise requires a shift in perspective from how organizational assets typically are viewed.
What is the source of my information capital?
Take my assets, but leave me my organization and in five years I’ll have it all back.
— Alfred P. Sloan
As a manager you are already responsible for optimal utilization of your intellectual capital, but the tools or approach may not effectively account for information capital performance. The right tools and approach, incorporated into your organization’s daily heartbeat, can help you act on knowledge which enables your intellectual assets to perform at organizational expectations and beyond. Studying changing valuation approaches and accounting methods helps us gain an understanding of how all organizations are part of the knowledge economy, not just those whose end products are obviously knowledge products, such as Google. The companies that not only lead, but define their industry or product, have as a core competency the ability to effectively and immediately evaluate the effective use of their human capital.
The approaches, methodologies, and even service providers to assist you with these evaluations are diverse and the list is exploding. Every organization’s objectives and environment is different; you should select the thought process that is most comfortable for you and best accommodates your needs.
Recognizing knowledge as a strategic resource is the first step, but to manage knowledge as a valuable asset requires evaluating where (and in whom) the knowledge value lies. PPM/Governance tools are specifically designed to collect information about people, their time and their actions for strategic analysis, making them the ideal springboard for whatever overall solution you implement.
Focus on intellectual capital and intellectual continuity may pay-off!
The knowledge society will inevitably become far more competitive than any society we have yet known — for the simple reason that with knowledge being universally accessible, there will be no excuses for non-performance.
— Peter F. Drucker
This Drucker quote clearly was a harbinger of the recent “world is flat“ discussion. Perhaps nurturing the human spirit is not untrue to the bottom line. Thoreau’s comment on the majority of people leading “lives of quiet desperation” may not be specific to vocation or level of visibility, but perhaps indicates the universal need for self-value. If so, giving employees an understanding of their role in value creation is a truly empowering move. And in the emerging era of competition, maybe a rational, justifiable, capitalist strategy.
After years of inconsistent motivation and recognition programs, employees risk becoming jaded and leery of anything that purports that an organization “cares” about them as human beings. To recognize humans as value contributors, versus wage-earners-detracting-from-profits emphasizes what is uniquely human: the ability to reason beyond the boundaries of pre-defined formulas.
This rebellion against pre-fabbed idea boundaries and support of self-motivation is often evident in “Generation X” or “D” co-workers. We seem to have this mixture of awe and disdain for these employees; a twenty-four year-old who was considered an arrogant maverick in one environment becomes a young billionaire in another, bringing to the picture nothing other than himself. That “nothing” sometimes represents over two-thirds of the organization’s assets. That nothing can magically accelerate a sleepy organization in a few short quarters into a market leader. Invoking this financial magic from nothingness has created business practices for consulting firms everywhere. PPM and Governance isn’t magic. It requires involvement and commitment to achieve real results. But, as a tool and as part of an evolutionary process, it can work with the magic that is already within your organization: your environment, your processes, your culture ... and your people.
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