Microsoft Mole?

Colly Myers almost destroyed Symbian when he was its CEO. He continues to say some of the same things (in this recent interview with The Feature) now that he leads IssueBits. According to The Feature Colly "...believes that OS-level applications have their place -- namely in extending the system level functions of a handset, but that Java applications make more sense for everything else" and he "....believes that the true mobile economy lies in services, and small Java applications are more akin to services, and more appropriate for cellular hardware / bandwidth than OS-level applications."

These are the same things that Colly, then CEO of Symbian, was saying to me two years ago, when I was the chief strategy officer for Borland trying to convince Symbian that they needed a development tools partner. Two years later, the world looks the same to me (and I guess to Colly) -- why doesn't Colly recognize that:

• High-speed, reliable bandwidth is necessary for handset service-based applications to work and we don't have that now and won't have it for 10 years;
  
• there will always be a set of applications, or at least pieces of applications, that need to be on the device, not the network, and they need to be high performance -- think Doom as an obvious example and extend from there;
  
• 80% of all Java developers use the language as a SERVER development environment, not a client development environment. There are numerous problems with the quality of Java as a client side development tool, starting with standards;
  
• and then there is the problem with the size of the development communities. There are something like 2 million Java developers in the world (that is, professional developers, paid full time to write code). 20% of them use Java for real client side applications -- so we'll be generous -- 500,000 developers. There are 5 million developers using Microsoft tools, and 80% of them use MS for client side applications. That's roughly 4 million developers.

Is Colly trying to help out Microsoft? Convincing the non-MS world to ignore the need for a native device-side application development environment is tantamount to handing the market for handheld computing devices to Redmond.

Strange advice from T-Mobile

I have recently been having some problems with one of the GSM phone on my T-Mobile family plan -- it stopped receiving SMS messages. It could make and receive calls, send SMS messages but never received messages. So I called T-Mobile customer support.

I was quickly passed the dummy script of solutions and was passed on to technical support. The technical support person asked me to shut off the phone and wait while he "adjusted some settings." In a minute he asked me to restart the phone. Sure enough messages started coming through. That was strange enough in itself but the next part was stranger.

The tech support person asked me how often in a 24 hour period did I power cycle the phone. I told him that I never turn the power off. He then recommended to me that I shut off the phone at least twice per day! He assured me that he did this himself, and that this would give me much better service. He explained that when you turn your phone on, it registers with a particular cell tower. Throughout the day you may roam around and connect to multiple towers, but the first tower remains your registration point and the way the network finds you. However, as the day goes by, more and more people register at a given tower. The most recently registered devices get the best service...

Is this making sense to anyone out there?

pulver.Communicator Beta Test

Jeff Pulver has granted special permission for me to blog about my experiences as a participant in beta test of his company's new pulver.Communicator software product which I will be doing over on my IP Inferno blog.

Powell Does San Francisco

Opening with the comment that he was surprised to see so many Republicans on the west coast, our new blogosphere member Michael Powell gave a speech tonight at an event organized by the Progress & Freedom Foundation. A few non-members seemed to have snuck in including Tim O'Reilly, Joi Ito, Craig Newmark, myself... maybe it was actually a blogger conference...

Michael's comments were fascinating. Here are a few:

he described himself as a libertarian,

effectively said that he is against government control of content in the media, though expressing his obligation to enforce the indecency act (a part of the Criminal Code, he observed, passed in the 1920s...),

stated that 80% of all spectrum (including licensed) is unused 80% of the time and that he feels more should be done to free up spectrum for varied uses,

feels that when spectrum is licensed that it should be "like a driver's license" -- that is, the government shouldn't tell companies what to do with the spectrum, "just don't kill anyone..."

on VoIP he noted that the number one thing that the industry should be focused is on avoiding the common carrier taxation present with PSTN, but that the few requirements (presumably 911 access, etc) that the government ultimately should impose will not be burdensome on this emerging technology area...

When asked whether the FCC should be abolished he commented that "this crowd is suddenly looking a lot less friendly!" But he did express frustration with the code under which the FCC had been founded...

He also mentioned that he had spent three hours with government attornies trying to explain to them why it should be OK for him to blog...

Speaking of blogging, I expect with so many bloggers attending, not to mention journalists such as Dan Gillmour, Paul Kapustka, etc. in attendence, that others will provide a more in-depth report. I'll provide links as updates when I see other's comments.

Nokia Won't Control Symbian

Graeme Wearden, writing for CNet's News.com reports that "Nokia's attempt to win a majority stake in Symbian has been blocked by three fellow shareholders that have increased their holdings in the company." Industry observer TechDirt seems to think this is a good thing, posting the comment "...it is likely a good thing for the future of Symbian, as the less it appears like a Nokia puppet, the better its chances are of winning deals."

I couldn't disagree more. The 800 lb. gorilla that Nokia must worry about in this marketplace is Microsoft. With apologies to my friend David Levin, continuing to have Symbian as a dysfunctional semi-independent entity dragged in numerous directions simultaneously by multiple licensee/owners will never result in a strong answer to the unified strength of Redmond.

2004 SDForum Visionary Awards

I had the privilege of attending the 2004 SD Forum Visionary Awards last night, in Atherton, CA. This year's honorees were Craig Barrett, Marc Benioff, John Chambers, and Scott Cook. The event honors the "business leaders shaping Silicon Valley" and in some ways the most suprising thing about the event was that, after 20 years, people like Craig Barrett and John Chambers hadn't already been recognized by the group. This is more understandable when the "SD" of SDForum is dissected -- it used to mean "Software Developers" and it clearly doesn't anymore... Scott joked in his acceptance speech that "tonight must be the revenge of the suits..." but that is getting ahead of the story.

SDForum Executive Director Laura Merling was the MC for the evening, making opening remarks and keeping things moving. She seemed a little in awe at the powers that she had brought together on one stage. Not only was the list of honorees an amazing who's who of Silicon Valley, but each person was introduced by an individual impressive in their own right.

Yahoo founder Jerry Yang was first up, introducing Craig Barret. Amongst his praiseful comments for this truly great business leader was the observation that Jerry was "jealous" of Craig because Craig had received a PhD from Stanford (Jerry dropped out to start Yahoo). It is particularly interesting to note in looking at Barret's background that he joined Intel in 1974. Thirty years with the same company is unusual in our industry, especially today.

Craig used his acceptance speech to talk about American competitiveness. He expressed concern that we are not investing enough in education or in basic research. He talked about some of the things that Intel is doing to support education and he made an interesting comparison -- he pointed out that the US Government spends the same amount of money, $5 Billion annually, on basic science research, that Intel spends on semiconductor R&D. He joked, "and Intel is just not that big of a company. On top of Intel, there is Microsoft's R&D, Cisco's, etc..." Craig also took time to rib Jerry Yang, suggesting that it would be possible for Jerry to buy that PhD he was missing from Stanford and that Craig would be happy to negotiate with Stanford on Jerry's behalf.

CNet founder Halsey Minor was up next, to introduce Marc Benioff (who was not able to attend...). Halsey told a funny story about his email to Marc after the recent SEC troubles... "I told Marc to go into his back yard, dig a deep hole and throw his blackberry and his cell phone into the hole. Then he should fill the hole up with dirt again and out of this hole an IPO would grow..." But Halsey reserved most of his time to talk about the innovative Salesforce Foundation into which Marc has dedicated 1% of the company's profits, 1% of the company's stock and asked the company's employees to donate 1% of their time. This non-profit organization is dedicated to supporting tech educational projects in public schools.

Ex-Cisco employee, and now venture capitalist Pete Solvik introduced his ex-boss John Chambers next. Pete gave quite an impressive introduction for John, pointing out that when he joined Cisco as the head of sales, the company had just $70 million in revenue. His success in growing Cisco led to his appointment as CEO in 1995, and since then, John has increased revenues from $1.2 billion to almost $19 billion. When John took the podium, he picked up where Craig Barrett had left off, expressing enormous concern for US competitiveness. In particular, he spoke against the proposed FASB rules regarding stock option expensing. He said that Cisco has done an analysis of the real value of granted stock options against the proposed FASB expensing formula over the past 10 (or 20?) years and the analysis came out showing that the proposed FASB method would have been 300% wrong. He didn't say whether that was on the high or low side... He also talked about a commitment that Cisco is making in their 20th anniversary year to dedicate a cumulative 20 years of community service -- roughly 5 hours for every Cisco employee.

Finally, venture capitalist Ann Winblad introduced Intuit founder Scott Cook. Scott was his usual modest self, although in Ann's introduction she recounted a comment that Scott had once made to her that it should be an obligation to always behave modestly even if one didn't feel modest. It was hard to watch Scott be modest in his acceptance of the award without wondering if it was only an act that he had perfected. But Scott deserves to be immodest about his accomplishments, since founding Intuit in 1983. And he took his time at the podium to talk about leadership and one's moral compass. He closed his speech and the evening with a reminiscence from Harvard Business School -- he recalled that on his last day in one particular class the professor did not provide a case to work on but spent the time discussing moral choices that we make in our lives. The professor observed that many, if not most, of the world lives from hand to mouth and is sometimes forced to make decisions that they regret morally, in order to feed their families. But he pointed out to these soon-to-be-minted business school students that they had no such issue. They were the ones that were privileged on this planet to know that they would always have the ability to provide for themselves and their families. And so there was never a time when they should face a moral question and make the wrong decision. Scott posed this lesson to all of us in the audience as well -- we are the privileged ones, and we have no excuse for not making the right moral decisions in our businesses and in our lives.

A truly impressive event, and memorable evening. Thank you to Craig, Marc, John, and Scott for your leadership and inspiration.

Rational Exuberance

Perhaps we all remember Greenspan's prescient "irrational exuberance" speech made back in 1996, before he become goggle-eyed over technology as a productivity improver... With the latest 1/4% interest rate rise and general positive comments from the Fed on the economy, can we now expect a period of rational exuberance?

While I cannot say anything in particular about companies that are presenting here at MDV, I can say that I am feeling some rational exuberance myself - silicon valley inventors are at it again and the powerful combination of factors that make this such a dynamic generator of new technology and new companies are, I think, poised to unleash some very exciting new trends...

So maybe the long boom is back?

Moto/MS Get it Right (Smartphone)

Third try is a charm, the rest of the Smartphone world should really start worrying about Microsoft now. It looks like the new Motorola MPX is going to be VERY hot. Here is a fansite with photos and a description. There are 14 pages of comments so far -- it is worth going through all the pages as "Bengalboy" answers readers questions and posts more photos of the device and its capabilities throughout... THE MOTOROLA MPX

JavaOne Blogger Meetup

I'll be at the JavaOne Blogger Meetup on Monday -- how about you?

The IM Wars

Yahoo decided to change the API for connecting to their IM service. Jim Hu of ZDNet writes "Yahoo to Trillian: Talk to the hand." Of course the change blocks other 3rd party clients such as GAIM, and the one I use on my mac Adium.

But the egg is on Yahoo's face as Trillian has already released an update to fix the problem -- according to publisher Cerulean Studios

So why continuously change the interface if it takes less than half a day for the third parties to patch their software? Someone over at Yahoo needs to get a clue -- this is a war they are going to lose. Yahoo should learn to love the 3rd parties instead of harrasing them.

Congrats to Benioff

$1.7 Billion. That is the current market cap of market innovator Salesforce.com in the second day of trading on NASDAQ. And what a coup to have scooped up the symbol CRM -- as the Wall Street Journal said, "that would be like Porsche asking for the symbol CAR." Marc and his team have proven that the application service provider model is a viable business model, if not the future of software... or should I say, the future of no software? I expect to see more companies follow in this company's footsteps.

But don't be mistaken by the name of the company or even the ticker symbol -- the magic here is not a new approach to salesforce automation of even customer relatoinship management. The secret sauce is a multi-tenant industrial strength application hosting environment. This infrastructure investment could be the launching point for hundreds or thousands of new applications - now to wait and watch Salesforce (and their development API division SForce) to see if they can break out of the narrow application specific market that they have succeeded in so far, and provide a broader platform for applications.

FCC Chairman Endorses IP Inferno

OK, not exactly. I think what he said in his keynote speech here at Supercomm was that "the IP market is on fire!" Which does sound like an endorsement of my proposition that IP is the fire burning down the traditional telecom industry..."

All quiet...

Its quiet over her because I am posting the results of Supercomm interviews over at IP Inferno... Come on over and read about the WiMAX Forum, Motia, SkyPilot, and Peerio... And more to come.

Taking the Plunge

It has only been a month since we shut down CallTrex and I have alreated started a new adventure. The good folks at Mohr, Davidow Ventures have asked me to join them as an "entrepreneur-in-residence." This is an exciting opportunity to pursue some of my own ideas and to learn more about how the venture community works, from the inside. I am here for my first day, learning about what an EIR can do to support a venture partnership. It will be an exciting few months!

Russell Beattie on Nokia

Long time mobile watcher Russell Beattie has a great post on what is wrong over at Nokia. If you follow mobile devices and Nokia in particular, this is a must read. I have only one disagreement with him -- he suggests that Nokia exit the S40 business. Its sometimes easy for gadget wonks like us to forget that most of the world still wants *free* phones -- well, subsidized by operators. Nokia has to have the world's cheapest phones in addition to the world's best phones. It is a delicate balancing act -- maintain the volume with operators and the public so you remain the most important guy on the block, but produce the best mid-range and high-end phones to earn real profits. But without the volume business, Nokia would have less distribution power for the high-profit phones. I mean, would anyone have agreed to carry N-Gage at all, if it wasn't for Nokia's overall market presence?

Deja Vu All Over Again

Just in time for summer, BusinessWeek has rediscovered digital convergence! You know, the coming "Big Bang!" in which the computer industry, consumer electronics industry, and communications industry all merge. Let's turn back the clock and look at a few other times they have "discovered" this phenomenon...

July 2, 2001 -- Technologgy's Unholy Convergence (doesn't sound like nearly as much fun as a Big Bang)

June 23, 1997 -- Is Digital Convergence for Real? (I guess it wasn't...)

For extra credit, how about an examination of BusinessWeek's other lead story -- Wounded, Nokia Comes Back Firing. Where have we heard this before? How about in BusinessWeek...

January 22, 2001 Is Nokia's Star Dimming? (short answer, no it didn't)

August 10, 1998 Nokia: Can CEO Ollila keep the cellular superstar flying high? (short answer, yes he did).

So is it just me, or are there certain stories that the mainstream media has decided sell papers (magazines in this case), and they just roll them out every few years as if they suddenly had a new idea? I can almost hear the folks sitting around the newsroom, "Hey, we haven't run that stupid digital convergence story in a few years... no one will remember the last time we ran it so lets prop up an issue with the usual sweeping statements updated with a few new quotes from the usual suspects..."

I am almost to the point of joining the blog-only news groupies...

This Compromise Stinks

I rarely wander from the beaten path of technology on this blog, but now that I have been firing up IP Inferno as my outlet for tech related commentary and news, I might comment a little more on non-tech. What has me in a lather today? This terrible ruling by the US Supreme Court.

I respect you if you think that the word "God" should be in the US Pledge of Allegiance, and I respect you if you think that it should not be in that Pledge. As citizens we can all respect each other's right to believe in a God (or Gods) or not and express our opinions on what the government should and should not do about those beliefs.

But the Supreme Court is the place where decisions should be made, sometimes hard decisions, on what the relationship between Church and State should look like in the 21st century US. The Justices have abrogated their responsibility to this nation by ruling that Michael Newdow cannot sue his daughter's school because he "...is in a protracted custody fight with the girl's mother."

This ridiculous side-step of the core constitutional issue comes at the wrong time for the US. We need to be demonstrating to the world that our system of government works -- that it is possible to balance the powers of executive, legislative, and judicial branches and to emerge with a government by, for, and about the people. In this ruling, the court has demonstrated that it is, once again, willing to step away from a difficult issue.

We should be engaging more Americans in the debate about the relationship between church and state, not trying to bury the issue under legal technicalities.

Another State Taxes VoIP

Thanks to Andy Abramson's VoIP Watch for the link to this Seattle Times article --

Washington state regulators yesterday determined that Portland-based LocalDial, which offers Internet phone service, is a telecommunications company and must start paying access charges like any other phone company.

The case is interesting in that it only determines that VoIP is a phone service in a narrow case -- where it is used for the backhaul of voice communications between a caller and call recipient who are both using POTS.

Nokia vs. Sony?

While the talk was about how Nokia's new clamshell phones might be too little, too late -- no one seems to have picked up the other interesting tidbit in this Reuters article, that Nokia is coming out with their own MP3 player...

"...plans events at its headquarters in Helsinki and in Asia, where it is expected to launch one or two fold-away phones, a music player without a phone keypad, a lightweight communicator model..."

Just tucked in to the middle of a paragraph, between the "buzz lacking" fold-away phones and the expected replacement for the brick. Will this "music player without a phone keypad" even be a phone? or will it be an add-on device that connects via bluetooth to your phone?

Nokia seems to have increasingly fixed its eye on Sony, competing to define the digital lifestyle. Lets hope that both companies realize that these devices eventually all need to be open and programmable...

What's the punchline?

Someone failed to tell Guy Kewney over at eWeek about Vocera before he wrote his article, Voice over WLAN Still a Joke That's Not Funny. And I suppose he also failed to do any background research into the matter and missed the recent tests by Vonage of Voip over Verizon's EV-DO network. Not to mention the trials that IDT Corporation currently has underway of VoiP over Wi-Fi in the Ironbound neighborhood of Newark, New Jersey. So why does a reporter blast a technology based on a trade show floor demonstration? Is there something going on here, other than sloppy journalism?

Delays in ITALK2U

I spoke with John Jarvis, CEO of LitFiber, by phone this morning regarding the delay in release of the "Final" edition of ITALK2U. John told me that they are hard at work adding the capability of bridging to a POTS network -- their revenue model for the product. He expects that a new release will be available on their web site by the end of the week.

VoWLAN is back...

As regular readers of this blog know, I have been concerned about the evolution of the acronym for VoIP over wireless networks. My primary concern has been a marketing one -- we are still in the process of explaining to consumers what the heck Wi-Fi is, now we need to explain to them voice applications over these wireless networks... so we start confusing them with VoWLAN.

But I recently saw an article in the respected CMP publication, Mobile Pipeline that used the term VoWLAN (the article is here) so I wrote to editor David Haskin and asked why he used the term VoWLAN. His reasoning is persuasive. Repeated with permission, his email reads:

It's an entirely subjective decision. My thinking was that WiFi (Wi-Fi, actually) is a brand created by the Wi-Fi Alliance that refers to a specific type of wireless technology. WLAN is a more neutral term. It likely won't happen, but if an entirely new wireless LAN technology emerges, I'd rather not be guilty of promoting one technology over another, even if it's subtle.

I certainly have to agree with David. With WiMAX growing in importance and Wi-Bro on the horizon and ever more wireless options emerging, VoIP over wireless will not be limited to Wi-Fi. VoWLAN now makes much more sense to me. Oh well, think of it as a full-employment program for marketing departments...

Why HP and PalmOne will be the last 2 PDA makers

Steven Bush, founder of Brighthand, has this interesting article on the evolution of the PDA market -- Then there were two. The article begins 20 years ago, with the innovative Newton being dreamed up in a lab at Apple and lightly sketches a few historical points on the market's evolution. More interesting is his analysis of the market today, and where we will be in the near term. He observes:

The "Big Three" Pocket PC manufacturers of just a few years ago -- HP, Compaq and Casio -- has dwindled down to one, HP. And the "Big Three" on the Palm OS side -- Palm, Handspring and Sony -- is now down to palmOne.

While acknowledging that other manufacturers such as Dell and Garmin still exist, he believes they will be niche players. What's missing from the article is an analysis on how and why we ended up where we are.

On the Palm front, my view is that Palm made good decisions about partnering -- licensing their OS when Apple had made the wrong decision on this point so many years before. However, they made two mistakes. The first was execution. While the licensed the OS, it remained too tightly connected to their hardware business. By the time they made it a truly independent business, the market was already in decline. And far too much time and energy was spent in this process. Not to mention the process of spinning off from 3Com or being acquired by 3Com. Corporate restructuring may be necessary but it can be very disruptive.

The second mistake was around innovation. Palm became stuck in their approach to the PDA market and change was a monolithic process. New operating system releases were painful for the company and for licensees. The company was not able to take some of the base ideas and technology and use it for adjacent device categories like mp3 players or smart phones, both of which started growing much faster than the core PDA market. This inflexibility and inability to innovate limited licensee growth. Palm's competitor, Microsoft, hasn't succeeded here either, but MS has the drag through revenue and relationship with the desktop and laptop platform that Palm had to compete against. Palm needed more of a constellation of devices supporting the same set of APIs, if not running the same OS.

On the Pocket PC front, rather than saying HP, really we should say Compaq was the winner here. This is a story of early commitment to a market, innovative engineering, hard work, and smart marketing. Despite Dell's proven approach in the PC and Laptop market of gutting cost throughout the engineering to delivery cycle, Compaq/HP has been able to hold their ground in this segment of the market. I attribute this to the innovation necessary so far in the PDA segment and for this reason I would not count out Dell in the future. Once Microsoft publishes a universal reference platform that can be made cheaply in China and is appealing to consumers, Dell will be back in the game. As long as consumers are looking for innovation in the device, Compaq/HP will continue to lead.

But as I have written elsewhere the PDA market is in a period of terminal decline. Perhaps it is more appropriate to say a period of transition -- the things we do with a PDA are not going away. Just the idea that Palm was born on, a personal digital assistant. Perhaps the old adage is true, that it is always that characteristic which gives you your strength which is also your weak point. Palm succeeded because it eschewed the general programmability model of the Newton and focused on providing core functionality and doing a great job in that limited area. Now the market is moving in three directions, away from the core value proposition that Palm was built on --

(1) even more special purpose consumer electronics (mp3 player) though I expect this market to drive toward high volume and low cost rather quickly.

(2) general programmable device with a very small form factor -- smart phone. In this market I expect to see the greatest challenge coming from integration with the rest of the computing stack. Here Symbian is the only player with any significant volume.

(3) integrated platform, running the same OS, from smallest device to largest server -- Microsoft and Linux are the two options today.

So what should Palm do? Ditch PalmOS. Start making devices based on Linux. How about the Palm user interface on top of Linux? Start making devices in other categories outside the PDA -- Linux MP3 player, Linux Video recorder, Linux Smart Phone...

Assault on Smart Phones

For every action there is an equal and opposite reaction... my physics professor tried to teach me something like that. Now I see what he meant. It hadn't occured to me that professional technology industry consultants would advise against the adoption of new technology. Luddites or Amish maybe. But thanks to Cory Doctorow, I now see how short term economic thinking warps some consultants brains... Cory points out an article from the Register entitled Symbian loophole 'threatens operator revenue' which details a report from consultancy Mako Analysis. Of the Symbian OS, Mako is reported as having said

"The increasing sophistication of high-end mobile devices opens up a range of additional problems and will continue to undermine the data revenue streams of mobile operators at a time when they desperately need them to be increasing."

At Mako's web site a full article is available on the topic. Mako explains that with the Symbian OS "...a savvy user can... completely bypass a range of services that are normally charged for by their mobile operator." Mako outlines four categories of services that mobile operators hope to charge for that could be impacted -- messaging, mobile music, gaming and phone personalization.

I don't suppose that Mako is aware that you don't even need Symbian -- with Java midlets, people have been avoiding operator's high prices on SMS for a few years with programs like this one.

At the same time another Register article warns of a University of Surrey study that shows that "Mobile phones drive us mental." The study warned that "...the incessant demand for instant communication heightens stress in the workplace, makes people angry and can prove to be an annoying distraction."

So perhaps instead of simply warning against smart phones, Mako should be arguing that we should do away with mobile phones altogether! Of course that would result in a somewhat larger impact on revenues for their clients...

A more useful role for a consultancy would be to advise mobile operators on how to transform their business models to take advantage of the relentless and unstoppable pace of technological innovation, as opposed to suggesting that it can in some way be halted.

VoWiFi it is!

Thanks to all the readers who sent me suggestions on how to solve the problem of the horrible acronym for voice over wireless networks.

The winner is in! First use goes to techdirt where on March 18, 2003 mmasnick ponders "...VoIP over WiFi (or is that VoWiFi?)..." in this post on the economics of wireless. Techdirt has used the term 15 times since that first use, most recently for this article on giving the homeless VoWiFi...

Lets keep up the momentum and make sure we aren't having to write VoWLAN in future blogs... and having to explain over and over again what it means...

Peerio Interview

Some time ago I wrote about Peerio444 as a competitor to Skype and raised a number of questions about their product and business model. This morning I was able to have a brief conversation with CEO Dmitry Goroshevsky and I have posted the interview on my IP Inferno blog. Enjoy!

Does Nokia have their COOL Back?

I recently wrote in this blog that the issue is not about how cool the phone looks and I still believe the basic premise -- that the next evolutionary step for phones is dependent upon programmability. But two announcements this week from Nokia definitely show that the good folks in Finland are hard at work to prove that they are still the thought leaders in mobility.

First is a very strange new technology which allows a mobile handset user to flash a message across a room to another person via a set of leds embedded on the back of the phone. The BBC has a good photo of the new phone, dubbed the Nokia 3220. The Register explains that this will "change the face of waving as we know it" and Joi Ito imagines what it would be like to have them in an audience, "it would be like a chorus of Hecklebots." More information is available at Nokia's web site

The second annoucement is more interesting in that the long term implications are deeper... Dan Gillmor writes just that "The project is young, but the possibilities are fascinating" while Marc Canter writes simply "This is Killer." What are they both talking about? Nokia's new initiative LIFEBLOG. What the heck is a Lifeblog? Here is what Nokia has to say:

Nokia Lifeblog is a PC and mobile phone software combination that effortlessly keeps a multimedia diary of the items you collect with your mobile phone. Lifeblog automatically organizes your photos, videos, text messages, and multimedia messages into a clear chronology you can easily browse, search, edit, and save. Nokia Lifeblog does the work of organizing the items you create and receive, and you can also add notes throughout the day, or tag and update your favorites so they're always on your phone.

The Nokia 7610 imaging phone will be the first to have the Lifeblog software. The 7610 is a tri-band phone with a megapixel camera, running the Symbian operating system. The phone also comes equipped with bluetooth, an MP3 player, and the standard Symbian productivity applications (email, web browser, etc).

Nokia definitely has a good claim on cool for this summer.

ITALK2U Final Now Available?

John Jarvis sends news that ITALK2U, the P2P VoIP Skype competitor, is now out of beta and available with "...all of its features..." -- However the link he sends still has the test version. So I assume he will be updating soon... when available I will download and post my experiences.

IP Inferno

I have been working on a new project, IP Inferno in which I attempt a new approach to the blog editorial model. Blogs seem to fall into two broad categories, either (a) regurgitated, if idiosyncratic, news feed or (b) the personal voice of the blogger (as interesting as that might be). With IP Inferno I am trying something new -- attempting a roundup of the news and comment on a particular topic, albeit with an editorial slant. I was inspired by a publication called The Week which describes itself this way:

The Week is a witty, informative, important, and completely indispensable digest of the best reporting and writing from the U.S. and international press. In just 40 pages, it will bring you up to date on what’s happening at home and abroad, and what the experts are saying about it.

With IP Inferno I aspire to this formula but with the narrow topic of advanced IP applications such as VoIP, Wi-Fi, and Wi-Max. Why "IP Inferno" as a title? IP is the inferno that is burning down the traditional telecommunications industry... Enjoy!

V oWLAN With an emphasis on the OW!

As in OW! Why are you hurting me with these terrible acronyms? Om Malik's V oWLAN coming on strong is the first time I have seen the acronym in use... stands for Voice over Wireless Local Area Network... This is a very important technology and deserves a better acronym. A google search turns up only 3 references to "V oWLAN" so it is NOT TOO LATE... VoIP is bad enough but we are stuck with that one. Here are my suggested alternatives:

• VoWIP (Voice over wireless IP - at least its close to VoIP)
  
• VoWiFi (Voice over wireless fidelity -- more consumers will understand)
  
• VWN (Voice wireless networking -- pronounce v-win)
  

More suggestions welcome -- lets just try to stop this new acronym before it gets any further...

How high can ARPU go?

ARPU or Average Revenue Per User is the way that mobile operators judge how well they are doing in mining expansion opportunities within their current customer base. This is especially important in western markets where mobile phone use is virtually ubiquitous so no new growth will come from expansion of the customer base. It looks as if the news is good for operators who have bet on next generation services, if you believe the results of a JD Power and Associates survey reported on the BBC. "It is quite amazing really that people are spending more on their mobile than on gas or electricity bills," Gunda Lapskim, a JD Power director, is quoted as having said. Much of this spending is on services beyond voice. But how much will people pay for communication services even if entertainment is included? How high can ARPU go?

According to the survey, the average monthly bill rose by 14% since 2003 -- an average of 534 British pounds per year. If the annual increase continued at 14% for the next 10 years, ARPU would grow to almost 2000 pounds per year. Even allowing for inflation, this still suggests that people would be willing to spend as much on their mobile bill as they would for a new desktop computer... every year.

Here is the full JD Power press release in which the rankings of UK operators are also disclosed -- Virgin is number one amongst pre-pay customers and Vodafone is number one amongst contract customers. "Image" competes closely with "Call Quality/Coverage" as the most important factor...

The issue is not about how cool the phone looks

Martin Geddes blogs Finland, Finland, Finland offering opposing views on whether Nokia can get its cool back (not to mention growth, profitability, etc). What I find interesting about this discussion is that here (and elsewhere - Techdirt and BusinessWeek) the debate is about industrial design -- do Nokia phones look and feel cool? But in my opinion this is not at all what the next evolution of the device is all about...

Nokia made a really smart move -- they jumped on the digital bandwagon early, when a lot of their competitors (and leader Motorola) stuck with analog. The question in my mind is whether or not Nokia will make the next jump from phone to computer.

The handset industry has approached the problem of increasing features in handsets from a consumer electronics perspective -- pack the electronics tighter, pre-wire the features, and focus the device on a particular demographic.

Two years ago I was at the Nokia Mobile Internet Conference and heard Jorma Ollila's keynote speech in which he said that in the future every phone would be unique. That is, you would have a phone that suited your needs, I would have one that suited mine, and 500 million other people would have their own idiosyncratic versions of the "perfect" phone.

The only path to this vision is by making the leap from thinking of the phone as a consumer device to thinking of it as a computing platform -- infinitely programmable to provide whatever feature set a given user wants -- even different feature sets at different times of the day (work vs evening).

Nokia's purchase of Symbian solidifies their intent to own this new phase, but will they understand enough about this alien world and will they understand it fast enough? Microsoft is moving quickly, and we could wake up one day with Windows ubiquitious in our pockets the way it already is on our desktops.

Wi-Fi -- just like Bathrooms and Napkins...

In the continuing saga of the Cometa Networks shutdown, eWeek reports that Cometa customers are scrambling to find alternatives. In the article, Peter Hoedemaker, vice president of retail at Tully's Coffee,is quoted as saying

"Everybody is still trying to figure out the economics of [Wi-Fi]."

Note to Peter -- the economics are in selling coffee.

Perhaps he should go check out this post at Wi-Fi Networking News, outlining Wayport's new pricing plan. Wayport is converting from the common Wi-Fi model of sharing variable revenue and cost with their location partners to a flat fixed fee, allowing the partner to decide how much (if anything) to charge.

In a clear swipe at T-Mobile’s arrangement with Starbucks, Borders, and Kinko’s, in which, according to many sources, the cell company bears the cost of the network and operations and shares revenue with its venues, Wayport’s CEO Dave Vucina said, that a retail partnership “shouldn’t be about how much they can get for free from the provider but should be more about their core business and driving enormous traffic for their core business.”

So Peter -- think about it this way -- you provide a bathroom in Tulley's and that costs you something every month, even though not all of your patrons use it. You provide napkins, even though not everyone takes one. Why not build Wi-Fi into the base cost of operating a Tully's outlet and offer patrons free access just as you do with bathrooms and napkins?

Will Telephony go to Zero (dollars)?

A reader of this blog anonymously posted a comment to one of my earlier posts, How Cheap Can It Get?, asking if the price to make a phone call might one day drop to zero. The answer is YES and that day is already here.

How can you make a free phone call? Download Skype, go to a coffeeshop with free Wi-Fi access, and dial anyone else who has a Skype phone.

While we are still a few years away from ubiquitous free calling (and free Internet access for that matter) this day is likely to come sooner than later

Jeff Jarvis has a report on an article by Eli Noam, a Columbia professor, in which he argues that:

the entire information sector - from music to newspapers to telecoms to internet to semiconductors and anything in-between - has become subject to a gigantic market failure in slow motion. A market failure exists when market prices cannot reach a self-sustaining equilibrium. The market failure of the entire information sector is one of the fundamental trends of our time, with far-reaching long-term effects, and it is happening right in front of our eyes.

Eli seems to take this as a negative, while I tend to think in terms of Joseph Schumpeter's concept of Creative Destruction -- the deconstruction of these industries is enabling an entirely new generation of technologies an industries to evolve.

In the future we will pay for certain aspects of connectivity -- reliability, security, and performance. Like drinking water, in the western world basic access will be ubiquitous (it may just taste funny) and you will pay for the higher quality bottled stuff. Telephony will become just "...a voice application, completely indistinguishable from any other kind of application that can run on an IP network..." (Michael Powell, Chairman of the FCC)

Should I Stay or Should I Go?

The provocative title of a recent Crain's Chicago Business article is Should Moto sell its cell phone biz? Now may be best time to hit the exit though the article goes on to state what most analysts believe -- that Motorola needs an Asian partner to take over manufacturing while continuing to be a design center:

No Motorola business needs bold action as badly as its largest, the $11-billion cell phone manufacturing unit. Now a distant second in a business it once dominated, Motorola has operating profit margins less than half those of its biggest rivals. Cell phone manufacturing is migrating to low-cost Asian producers able to churn out cheap phones for the mass market. Cell phones themselves are morphing from a sophisticated technology into a household product subject to shifting consumer tastes and falling prices.
...
Decisive action on the cell phone business could take one of two forms: an outright sale of the business, or a deal with an Asian manufacturer to take over Motorola's handset production while Motorola continues to develop and license the technology and its brand name. A pair of big European cell phone makers have cut such deals in the past month.

But does this make sense? The interesting problem for all of the handset manufacturers is that virtually ALL of the growth in this market (60 million units) will be in China. According to China View (Xinhua online)Lucky Goldstar has already surpassed Motorola in the worldwide CDMA handset business and is also number one in the critical Chinese market. And they have there eyes set firmly on the GSM prize.

Motorola could hollow out their handset division, handing over manufacturing to China the way they have handed over software to Microsoft. But what is left? The Motorola brand name? Dell would have more success managing this kind of business. If Motorola truly can't figure out how to manufacture mobile phones cost effectively at an $11 billion annual run rate, maybe they should exit the business.

Firefly.. softphone and network but not P2P

A reader anonymously wrote in to suggest that I give Freshtel's Firefly a test drive. While it looks like another nice option, competing with FWD and others, it doesn't appear to be P2P... am I missing something? I believe that there is an important distinction between the VoIP providers with centralized arhchitectures and a P2P architecture. The three providers I have found so far in the later category are Skype, ITALK2U, and Peerio -- anyone know of others? Of course each of these has drawbacks starting with the reasonable argument that Skype shouldn't be considered P2P at all... (see earlier post on Why Skype is No Different...)

Review of ITALK2U

Alec Saunders sent email with a link to his review of ITALK2U and a comparison to Skype. Thanks Alec! In part he writes:

iTalk doesn't yet support conference calling, or encrypted calling, and doesn't have the Skype missed calls list, but other than that appears to be a functional clone of Skype. It's also a bit more standards based, in that it supports H.323, rather than a proprietary signalling protocol, but it uses a proprietary codec, which makes that somewhat moot. Voice quality is similar to Skype, which is to say very good, but I don't know how well it will handle dial-up. The codec seems to be some kind of a learning codec, in that quality improved over the duration of the call. MSN messenger is the same way.

Click on over to Alec's blog for the rest of his rundown and screenshots.

Another Skype competitor

Here is another competitor to Skype in the peer to peer VoIP world -- called Peerio it appears to have a number of advantages over Skype... with a few caveats though. First of all it is open source, second it has a developer API which will easily allow others to build Peerio compatible applications, third it claims to be entirely serverless (as opposed to the directory architecture required by Skype) and fourth it is based on H.323 and SIP standards.

Now for a few caveats... their web site definitely leaves a lot to be desired with lots of holes to be filled (although the promise is there). More problematic is the half-hearted approach to open source. On the site they write:

Despite our efforts, there are two necessary exceptions to the open source principle:

1) The source codes for the Peerio444™ core will not be released.
2) Peerio444™ will not function in embedded systems and is limited to standard PC use (x86 and PowerPC).

Why is that?
The source codes for the Peerio444™ core will be kept proprietary so that we can avoid spawning hundreds of proprietary commercial systems (see Linux) that could jeopardize our ability to maintain a Forever Free platform. To be Forever Free we must protect the system from profiteers. Support and maintenance of the Peerio 444™ core will be limited to our research and development team.

This is like saying that you can do any work on the car except for modifying the engine -- we have welded the hood shut to prevent you from making modifications to anything inside that compartment.

This flies in the face of good open source policy for a whole bunch of reasons but I'll just mention a few here:

• At anytime Peerio can change the definition of what is inside the core and what is outside the core, endangering other projects that have been built on Peerio.
  
• The argument that this protects the system from "profiteers" is spurious -- by contrast placing assets in the open source community creates a level playing field
  
• Most importantly, Peerio will defeat its own strategy by holding back this key element of the product -- open source only works as a viral means of distribution when it is truly open.

Part of the point of open source is that by using it, a developer is no longer dependent upon the whims of a given company for the future of their development project -- The developer knows that the core building blocks will always (Forever?) be available. By holding back this key element as proprietary property Peerio eliminates that key advantage of open source and will significantly reduce the number of companies and individuals willing to invest in the future of the project.

On another front, I have been meaning to test the beta of ITALK2U which has been out for awhile from Endoreal/LitFiber. I downloaded one version and couldn't get it to work, but have been meaning to download a newer version. If anyone out there has had any success, please let me know.

How cheap can it get?

Already it is significantly cheaper to use VoIP providers like Vonage for your telephony needs, but now there is a price war between the low cost providers! According to this NetworkingPipeline story, Vonage Cuts Prices for Internet Calling

The company insisted it was not launching a price war in a market that is just starting, saying that the price cut reflected its decreasing costs in doing business.

Right. And as the article goes on to point out, AT&T announced their CallVantage plan just 6 weeks ago with an introductory price of $19.99 a month for the first six months. I am guessing that would have slowed Vonage's customer acquisition rate.

More time to blog...

After almost 7 months of work and a considerable financial investment, Fred Ball and I along with the founding partners have decided to turn out the lights at CallTrex.

The immediate cause of death was our inability to close follow on financing to help grow the company. A call center model only works at a significant scale of operations. Below a certain threshold, fixed costs represent too large a part of the financial model and it is impossible to make money. We were operating at about one-third of the scale that we needed to be to start generating top line profit. At least another $300,000 was needed to arrive at this first milestone. A number of angel investors moved in the direction of funding the business but pulled back at the last minute. Others simply moved too slowly. In the end, the Board of Directors expressed a lack of confidence that we would close this angel financing round in time and approved a plan to shut down operations.

As in so many cases, there were a set of underlying causes of death that led up to this end point. A large number of people had warned that selling to the small and medium business market was fraught with peril -- this certainly proved to be the case. Customer acquisition was slow and expensive and we never reached a scale where a larger distribution partnership made sense. In addition we suffered from technology problems which could have been solved with more resources, but we found ourselves spending money to fund the call center operations and starving the technical team. Technology problems sometimes meant the loss of customers which further slowed our growth rate.

Despite all of these challenges, CallTrex had a unique value to offer the marketplace, with an innovative system for connecting our customers to their remote staff and allowing that remote staff to provide a great service to our customer's callers. It is sad to see it go. As we have notified our customers that the service will be turned off, we have received some terrific praise on how great our service was.

I will be taking some time off and thinking about what I want to do next. Definitely spending more time with my daughter -- 7 months old and doing great!

Asterisk Use Accelerates...

The adoption of a technology outside the initial core group of visionaries is an important milestone on the path to greatness or abandonment. Recently a number of folks have pointed out that Pulver's "Free World Dialup" now supports Asterisk -- you can read about it here on -- Pulver's own blog . A comment over in North American Bandwidth news:

Soon, protocols will be irrelevant since all VoIP devices will support all of them.

An interesting point -- though it misses a key issue. Translation can replace standards as long as the standards are transparent and processor speed is cheap and plentiful. This is true for all open protocols -- think currencies, human language translation... But not so for closed, proprietary protocols. As an open-source VoIP offering, Asterisk makes it easy for anyone to support since their protocol is published. Translation for Skype, on the other hand, might prove much more difficult.

On another front, I spoke to someone who was told by Global Crossing that they are now doing tests to certify Asterisk. If they decide to formally support Asterisk, this will be an even stronger indication that we are on the road to wide adoption rather than oblivion...

COMMENT 5/8/2004 1:40:50 AM Roland Tanglao (www) said:

Hi Ted:

Yes, it can be difficult to translate and emulate a closed protocol like Skype, but it's not impossible.

If Skype doesn't interoperate and coexist with other VoIP protocols but in spite of this still becomes popular with the mass market, somebody will reverse engineer it!

Corporate Cockroaches

One should never underestimate the lowly cockroach. If any creature could survive a nuclear holocaust, it would likely be cockroaches. They have a capacity for survival that surely puts them in the Darwinian All-Stars. A few days ago a friend of mine (who works for a very large company) and I were talking about the people that somehow survive layoff after layoff inside his company. "They are cockroaches!" he exclaimed. A kind of corporate cockroach. Through a combination of hoarding information, avoiding accountability and spending their work time on building a network of relationships these individuals find cozy cracks and crevices to survive the reduction in force bombs that explode on a regular basis.

One can't entirely blame the cockroach, however. If corporations made their employees feel a little more secure in their positions, perhaps they wouldn't feel the need to spend their intellectual energy on how to protect themselves instead of on how to get their jobs done. Or is society to blame because we learn to attach our own sense of self-worth to the work we do, so losing a job can be a more terrible blow to self-confidence than virtually anything else?

Whoever is to blame, a manager's task is clear -- take out the RAID can and exterminate the beasts. Watch for those three signal events -- hoarding information, avoiding accountability, and inordinate amounts of time "networking." Businesses have to be able to have "roles" and not "faces" as another of my friends recently stated. We each play a role within or organization. Part of our job should be making sure that someone else can play that role if we move on. And we should look to our teams as people playing roles as well. The moment you believe that a particular person is essential, rather than a role being essential, you should recognize that you have a problem.

Will VoIP kill the telco star?

A nod to pop music group the Buggles* in the title of this Red Herring website post on VoIP -- Will VoIP kill the telco star the latest article pointing out how mainstream telephony is fumbling the opportunity to emerge as winners in the new IP based world that is rapidly emerging...

A particularly interesting point made in the article -- a report of one individual's experience in switching over to VoIP -- the phone company did nothing to try and keep this business:

Qwest did not handle the transaction well, failing to complete the hand-off of my old telephone number and cutting me off from the world for several days. Rather than competing for my business – there was no call asking if they could find a way to keep my business after I requested the number be moved – they made it difficult for me to stay connected.

I love the comment from the Qwest customer service person as well when the reasons were explained for the switch:

Wow, that's a lot of savings every month.

The author reports savings of 87% on his total phone bill.


*(Video killed the Radio Star on their Age of Plastic album)

Too late to close the barn door...

Great blogging of the VON show by industry pundit Paul Kapustka. I like his post today in particular about the strength in numbers approach to the regulatory questions being asked of the VoIP industry. When VoIP was a flash in the pan with a few startups playing, the ancient telecom companies might have been able to deal the industry a fatal blow with some heavy regulatory action. But now that there is real momentum and many large players getting together to create a political lobbying power, it is reasonable to believe that the cow is long gone from this barn...

Why Skype is No Different

Great link found on Lance Tracey's Blog on why Skype is no different from other VoIP services. A thoughtful analysis by Aswath Rao on what Skype really is and is not, and how its technical architecture embodies faults that undermine the P2P marketing message. Excerpt:

Some have expressed reservation because Skype is proprietary. There have been previous instances where proprietary consumer items have found wide adoption without incurring huge collective cost. VCR is one of the examples that come to mind. But in this case there are some differences:

• Alternatives, based on standards are available
  
  
• Skype uses mostly well-known and open technologies; only the protocol semantics is proprietary
  
  
• Even though Skype (for that matter VoIP) is naturally a “product” and not a “service”, Skype views it as service. For example, they do not allow an enterprise to use their own GIS, instead of the global one, even if communication will be restricted to internal use alone.
  
  
• As I am told, there is no way to directly address another client, even if the IP address is known. Windows Messenger from Microsoft has the same limitation, whereas NetMeeting allowed direct communication.

In this respect also, they are just like other VoIP providers. It is disheartening to see that even those whose middle name should be P2P, think like this.

Competition for Skype

It was bound to happen. The model is just too darn attractive. Other companies were going to enter the p2p VoIP business, it was just a matter of time.

I just finished talking with the founder of one such company about his company and product -- John Jarvis of LitFiber told me that they are just a few weeks away from a beta release of their new p2p VoIP product iTALK 2U.

John claims that the sound quality in their product is significantly better than what Skype can achieve due to a significantly better codec that his team has built from the ground up. Even more interesting is the way he is approaching the market though -- he has built his product to be H.323 compliant.

Compliance with VoIP standards means that users of his product should be able to connect to any other VoIP infrastructure that supports the standard. This is a terrific competitive advantage over Skype's current closed architecture approach and should really transform the game. With this product, any of the companies that have made VoIP investments will be able to leverage the p2p VoIP phenomenon using LitFiber's product.

I eagerly await the release of the download...

Anyone in their garage can now be a telephone company...

Jim Kohlenberger blogs on VoIP
Excerpt:

VoIP has decoupled voice from the physical infrastructure itself. Now it can go independent of who your physical provider is. Of course, this challenged incumbent interests in that regard. Because of this decoupling it has allowed many new things. Microsoft build SIP (the protocol) just like HTML (http) and FTP, SIP is a protocol. Anyone in their garage can now be a telephone company for the entire planet. In shopping e-commerce you can get a voice rep. You can do online voice conferences. Included in game boxes and game consoles where kids use VoIP to communicate. Used in instant messaging. Star-trek type communicators are now used in Hospitals (Wi-fi based). All sorts of other things. Skype. Free World Dialup. Metcalf’s law: value of Internet goes up as you can talk to more people. New companies are broadband VoIP providers. Vonage, 8x8, etc. Plug in a regular phone to IP network and make calls. All types of new services are possible. Right now they look like regular telephones because that is what we expect. Many things are possible in the future. Question is how do we get there? How do we allow them to flourish so these new services can be made possible?

COMMENT:
On : 3/25/2004 7:27:06 AM Joshua Ruihley (www) said:

The "Jim Kohlenberger" post on Smart Cog isn't actually a blog posting by Jim. The post is of my notes from his presentation at the Internet Commons Congress yesterday.

Conferences, Panels, Speakers... getting your time and money's worth

Putting on a conference is a huge undertaking. Having it be a good conference with inspiring speakers, fascinating roundtables, and great networking is even more difficult. So the organizers of this week's Open Source Business Conference should get credit for meeting most of their objectives and inspiring, fascinating, and networking at least some of the time.

Two major places where the conference felt weak to me:

1) Too many gratuitous keynote speeches by event sponsors. Its OK to have a keynote from someone at a sponsoring company, but they have to have something to say! A tired flogging of the sponsor's products and market strategy (especially if the speech has been given before at other conferences... you know who you are) doesn't do the sponsor any good and cheapens the conference experience for attendees.

2) The panel format is difficult at best to pull off. The two key ingredients are a tough moderator and some tightly defined issues that the panel (and audience) can dig their teeth into. Going deep on an issue and really uncovering some great ideas is much more valuable than a skin-deep flyover of a broad set of questions.

Criticism aside, the idea of a conference on Open Source Business is definitely one whose time has come and I am certain that this conference will only continue to improve with time.

My thoughts on the open source investor roundtable

This group of venture capitalists seem to be largely interested in investing in commercial software -- gee, if you can use open source as a leverage point against a larger commercial competitor to get distribution scale or infrastructure -- great. But there is no open source business model. Proprietary software advantage is what will succeed.

This is quite a contrast to Ray Lane's presentation of the watershed that the software industry is confronting, or the comments that Clay Christensen reportedly made yesterday (I wasn't here) about how open source transforms the way we think about the software product -- instead of a core piece of software wrapped in service, documentation, etc -- the wrapping becomes the product.

So are the VCs wrong and stuck in the past? Or are they the pragmatic ones and the idea that open source can change the software industry is polyannish at best?

More from OSBC -- Open Source Investor Roundtable

Panelists:

Opening comments:

Dave Power, Fidelity Ventures -- open source is a way of getting a headstart and a way to build a community, but it is not a business model in itself

Peter Fenton, Accel Partners -- open source is one of the top three disruptive forces in the software industry, we don't make a bet on organic uptake but it has to be there, a viral broad and growing community around an open source product -- there has to be run time, or production value -- the oxygen that allows you to charge for support and thirdly there needs to be demand side economies of scale -- a dominant provider vs. many small providers, and lastly there has to be product drift over time -- sendmail doesn't have much product drift for example, that is the key to harvesting revenue streams for open source vendors

Tim Guleri, Sierra Ventures -- As Peter said, there has to be an organic uptake of the product, it has to be a group of people that has control over the way the open source community contributes to that open source product

Steve (?) -- we are looking at companies that are building applications on top of an open source platform


Moderator Question -- as venture capitalists you are making significant early bets, what are the business models you are making on open source?

Dave -- three models that make sense -- 1) a dual licensing model, an open source version but also a commercial version that they can make money on; 2) enhancing open source software with proprietary software and 3) a service model

Peter -- those are the revenue models. But as a VC we want a scalable, high margin revenue model. Consulting companies shouldn't be looking for venture money.

Tim -- there is a commercial tipping point at which big companies have deployed a certain amount of an open source product and then someone asks, is there a commercial version of this product?

Steve -- we are in a period of transition in the way that corporate america thinks about open source -- they have started to embrace it with the caveat that they still want to have a commercial vendor that gives them comfort that there is a support function -- but will they continue to evolve? will they become completely comfortable with using open source without the need to have a commercial vendor associated with these technologies?


Moderator Q -- relationships with the communities, as the products become more commercial how does the community react?

Dave -- in each case in the beginning there is a community leader of the open source product, a person that reaches out and then there are hundreds of thousands of downloads, that creates a community. But over time as you get more successful the companies that form around these products are doing more and more commercial software development so there is a challenge about how these companies continue to nurture that community that got them started. We are in a window where there is an opportunity for startups to do something special here -- but large companies are starting to figure out how to manage these open source communities.

Peter -- the starting point is some mercurial founder that gets the ball rolling, and builds a viral contributor base but this shifts over time. Once a project is established the issue becomes maintaining and this requires a different kind of support from the company built around the project

Tim -- we make sure that we fund, maintain, and make sure the open source community thrives -- in our market segment we keep the commercial and open source in sync (security product)


Moderator Q -- Where is the value of open source over time?

Dave -- the value will be up and down the stack

Peter -- anywhere you can get huge distribution efficiencies and broad developer interest

Tim -- every segment of software will get affected in a positive vein by open source. I think the SMB space is where a lot of this innovation is going to occur -- maybe GM won't want to run their financials on open source, but the 10 person parts company will want to.


Audience Q -- comment on standardization for interconnectivity APIs

Tim -- standard XML protocols that are self describing

Peter -- standard product sets - JBoss, mySQL, running on Linux -- a standard open source software stack and that drives standards

...

David Ritter continues...

but I was wrong about having power... yes there is a plug, but no it isn't providing any electricity.. so I am signing off for now and will be back when I find power...

Dave Ritter Keynote

Making Connections: Lessons on the Power of Networked Communities

David Ritter is Vice President of Strategic Technology for the Boston Consulting Group

Opening comments:

Open Source is about people. And it is about networking

Breakthrough creativity solving complex challenges by participants who are geographically and organizationally dispersed, who don't do it for direct monetary reward but display unusual enthusiasm...

Ray's closing comments

We are just starting the "golden age" of our industry

Open source is the key factor (besides web services) that will start that

Software will be delivered as a service. Software IS a service. A service company is a different DNA than a product company. Software companies have to recognize this shift.

Software has always been a service business and we just haven't been honest about this.

Ray continues -- How has the formula changed?

90s formula -- ROI = I x M / C

invention times momentum divided by the cost

NOW -- ROI - P(I) x U / TCO

Proof of innovation times useability divided by total cost of ownership

Software industry at the start of this decade is a $200 billion industry, 70% in the US, representing 1% of the US GDP, and employing 325,000 people

Today, (2004), Open Source Software and Web Services changes the marketplace. Apache is 2x Microsoft. Microsoft is only 3x Linux. India and China are becoming enormous. And the enterprise is adopting OSS

Here is what enterprise CIOs are saying about Open Source:

Positives -- Lower TCO, Equivalent Functionality, Equivalent Quality, Bi-directional scalability, Faster bug response fixes

Some challenges -- Informal support, velocity of change, no roadmaps, functional gaps, licensing caveats, ISV endorsements

What does the software industry look like in 2010?

OSS destruction > Growth -- the industry will be the SAME SIZE at the end of the decade because Open Source will destroy as much revenue growth as occurs in other parts of the industry

US Share < 60% -- more and more is going to move off shore

<1% of US GDP -- GDP will grow faster than revenue in the software industry

< 325,000 people -- the US is not supplying the engineers for this industry

Ray continues -- what the software industry needs to do

More predictability -- not necessarily perfect software, but better predictability about when software will work

Ubiquitous Access -- this is a worldwide marketplace

Continuous Updates

Service-Oriendted Architecture (network/federated data)

Flawless Service

Ray Continued -- Compare to the automobile industry...

Ray's comments

Progress on auto industry:

• Replace Horse
  
• Build for masses
  
• Make better, faster, cheaper
  
• Mass customization
  
• Differentiate on service

The software industry has done this --

• we replace Labor
  
• PCs were built for the masses
  
• progress on Moore's Law drove better, faster, cheaper
  
• the Internet drove mass customization
  
• Now it is about service

Ray Continued -- "New" Enterprise

Ray's comments:

The Software industry's technological progress is our vulnerability

Innovation-- emphasis on "how" vs. "what"

Scarcity -- focus on management vs. engineering

Entrepreneurs -- focus on Renovation vs. Invention

Investment -- "OP Ex." vs. "Cap. Ex."

Technology -- "Service-centric" vs. "Component-Centric"

Ray continues -- What does the next decade look like?

Constraints:

Volatility -- we can resolve for some time the assymetric threats in a conclusive manner. It was much easier to deal with the Soviet Union in the cold war. Now how do we operate? How do we plan our business and invest in the stock markets with the invisible threats?

Transparency -- if you are the CEO of a public company your shareholders should thank you every day -- why would anyone want this job? You run your company in a fish bowl and get no appreciation for this.

Low Growth -- focus on profitability instead of growth

Enablers:

Knoweldge Work Globalization -- it doesn't matter what your politics are, you have to decide where you stand on globalization of work and free trade economied. I just came back from India and I learned a whole lot about what is going on over there. India is not a black box that you shove work into. There is a lot of innovation goin on there and it is driven by an outstanding educational system over there. Either we use this advantage or someone else will.

Network Based Service Providers -- ASPs are NOT a flawed business model created by the Internet bubble. They are a capital intensive investment because you have to invest a lot to get the service level up by the time you have a first customer. End users are going to, more and more, say "I get it now" Instead of talking to my commercial software vendor and putting software on the shelf I can buy what I use.

Rationalize IT Infrastructure -- there is a modern IT infrastructure sitting out there now. CEOs say all that money I spent in the 90s I didn't get a return on so there is a negative attitude about IT. But what you have to convince them of is that they have to invest more now -- because the next set of technologies will leverage the infrastructure that was installed in the 90s and really deliver on that investment

Portable Computing -- Mobility is finally here -- we don't even need laptops as mobile devices, anywhere, any place, can provide communications and computing in a handheld platform.

Ray continues -- A New Economy?

Ray's comments:

A few years ago everyone was saying that the aggressive investment in IT technology was supposed to create an unending improvement in worker productivity that would allow economies to grow at a faster rate than at any other time in history.

Now people are asking, does IT matter? Quotes Nick Carr in the Harvard Business Review as saying "no"

The mistake -- it is not the IT that matters, it is the USE of IT that matters. How do you change the prospects of leadership in your industry because of the IT possibilities?

Nineties Optimism makes today look like a recession but if you look at the past 30 years, today looks like normalcy.

Based on a perspective from the bubble, it looks like we crashed the "new economy" -- wars, terrorism, market crash, job loss... but I contend that the new economy survived all of this.

Look at Amazon, EBay, knowledge workers at work anywhere in the world. Yes we destroyed it temporarily but it is being recreated.

I contend that by the end of this decade most of the predictions made during the Internet bubble will have come true

Ray continues... 2004: Things Are Looking Up, but...

Ray's comments:

The economy is recovering... so why the paranoia in the software industry?

This stuff is still not easy to sell, the buying activity is still back-end loaded at the end of the quarter, prices are at an all time low -- you are plagued with the thought "how long can I manage my cash flow burn rate to get out of the recession or is this the shape of things to come -- it isn't getting better? What is the next big thing to get us out of this rut?"

We all hope that this big new thing is going to solve all of our problems. But the wait for the next big thing is probably a decade away.

Examples of "big things" -- Transistor, Microprocessor, operating system, personal computer, Internet

Is open source a "big thing"? No, it is a shift in the existing set of paradigms that will effect incremental change in the way the computer industry operates.

Ray Lane's introduction...

Ray's comments:

This industry is at a watershed.

A sum up of all of our successes and problems.

The computer industry has become one of the largest in the world -- 3rd or 4th in the world

Yet we still operate with a lot of proprietary baggage that forces the end user to integrate and make it work

One of the significant events that is not often recognized is Andy Grove's horizontal stack chart which was designed to attack IBM's dominance of the computing marketplace.

This chart was one of the first attacks on the set of assumptions about proprietary advantage - that proprietary products will work better, have a lower cost of ownership, and give the company's that make them lasting profitability.

This is the subject that we will address today

Open Source Business Conference

I'll be blogging the conference today here in San Francisco -- the Open Source Business Conference or just OSBC...

This morning's keynote is by Raymond Lane, former president of Oracle and currently General Partner at venture fund Kleiner Perkins Caufield & Byers. His speech is entitled The Macro-Economic Impact of Open Source Software and should start momentarily...

Here is the abstract:

The bubble and subsequent crash in Information Technology will be recorded in history as a normal growth phase all industries inevitably go through. Our industry is maturing, moving from the "installation" phase to the "deployment" phase where mass adoption occurs. The next ten years will be the "golden age" of technology where the focus will be on applications and services, rather than the technology differentiators themselves. Profits will be attained by those that drive low prices and achieve volume adoption, rather than pure specialization. We will see widespread adoption of standards. This keynote will cover the economic impact of Open Source Software (OSS) and its benefits of no vendor lock-ins, significant cost savings, shift of IT spend from infrastructure to applications, and open standards based architecture. We will also discuss about where OSS has impacted today, where it will reach in the next 5 years, steps to accelerate its adoption and to exploit it to the fullest extent.

By the way, kudos to the show organizers. It is great to be able to get power connections and wireless Internet access from the main conference ballroom and thus to be able to blog the conference in realtime. It would be nice if there were more power outlets though... despite all attendees having laptops we live in perpetual fear of running out of juice so whenever possible, we plug in... thus the hall is filled early with people strategically sitting at the edges of the room so that they can reach the wall plugs.

Anonymous office buildings...

It used to be that companies would fight for the opportunity to have their names on the outside of office buildings -- every little bit of advertising helps, the reasoning would go.

I was just on the phone with a friend at a large company (which shall go nameless...) who told me why this practice may be waning -- due to international terrorism...

Why advertise your presence if this could make you a target for terrorism? The friend cited a number of examples where his company and others had been removing signs from properties they inhabit in order to be (or at least appear) proactive in protecting their employees.

Will the future bring vast anonymous office parks where it is hard to tell who the tenants are in any of the buildings?

Open Source Capitalism

Very interesting conference this week in San Francisco, the Open Source Business Conference or OSBC is being held March 16-17 at the Westin St. Francis in San Francisco, CA.

A great set of speakers: Clayton Christensen, Ray Lane, Larry Lessig, Chris Stone, Tim O'Reilly, Mike Evans, Bud Tribble...

Their self description:

Open Source Software (OSS) is rapidly coming to dominate certain areas of IT. Despite this advance, few beyond hardware vendors have developed solid models for leveraging OSS to boost margins or revenues. This inability to monetize OSS is perhaps its greatest inhibitor to thriving beyond the commodity server.

The Open Source Business Conference (OSBC) is the first forum to bring together established technology vendors, startups, open source community members and enterprise IT users/customers to jointly explore new oppotunities for OSS deployment and how to capitalize on them.

Who should attend? Senior technology executives (both vendors and users of OSS); venture capitalists; in-house and outside counsel for IT vendors or buyers; analysts; strategy consultants; and members of the media.

Databases are the next to fall to open source...

Anyone wondering why Oracle's Larry Ellison is spending so much time pursuing an acquisition of Peoplesoft need look no further than open source database company mySQL and today's news (care of CNET) that mySQL will soon offer database clustering technology previously only found in high end commercial databases (like Oracle). Clustering is one of the few remaining reasons to buy a commercial database product.

Open source is an unstoppable market phenomenon. We will see open source projects that provide as good or better software to commercial competitors in every software category over time. Infrastructure elements such as operating systems (and now databases) are the first because the characteristics of these products are broadly understood in the marketplace and technical innovation in these categories tends to be incremental and not transformative.

Larry is right to try to move Oracle away from its dependence upon that core database revenue but wrong in trying to replace one software revenue stream with another. IBM is the only one of the tech giants that seems to clearly understand the future -- software is something you give away in order to lock customers into your other revenue streams.

Maybe Oracle should be trying to buy Accenture...

VoIP and the Telecom Giants

I happened to sit next to an AT&T exec on the plane last night. He commented that "...two years ago I would tell customers that while VoIP is coming, it is still a long way off..." And what do you tell them now, I asked? "VoIP came."

It was interesting to speak with him about their VoIP experiments though. AT&T is still spending a lot of time worrying about priority packet routing and trying to focus on the highest quality possible on the voice connection. I observed that 8.5 million people find Skype acceptable (he had never heard of Skype) and that the wireless providers have trained us all to expect a little fuzziness on our voice connections... so won't businesses choose "good enough?"

He admitted that this scenario worried him...

Interesting VoIP statistics

These statistics were provided by Federal Communications Commission Chairman Michael Powell in a speech that he gave today at the National Association of Regulatory Commissioners. You can download the entire speech from here.

• 2 percent of US firms currently use some form of IP telephony, and this number is expected to grow to 19 percent by 2007
  
• 73 percent of wire line service providers and 31 percent of wireless operators either have implemented, or are testing packet telephony in their networks
  
• 50% of Internet households are interested in Internet Voice as a way of reducing monthly long-distance charges
  
• Starbucks offers its customers 19,000 ways to have coffee (ok, not about VoIP but interesting nonetheless...)
  
• The US is 11th in the world in broadband development
  

More on Skype

Great post on Skype from Lance Tracey. I love the quote from Federal Communications Commission Chairman Michael Powell:

"I knew it was over when I downloaded Skype. When the inventors of KaZaA are distributing for free a little program that you can use to talk to anybody else, and the quality is fantastic, and it’s free—it’s over. The world will change now inevitably.”

Still don't know what Skype is all about? Find out....

Skype

North American Bandwidth News has some really interesting comments on Skype. If you aren't familiar with Skype you should be. As you'll read in NA Bandwidth News -- "Skype is a large bulldozer for destroying and rebuilding the telecoms industrial complex..."

The perfect fractalized enterprise

I encountered a terrific example of a fractalized enterprise a few days ago. A friend has started a business that takes professional photos of children's sports events and then sells prints or other items (coffee mugs, mouse pads...) back to the parents. It combines his interest in photography with his daughter's passion for sports and parents seem to love the opportunity to purchase professional quality photos of their children.

What is really amazing to me about this business is how Bob uses technology to create a business that appears significantly bigger than the one person shop he really is. The Internet provides a mechanism for Bob to outsource every part of his business that isn't core. Here is the formula:

Web site hosting company: YahooDomains
E-Commerce Storefront: PhotoReflect (specializes in photography e-commerce)
3-4 photo processors, all available on the web (some are better at posters and prints, some are better at mugs and mouse pads...)
Accounting and CRM: Intuit
Receptionist and personal assistant: CallTrex (my own company)

Add in a few friends who enjoy being weekend photographers and are willing to work for $10 an hour and a local camera shop that rents high-end photography equipment (REALLY big lenses for those close up shots from across the field) and you have a complete business set up for almost nothing.

This is the kind of entreprenuerial engine that the Internet can enable. Bob focuses on his "Core" -- marketing and sales -- and he uses technology to martial a set of organizational fractals that come together to serve his "Context" and present a unified face to the end customer.

An interesting idea -- what about creating a set of "recipes" for people that would like to start their own businesses -- essentially a list of the organizational fractals needed to construct a given type of business?

Greenspan on Intellectual Property Rights

As usual, Federal Reserve Board Chairman Alan Greenspan is eloquent, his position is well thought out, and his timeliness is perfect. But in this instance Greenspan is commenting on Intellectual Property, not interest rates.

At the Stanford Institute for Economic Policy this past Friday, Greenspan delivered an address on the importance of protecting Intellectual Property Rights. The full text of his speech can be found here.

He does not offer a specific remedy (as he did in the case of Social Security earlier in the week) but instead sensibly asks a set of questions:

If our objective is to maximize economic growth, are we striking the right balance in our protection of intellectual property rights? Are the protections sufficiently broad to encourage innovation but not so broad as to shut down follow-on innovation? Are such protections so vague that they produce uncertainties that raise risk premiums and the cost of capital? How appropriate is our current system--developed for a world in which physical assets predominated--for an economy in which value increasingly is embodied in ideas rather than tangible capital?

One thing that both sides in this debate are likely to agree on (at least privately) -- currently Congress, with the Digital Millenium Act for example, is primarily taking into account the interests of lobbyists, and not thoughtfully addressing the economic issues that Mr. Greenspan articulated. Hopefully his speech will spark a broader debate on these issues.

Revolutionize the PTO

Just about anyone who has had to deal with the US Patent & Trademark Office will readily agree that a major overhaul of this part of our government is needed, preferably as soon as possible. A significant portion of our economy is dependent on the principals of intellectual property protection and the PTO owns all of the passageways into these strange lands. With a wave of a pen fortunes are made and lost when a patent office action grants an idea the status of property, or takes it away.

The debate continues to rage (not least within this blog) regarding the merits of different types of patents, and the merits in particular of software patents. But both sides of this argument can probably see that the PTO as currently configured is in no condition to render intelligent judgements on a consistent basis as to the patentability of various software innovations.

At dinner with a friend last night, I heard the (not uncommon) story of receiving an official PTO office action memorandum, rejecting all claims for a filed patent due to the existence of "prior art" -- which is to say, someone else patented the idea first. However, upon review of the cited prior patent, the only conclusion a reasonably trained computer scientist could come to was that the rejected patent application and the prior patent both used the word "meta data" a few too many times and otherwise were not at all similar.

A Revolutionary Suggestion
In thinking about how he had arrived at this state, and whether the Patent office personnel were merely using a word search on prior patents to reject claims, my friend made an interesting observation: the business community as a whole has a vested interest in blocking the issuance of bad patents (that is, patents for ideas that are not, in fact, innovative), the business community has the resources and the knowledge to properly investigate a patent claim and uncover prior art -- why not have an open review process for patent claims?

This would radically change the role of the patent office from one of research to one of adjudication. Patent officers would have to determine whether or not the counter claims that competing businesses raise against a patent's issuance were accurate. But this role of adjudication would at least remove the patent official from the now almost impossible job of coming up with the potential prior art themselves.

The Fractalized Enterprise

Paul Kapustka notes in his most recent networking pipeline blog that small business is where we should be looking for growth in IT purchasing. As Paul points out, it is much more difficult for journalists and market analysts to pay attention to the behavior of small businesses -- but we all need to become better at understanding small business as a key underlying economic trend.

If Geoffrey Moore is right, the Internet is accelerating a movement toward what you could call the Fractalized Enterprise. Geoffrey explains his "core vs. context" concept as follows:

Activities that support ... differentiation are core to our businesses. Everything else we do, by contrast, is context -- that is, work that has to get done but cannot improve our valuation.

The interesting thing about the Internet is that it creates the opportunity to outsource context seamlessly. Every business can appear to be a big business, can have endless resources to handle customer support, sales, product development, marketing -- all by weaving together a team of disparate entities (organizational fractals) that cooperate together to create an enterprise.

That is the future -- small businesses, often sole proprietors, working together, mediated by IT, creating, marketing, distrubuting the brands, products, and ideas that we all consume. Much more powerful than corporations.

Of course our technology, government regulations, and personal dispositions must all continue to evolve for this to fully fractalize.