Communications and Technology Blog - Tehrani.com - Skype Archives

A Billion WebRTC Endpoints Force Voice and Data Players to Adapt or Die

2013-06-05T21:52:30Z

From an evolutionary standpoint regardless of whether we talk about nature or business, adaptation is a key to success in changing environments. During the industrial revolution in London a species of moth with a white color blended in with the bark of the local trees until soot from the nearby factories turned the trees black. Some darker moths were now camouflaged in the dark trees and eventually the species adapted and became black. When air quality improved, the moths over successive generations changed color again.

Although this may not be the most flattering segue, WebRTC is spreading like the soot from factories in London – it’s now available on one-billion endpoints… It’s beyond the point of no return and tech and telecom companies which don’t adapt will get eaten, just like a white moth on a black tree.

It’s worth pointing out there are some potential question marks regarding implementation of this new standard which encompasses peer-to-peer audio, video and data sharing. For example, when will Microsoft and Apple decide to support or ignore this standard.

It seems inconceivable however that either company could ignore WebRTC because quite frankly the ecosystem of companies developing new applications which leverage this new standard is staggering. In fact our upcoming WebRTC World Conference in Atlanta later this month had to expand its exhibit area twice to handle all the companies that wanted to participate.

These and many other entrants and existing organizations will be offering compelling services to the market and in order for companies to take advantage of them, they will have to leverage devices which run Chrome or Firefox as these are currently the browsers supporting the new standard. This will eventually force Redmond and Cupertino to come around and support WebRTC in my opinion.

But I digress – there are a few points regarding this disruptive technology which we should all consider. The first is how Unified Communications or UC vendors will handle this transition. Steve Anderson writes an intriguing piece about the matter on the WebRTC World website and it’s worth a read. Rory Lindstone writes another piece about how gateway vendors such as Voxeo, Huawei and Mavenir are helping bridge the old and new worlds of telecom meaning you won’t have to retire your existing solutions to take advantage of WebRTC.

Doug Mohney also writes on WebRTC World and describes some of the differences between RCS and WebRTC – he explains the latter is on a fast track when compared to the former. He has a good point – I heard about RCS quite often since the last few SuperComm shows which haven’t existed for years and still, RCS seems to be getting rolled out very slowly.

The point is, WebRTC is changing everything again. The same way IP led us to IP communications with new possibilities and entrants in the market, WebRTC will see hundreds if not thousands of new companies releasing products and services and many new entrants will displace older ones.

The adaptable startups and existing companies will make it through this transition and perhaps become tomorrow’s Skype, Facebook or Twitter. You may not realize it but Skype was released six years after the VoIP market was conceived! In other words when it comes to disruption it is difficult to predict who the next winners and losers will be but what you can generally predict is the more adaptable the company to new technology, the better it will do.

Oh and if you made it this far, I have a present for you… Here is a special code you can use for 50% off at WebRTC Conference & Expo. It’s only for friends of Rich Tehrani – if you enter it manually it is: WRTCRich and it will save you $397.50.

I hope to see you at the show.

Metaswitch Clearwater: Game Changing Open Source IMS Initiative

2013-05-08T12:20:23Z

The march to a software telco world is progressing nicely

Communications service providers are at war with OTT providers and need to ensure they are able to battle on as level a playing field as possible. There are significant costs associated with running a major telco and hardware infrastructure certainly ranks high among them. Sure, OTT providers like Skype and WhatsApp have infrastructure costs as well but they often leverage standard servers and software to achieve their goals. Contrast this to a telecom operator who typically buys proprietary equipment from a number of specialized manufacturers. The difference in costs between these approaches is quite steep.

This is of course is why carriers are pushing equipment providers to provide all of the network functions they supply in software which will run in virtualized instances on off-the-shelf servers. It also explains what ETSI network functions virtualization or NFV is all about and Metaswitch Networks has been on the forefront of this trend and hopes to ride the wave into larger carriers worldwide.

To further this push from hardware into software, the company recently announced Project Clearwater which takes the components of IMS and runs them on standard servers in an open-source manner. A number of carriers have leveraged open-source Asterisk in the past to provide telephony service to their customers, now they and others can take advantage of this new initiative to provide open-source IMS as well.

One of the main reasons carriers want to shift their network functions to software is it allows them to select products from a wider variety of vendors. The reason has to do with the costs of developing telephony hardware for carriers. You need phenomenally deep pockets and lots of patience to sell to carriers as an upstart hardware provider. As a result, an amazing number of equipment companies have gone belly up waiting to become adopted by telcos worldwide. Software on the other hand has less cost associated with it meaning a potentially higher likelihood of success.

Still, telcos can never be too cautious choosing a company to base their network on. One of the benefits of going with an open-source project is you no longer need to worry about one company to support it.

I spoke at length with CTO Martin Taylor and he tells me they learned a great deal from the efforts of many of the players in the social networking and cloud space and took the best ideas from these players and applied them to a SIP centric IMS network. Some things they learned and applied were using DNS as a load balancing technique as well as building massively scalable and resilient solutions in a low-cost manner.

How low cost you ask? Well, I am glad you did. Taylor says about 2 cents per subscriber per year based on the costs of AWS. Of course the solution is not dependent on Amazon, but this is just a guideline to consider. Moreover, this cost covers core plumbing of voice, video and messaging… You would still need an SBC, telephony app servers, messaging app servers and media gateways.

He further explained that carriers who are looking to deploy RCS know they have compete with OTT providers and being able to lower the cost of IMS is a huge help in doing so.

Metaswitch will supply support and bug fixes for the project. Taylor exclaimed, “Charging for peace of mind really is what it boils down to.” This and supplying additional solutions is how the company hopes to monetize this new initiative which is free for telcos to use.

This news is a potential game changer for telecom. Carriers once had to grapple with whether to purchase their IMS solutions from the US, Europe or Chinese equipment providers… Now they have the option of trying a software-centric, open-source approach. They can even try this solution in tandem with other trials going on in their labs.

Be sure to learn everything there is to know about NFV and the birth of the software telco at Software Telco Congress, Nov 19-21, 2013 in Santa Clara, Ca.

How a Call Center Translation Service Went Mainstream

2013-04-24T18:24:08Z

Virtually everything in our lives has gotten more expensive over the years such as housing, cars, postage stamps, food and energy and yet telecommunications and broadband service costs continue to plummet. This state of affairs is in-part due to Moore’s Law and a side benefit of the declining connectivity costs has been bringing the world closer together. In the nineties you could bankrupt yourself quite easily if you direct-dialed from one country to another yet today IP communications has lowered the price of such calls to zero or a few pennies a minute depending on your location and device.

In 1982 a company called LanguageLine Solutions was founded to focus on helping translate conversations via telephone and since then, the company has grown to 6,000 interpreters who speak 98.6% of the 6,809 languages spoken in the world today. In this same year, TMC launched a magazine focusing on the call center market (now called Customer) and wrote about this company frequently in the subsequent decades.

I recently caught up with LanguageLine representative Linda Taffy who walked me through many of the new services the company offers such as Language Line University which measures the proficiency of multilingual agents. LanguageLine Direct Response is a service which allows your customer who speaks limited English to hear your message when they call in. From there, they first speak with an interpreter who greets them and then changes from being the greeter to an interpreter again. The company also offers a localization and translation service which helps companies keep their websites and documents accurate in other other countries and languages.

Perhaps the most exciting service is Language UC which is a video chat solution which runs on Macs, PCs and tablets. I had a chance to see a demonstration of sign language via an iPad and it was quite fascinating. What I learned was the sign for coffee which is an arm churning looks more to me like butter. But I digress. With this service you could be a traveling salesperson who could go to any country and communicate effectively in meetings by connecting to LanguageLine UC as needed.

Some of the benefits of LanguageLine’s services are you don’t have to hire full-time people on staff and can instead pay as you go. It is worth noting the video service has a license fee as well.

There aren’t too many companies still focusing on the same core business for over 30 years but LanguageLine is certainly one of them. With their new app/video service, they have certainly elevated their offerings and brought themselves current with the times and made their solutions something the mainstream market can use. You might even say the company is now a bit ahead of the times.

Chorus.im Reduces IM Islands with HTML5

2013-04-02T16:27:46Z

With the billions of messages sent each year it is tough to come to the conclusion that messaging is broken but it is. If I send an SMS from a cell phone for example it typically goes to another cell phone. Lets say I am on a PC and want to communicate via SMS - I can use an email gateway but I would have to know which carrier first before I choose a gateway. For example Vodafone in western Japan uses the following gateway address: number@n.vodafone.ne.jp while Vodafone in Okinawa uses the following slightly different address: number@q.vodafone.ne.jp.

Likewise for iMessage, it works great until you want to communicate outside the Apple ecosystem. Skype works great but requires downloads to all of your devices - of course we expect tighter integration into all Microsoft products over time.

This leaves an opening for Chorus.im which recently launched an HTML5-based messaging solution which works across platforms without the need for downloading plugins, software or anything.

Certainly, there is a need for such a solution since I do beleive messaging is broken but inertia is a powerful force and it remains to be seen how quickly people jump off their current messaging systems and embrace this new solution. One benefit of course to Chorus is it allows messaging without identities needing to be shared meaning it can be used as a communications medium for online dating or transactions where you don't want to give your email address. This reminds us of SnapChat - the service which allows a user to send messages which quickly auto-destruct. Chorus.im could be an enabler for a web-based version of such a solution and it could in-turn be embraced by people who gravitate to services like Facebook's Poke.

Microsoft, Facebook, Apple and Google: France's War With US Tech Firms

2013-03-13T17:45:27Z

Ten years ago the people of France had to deal with a major challenge – English tech words were beginning to become more popular than baguettes. As a result, the country’s Culture Ministry banned the term e-mail and replaced it with the term Courriel. A decade later, the country decreed the word hashtag shouldn’t be used but instead they suggested 'mot-dièse' which we believe may be French for “too much time on our hands due to overly generous government handouts.”

The country’s battle against tech terms coming from the US is dwarfed only by the country’s attack on US tech corporations. Most recently, Apple was fined 10,000 euros for having its workers work past 9:00 p.m. in retail stores. The French ban working between 9 p.m. and 6 a.m. unless it is required. Now the country is after Skype – France isn’t happy the free service hasn’t registered as a telecoms operator.

Last week I pointed out the irony in the delayed EU fine of Microsoft after it didn’t give users an option to install competitive browsers. The point is by the time the company got fined, it had lost a good deal of marketshare because the internet itself allowed the competition to bypass the installed browser default which Microsoft provided in its OS.

Facebook too has had to deal with EU regulators on privacy issues – in 2011 the EU started to look at how the service tagged photos using facial recognition and over a year later the social networking giant removed all the facial recognition data from the EU.

This is by no means an exhaustive list of French and EU conflicts with tech companies – many know Google has had a number of back-and-forth legal challenges relating to advertising and newspapers.

It’s worth pointing out in many of these cases I am sure the companies in question were on the wrong side of the law and did need to be slapped on the wrist in court, through fines, etc to bring them in line.

It is however worth considering the German and French governments came together in 2008 to build a competitor to Google called Quaero. The plan was scrapped after the Germans pulled out but the project was slated to be massive – up to $2.6B was to be spent on it over five years.

This isn’t to say the US government hasn’t at times made life difficult for tech companies. The FTC for example just decided that social media like Facebook and Twitter need to have the same consumer protection disclaimers as other forms of advertising. While this makes sense from a fairness perspective, how you put a disclaimer and a message in 140 characters has yet to be determined.

You don’t have to be a conspiracy theorist to see a pattern emerging here. First the French go after the terms, then the business models and finally the companies themselves.

IPgallery Helps Carriers Become Social Hub and More

2013-03-01T19:57:11Z

Communications service providers once the center of the customer's world have awoken to the new reality - social and apps are the new hub. In fact, Facebook, Twitter and a wave of other social networks have fully overtaken the telephone number as the primary method of communicating among many - especially younger users. Then there are the the OTT VoIP and video vendors such as Skype. The telephone number has gone from being a protected client relationship to an afterthought. Even the bright spot related to phone numbers - massive texting revenue has recently been eroded by OTT apps like WhatsApp and even iOS messaging which seamlessly takes text messages off the operator network.

Enter IPgallery, a company playing in the IP communications carrier space for over a decade who wants to help service providers become the focal point of this brave new world of social and apps. Their suggestion is to provide customers with a social communications and hosted-PBX solution which integrates so seamlessly with popular web-based servies that users will rarely need to leave the comfort of the environment. An HTML5 interface allows a cloud-based service to tap into APIs of a slew of other companies to provide social, mapping and just about anything else a user can think of.

Just like a person might use HootSuite as a central hub to interface with numerous social networks, IPgallery helps carriers provide customized user interfaces which they believe are captivating enough to keep consumers living inside them.

Consumers for their part have shown a willingness to spend huge amounts off time interfacing with specific services such as Facebook. In fact, companies are tripping over themselves to have users interact with them on the world's most-popular social network. Carriers have a shot to get control back by providing customers with a user interface worth "living in."

In addition, they can add services such as shopping and entertainment and even combine location information to provide compelling applications which rival those of the OTT world. As carrier information is even richer than what is available to typical smart phone applications, they can actually provide better services than consumers can get elsewhere.

At Mobile World Congress in 2013 the Israeli company showed me an app they wrote which accesses Facebook and Maps and provides the photos of friends on their actual locations on a map. A user can select one or more friends and start a group communication, complete with file sharing and collaboration.

There is a great deal more - such as integrated e-learning, a hosted PBX with separate skins and functionality broken out by department such as accounting or sales. Finally, operators can add functionality by providing cloud-storage which could be used to hold content which is shared between users on the system.

IPgallery functions as part software/integration vendor and part systems-integrator, working with carriers the world-over to develop solutions which they need in their particular markets. This allows carriers to focus on their core competency while taking advantage of best-practices being developed by other service providers.

We often hear of discussion revolving around whether carriers are ok just being "dumb pipe" providers and regardless of the answer, there is definite value in owning the home page of the customer's world. Amazon has used this prime real estate to successfully push Kindle devices and Google uses it to push its Chrome OS, tablets and other devices.

Perhaps the better question is - what are the benefits from being the gateway to your customer's online activities including social, commerce and shopping? The answer of course is increased revenue and flexibility. And as service providers grapple with stagnant to lower ARPU and increasing network costs as they upgrade to 4G and beyond, exploring new revenue opportunities which could also reduce churn seems to make a lot of sense.

Latest ITEXPO Miami 2013 Show Daily

2013-01-26T01:03:22Z

There is so much happening at ITEXPO next week I thought it made sense to share the latest show daily from the event - Friday, Jan 25, 2013. Some of the companies mentioned are Microsoft and specifically their Lync platform and UC connection, Truphone, TransNexus, Sangoma and FiberMedia. There is also a great conversation about BYOD versus BYOI or bring your own identity. There's lots more - check it out for yourself to see some of the exciting happenings at the show.

Who Should Buy Linksys and how does the Cloud fit in?

2012-12-17T22:32:28Z

Cisco recently appointed Barclays to help it auction off Linksys – a move consistent with the company’s desire to exit low-margin consumer businesses as it looks to invest in high-margin areas like software and services. But as the saying goes, one man’s garbage is another man’s gold. Linksys is indeed a treasure to the right partner like Google or even Samsung.

The reason is simple – both companies need to blunt the move by Apple into the home and entertainment is the future of technology as consumer technology trends coupled with BYOD turn into corporate success. When the iPhone first came out CEO after CEO explained to me patiently about how they could never abandon RIM and that the iPhone would never be secure enough for their IT departments to sanction.

Well, that was a short wait as a few years later RIM is gasping for air and even mighty Microsoft is trying to figure out how to get people to buy its mobile products.

As Apple invades the living room further with its rumored new TV solution – whatever it may be, the defensive strategy of its competition has to be to get into the home via an adjacent method and leverage this success with add-on solutions. Of course the acquisition of Scientific Atlanta by Cisco coupled with Linksys was in-theory going to do the same thing except the cable and telecom companies stood in-between Cisco and its customers meaning the leading networking company wasn’t going to come out with an OTT television solution.

The question is – who should buy Linksys and the answer to me seems to be anyone who needs to compete with Apple. Aside from Google and Samsung, let’s be sure we add Microsoft to the list as well. Imagine what they can do with Linksys and Skype integration – coupled of course with Lync and Xbox. This combo would certainly make the company even more powerful in the world of VoIP/IP communications.

Then there are the cloud vendors – there is a natural fit between products and services these days – Amazon has shown us that software can and will subsidize hardware. In its case, a suite of cloud services and apps are there to increase consumer spending on products in the Amazon ecosystem.

Google with its Chromebooks gives away lots of cloud services in the hopes customers will buy more. Expect this trend to extend across hardware in general meaning companies like Carbonite and Mozy may look at Linksys as a way to get consumers to use their services on a trial basis.

In a way, both of these companies can justify the purchase of Linksys by subsequently cutting their marketing budgets as the sale of each router and other consumer electronics product bundled with a free trial is effectively the same as the result of advertising on radio, TV or the web.

Finally, there is Dell and HP – I can’t imagine either company successfully pulling off such a merger but the synergies between consumer printing, computing and networking are too obvious to ignore. Moreover there are a slew of Asian vendors – many in China who could take the Linksys brand and use it to introduce a number of new products which would have immediate name recognition in the US. Lenovo leveraged IBM at first to do something similar – I imagine in my scenario a Chinese manufacturer renaming itself as opposed to the other way around. Of course the US government may have something to say about such a move from China but then again being a consumer play, Linksys may not get much attention from the feds looking to keep our communications networks safe.

Either way the biggest opportunity for growth for Linksys seems to be the melding of hardware with cloud services such as storage, audio and video. Apple and Amazon are pulling this off brilliantly and it seems to me the future of commodity hardware will be using it to push a surrounding ecosystem. In a way consumers can thank the cloud for adding more value to the products they buy and for its ability to subsidize hardware in order to make upfront costs more attractive.

Michael Robertson's New Dar.fm

2012-12-11T22:06:45Z

Michael Robertson is one of the most interesting people in the tech world having burst onto the scene during the dotcom days with the launch of MP3.com which allowed users to store their CD collection in the cloud. Now a commonplace concept, at the time the record labels weren’t sure what to do about the company so they defaulted to what they do well, suing the startup into oblivion. Of course it didn’t help that Napster was popular during the same time and brought major attention to how new technologies were robbing record labels and artists.

Talk about being a visionary.

He had a string of other startups as well such as SIPphone which was later purchased by Google and another music related company MP3Tunes which filed Chapter 7 bankruptcy.

I had a chance to meet him a few times as he was producing SIPphone – another vey novel business which showed how creative he could be.

More recently he has launched a novel service called Dar.fm which allows you to record radio for later listening. Recently he put the word out that his company will be very transparent with the release of the relevant statistics regarding the shows his company tracks.

He also released some analysis worth pondering. Half the top hosts are liberal/progressive as opposed to the “conventional wisdom” espoused by many. For example, Robert Kennedy said this week that the right-wing controls 95% of talk radio in our country.

But getting back to tech – Robertson has done it again. He has started a new business which makes you think, “Hey, why didn’t I think of that?” and then after a few more moments you say to yourself, “Probably because I don’t feel like dealing with lawyers for the next few years.”

WebRTC Conference & Expo Kicks Off

2012-11-28T16:48:33Z

I am at the WebRTC Conference & Expo here at the South San Francisco Conference Center and the mood at the show is positive. What I have heard over and over from telecom equipment vendors, call center vendors and software vendors is that WebRTC is a once-in-a-lifetime opportunity in the telecom space.

At a cocktail party sponsored by Google and Plantronics many people told me that the handset players are in trouble while the headset vendors have a great opportunity. This of course explains why Plantronics has taken such an active role at this conference and in this space.

I will update you with more as the event progresses - here are some photos of the show for your viewing pleasure - The person at the podium is Phil Edholm who has partnered with TMC and Crossfire Media to host this conference.

WebRTC: The Phone meets the Web

2012-10-19T17:40:22Z

We have seen the multi-billion dollar communications market get disrupted as the phone met the IP network. In the video below Phil Edholm describes how with WebRTC, the phone meets the web. As he describes, even though IP communications has been around for more than a decade, there hasn’t been a fundamental change in how we communicate. We still hang our phones off servers which allow communications to take place. Now, every web browser will become a multimedia communications engine, allowing browsers to communicate to other browsers directly. This is a totally new way of working – I like to refer to it as putting the power of an open-Skype into every browser.

Phil believes WebRTC will change communications the way the web changed the way information is shared. In other words – you can communicate very easily with others – without the need for continuous and central command and control.

As you may know, Edholm was Vice President of Technology Strategy and Innovation for Avaya GCS and previously the CTO/CSO for Nortel Enterprise Solutions. He knows the industry well and has been a past keynoter at ITEXPO. TMC has partnered with him and Crossfire Media to launch a new conference called WebRTC EXPO in order to educate the world on the power of this new technology.

Here is a partial list of people who should attend the event and why, according to Phil. The last one is my addition:

Enterprise IT: How will WebRTC integrate or even potentially replace your unified communications systems? Will you need to integrate WebRTC into your contact center to more fluidly communicate with current and potential customers?

Carriers: The implications of every browser allowing for rich communications to impact your business model can’t be overstated. In short, the pace of communications disruption continues. The simple question is, “Will you be driving or under the steamroller?”

Website owners: Does the addition of communications to the browser change your business model? How do you benefit from WebRTC? Can you use it to add value or generate more revenue for example?

Developers: This is a ground floor opportunity to change the world by writing new and innovative applications which weren’t possible before.

Investors: The entire phone network has just come under increasing pressure as a result of WebRTC. Moreover, Facebook, Twitter, Zynga and other companies with large reach have the ability to become their own phone network overnight.

WebRTC Expo takes place in South San Francisco, Nov 27-29, 2012 with keynotes from Plantronics and Thrupoint. We hope to see you there.

Major Flaws in Ballmer's Apple-Fighting Strategy?

2012-10-11T16:33:06Z

It really is shocking that Apple has pulled so far ahead of every other device maker with designs that are more art than technology focused. For those of you familiar with Bang & Olufsen products (BeoSound 8 pictured above) you know in some ways Apple’s designs are a copy of this iconic audio manufacturer meaning Apple didn’t entirely invent cool looking consumer electronics devices and others should be able to compete effectively in the space.

I am sure Microsoft agrees but as they’ve watched Apple become the cool and fast growing computer company they used to be, they determined they need to be more like Cupertino. This of course is the reason the company decided it was more important to design new hardware than keep their partners churning out directly competitive products happy.

With the Microsoft Surface Tablet introduction they told the entire ecosystem at once – you suck.

Steve Ballmer’s recent shareholder letter spells it out further. In it he says:

There will be times when we build specific devices for specific purposes, as we have chosen to do with Xbox and the recently announced Microsoft Surface. In all our work with partners and on our own devices, we will focus relentlessly on delivering delightful, seamless experiences across hardware, software and services. This means as we, with our partners, develop new Windows devices we'll build in services people want.

The key word above is “delightful.” Whether buyers consider this upcoming tablet to be accurately described by this term remains to be seen but the comment reinforces the “you suck” comment to partners as it suggests they can’t build such products.

Continuing, Ballmer says:

A great example of this shift is Windows 8. Windows 8 will come to market Oct. 26, 2012, with beautiful hardware that will light up with our consumer cloud services. Windows 8 unites the light, thin and fun aspects of a tablet with the power of a PC. It's beautiful, it's functional, and it's perfect for both personal and professional use. Xbox Music, Video, Games and SmartGlass apps make it possible to select a movie from a PC, start playing it on the TV, and finish watching it on a phone. SkyDrive, our cloud storage solution, effortlessly connects content across a user's devices. Bing's powerful search technologies in Windows 8 will help customers get more done. Skype has a beautiful new Windows 8 app and connects directly into the new Office.

The idea here is to use Skype and Bing as differentiators against Apple. The problem is how is Microsoft better able to integrate search and Skype than Apple? To keep its value, Skype has to run on Apple hardware and if its inferior on Apple’s platform, users may just switch to FaceTime which can easily be augmented to compete with “Skype Out” and other features.

Moreover, I have used SkyDrive and the product needs work. It seems to have been designed by sadistic engineers. Moreover the duplication between LiveMesh and SkyDrive was beyond confusing and multiple URLS made the experience really painful for me as I tested the service. If Microsoft is serious about the cloud they need to make life easier for users.

Here is another salient comment from the Microsoft head:

Fantastic devices and services for end users will drive our enterprise businesses forward given the increasing influence employees have in the technology they use at work — a trend commonly referred to as the Consumerization of IT. It's one more reason Microsoft is committed to delivering devices and services that people love and businesses need.

Yet another statement of the inferiority of the current hardware on the market.

If we are to assume that Surface is a hit and Microsoft starts to regain traction – two big ifs, the job will only be partly done by Redmond. You see the company needs to regenerate excitement around its brand. Xbox Kinect is a spectacular product but doesn’t create the excitement of Apple. Ballmer needs a cult-like following for Surface and they will likely have to create a Surface phone which needs a similar following. And from there the company is going to have to make sure they push the Ultrabook market which has no identity despite many of them – especially those from Asus being incredible machines.

Ballmer sums up the opportunities which lie ahead for Microsoft as follows:

Developing new form factors that have increasingly natural ways to use them including touch, gestures and speech.
Making technology more intuitive and able to act on our behalf instead of at our command with machine learning.
Building and running cloud services in ways that unleash incredible new experiences and opportunities for businesses and individuals.
Firmly establishing one platform, Windows, across the PC, tablet, phone, server and cloud to drive a thriving ecosystem of developers, unify the cross-device user experience, and increase agility when bringing new advancements to market.
Delivering new scenarios with life-changing improvements in how people learn, work, play and interact with one another.

The challenge here is just how generic these talking points are. They can apply to Google, Apple and Samsung as well. The monopoly position which Microsoft enjoyed is quickly eroding because there are hundreds of thousands of Android and iOS apps on the market. To make matters worse, as the world moves to the cloud, HTML5 browsers will allow cloud-based apps to be nearly as or as powerful as native OS apps.

Then there is WebRTC which will allow every browser to become the equivalent of a Skype client meaning any web user can communicate using voice and video with any other web user and no specific software will be required.

In short, this annual report letter from Microsoft is excessively generic and doesn’t explain the risks to Microsoft’s client business if they aren’t able to execute a successful tablet and mobile strategy. Moreover, as the cloud grows in importance they risk losing even more of their lock on the end-user client market.

Then there is the store strategy. It is apparent Microsoft needs bustling stores to compete with Apple and this means Surface has to be a hit and be followed up by killer phones and Ultrabooks people stand in line for.

Ballmer infers the future will be "delightful" but there is no telling if consumers will buy into this strategy. We should know more after the Surface Tablet becomes available. If it is a flop, it may not be a bad idea to start acquisition discussions with Bang & Olufsen - at least this way Redmond can't be accused of copying Apple's designs.

VCs disrupted by Angels thanks to Cloud, Apple, Google and Facebook

2012-08-23T15:08:13Z

How too many investors can lead us to irrational exuberance 2.0

Fred Wilson, managing partner at Union Square Ventures is one of the most well-respected VCs around and does an amazing job with his AVC blog – it is in many ways a blueprint to starting a company. He has had so many good posts over the years it is tough to count.

In a recent interview with Technology Review he made some alarming comments which you should be aware of. He says VC firms are having a tough time raising money because returns have been mediocre. Amazingly, he describes “mediocre” as anything less than three times your money in a ten-year period which seems like an incredible return to anyone who hasn’t put all their investment dollars in Apple or Priceline.

He goes on to say venture capital is the best place to get money where a company has high risk but a large upside. He continues by saying that many IT companies can get going nowadays with money from Angel investors without the need for VC investments. This is exactly what David Rose alluded to when he keynoted the DevCon5 HTML5 conference last year in New York. The reality is the cloud is making it really easy to launch new companies.

Moreover, it is worth pointing out that ecosystems built by Apple, Google and Facebook make it infinitely easier to launch successful products as you can piggyback and augment products and services and instantly have access to hundreds of millions of potential users and customers.

Consider also that the freemium concept has allowed companies to instantly become juggernauts in their spaces. Skype is a great example of a multibillion dollar valuation put on a freemium service. LinkedIn at over $11B in market cap is another.

He continues to say one of the problems the industry faces is that there are a lot of people chasing a few big-name firms and moreover most of the money is tied up by “six white guys” who control two-and-a-half billion dollars. He feels this money would be better allocated to 25 firms where each has $100 million.

My thought process on the matter is the advent of cloud and ecosystems allows so much more innovation that the VCs are being disrupted by the angels. It is unclear if the market would be better served with more wealthy investors because it requires a tremendous amount of restraint to be a good investor in a heated market.

How many people went out and purchased homes which were larger or newer than they really could afford because everyone else was? How many of the smartest people on Wall Street bet their futures on complex derivatives that even Warren Buffet said he didn’t understand – because, everyone else was doing it? How many people invested in numerous CLECs, fiber and Internet companies in the nineties because everyone else was doing it?

From what I am seeing in the market the competent people are getting money and the ones who have less competence are struggling. I don’t mean this to be declarative – there are always exceptions but in general, there seems to be a balance of good ideas and people getting dollars to start and grow their companies.

So I do have to disagree with Fred a bit on this last point – if only because I don’t trust a plethora of VC firms to not lead us to irrational exuberance 2.0.

Not So Fast - Yes We Should Protect Innovation

2012-08-20T18:20:04Z

The tech news of the day includes Google using its Motorola Mobility patents to sue Apple. Patent suits aren’t new but we are getting to a point where the news flow relating to patent litigation seems to be overshadowing the news relating to new products. The cost of these suits isn’t trivial and there is risk of significant distraction for all the companies involved. It seems like the industry would benefit from a tech patent truce. After all, large tech companies have enough patents to sue each other into oblivion. In fact you can equate the situation to mutually assured destruction – the deterrent often cited which keeps adversaries from engaging in nuclear war.

A common argument relating to patents and justification for these endless tech patent lawsuits is “Why would people invent things if they can’t keep them from being copied by others?” James Allworth at Harvard Business Review disputes this thought and has a solid post on how copying doesn’t stop innovation. The idea is companies are always copied – even the innovators copy from someone. At the end of the day the more copying there is, the more innovation there is and this leads to better outcomes for innovators and consumers.

While this may be the case at times, successful startups have to have timing on their side. If were are an innovator in VoIP and launched your company before the networks had enough bandwidth to support IP communications of acceptable quality – history has shown your company won’t be around to benefit when networks improve. Investors never seem to be as patient as CEOs would like.

So the question worth asking is does the inventor of a new technology deserve protection if someone copies their ideas at some later time when success is more likely?

For example - does Skype, perhaps one of the most successful IP communications companies owe money to any of the hundreds of VoIP companies which litter some telecom innovator graveyard?

In the drug space where it could cost billions of dollars to invent a new drug, does it make sense to allow every competitor in the world to immediately copy a discovery? Of course not.

Is tech different?

In some ways it is in that there are just so many companies with so many ideas. Hundreds of innovative communications companies in the late nineties invented some of the most amazing technology ever. Then the telecom bubble burst in late 2000 and wiped most of these companies out. Still, years later other companies took credit for inventing things they clearly didn’t because they had deep pockets, lots of lawyers and were good at applying for patents.

Some might see protecting tech innovation as a much tougher situation as so many ideas are rehashed.

Still, truly innovative discoveries are really worth protecting from competition – at least for a while. Anyone who has benefitted from life-saving drugs which cost a fortune to develop will readily agree.

Houston, We Have Disruption

2012-06-04T17:51:30Z

When many of us think of disruption we think small. The client-server model disrupted the mainframe and mini market. Small hard drives in RAID formation disrupted larger hard drives. Tablets and smartphones disrupted PCs, etc. The digital device disrupted camera film, small IP communications companies disrupted large telecom equipment companies and eventually global phone networks.

Skype is a great example of a company which has absolutely changed the model of communications – not only did they take many billions of dollars out of the market for long-distance calling they also became a major video player before most carriers had a chance to come up with similar services they could have theoretically charged for.

So if a couple of entrepreneurs could disrupt the music industry using P2P technology and then transfer this technology to telephony, it shouldn’t be too surprising to learn that the space industry too can see new entrants change their markets. Specifically, SpaceX has changed the stodgy rocket industry occupied by companies such as ArianeSpace, ATK, Boeing, Lockheed-Martin and Pratt Whitney Rocketdyne.

SpaceX factory floor

Doug Mohney makes a compelling case that the rocket industry is facing its PC moment and this industry will experience amazing change. He further argues that IBM became a winner in the computer market by innovating and not being afraid to jettison (no pun intended) portions of its business such as PCs to focus on other areas which were more lucrative like consulting.

Here is an excerpt:

Once upon a time, glass-enclosed mainframes and minicomputers ruled the land. Companies like Burroughs, Cray, Control Data Corporation, Data General, Digital Equipment Corporation (DEC), IBM (News - Alert), NCR and UNIVAC were names that generated awe and respect with big iron computing machines.

Today, the only true survivor is IBM. The rest fell. Why?

Despite almost being a cliché for corporate stuffiness, IBM made three major changes in order to survive and thrive through decades of turmoil in the computing industry. First, the company launched a Skunk Works-style effort to develop the IBM PC, establishing a standard for desktop computing hardware during the chaos of the CP/M days. Second, the company embraced and popularized the Internet at an earlier stage. Having evolved from a hardware-based business to a services and solutions power, it was willing to shed its PC business.

He further argues that Boeing can potentially be the IBM of the rocket/space market.

SpaceX's Falcon 9 rocket's 9 engines ignite during launch from the SpaceX launch pad at Cape Canaveral Air Force Station, May 22, 2012. Credit: SpaceX

It is obviously way too soon to declare that SpaceX will have continued success in leading disruption in the rocket space. For one thing the industry functions more like a good-old-boys network than just about any other market I have seen. This generally means incumbents have huge advantages as they have existing relationships. But then again, many governments who fund these launches are piling up massive amounts of debt and one day soon may actually decide they need to cut their spending. This in-turn may lead to a time when launch partners are chosen more based on cost/benefit analysis than length of prior relationship.

That and the growing more price-sensitive commercial need for satellite players means disruption knows no bounds and cannot be stopped - regardless of industry. So it likely won't take much time for existing players to exclaim, Houston, we have disruption... What do we do now?