Isn’t about Mobile

 
Before i start, let me just say i’m not a engineer, so if i get some of the technical bits wrong, forgive me. But i genuinely think i’ve got the ramifications correct!

There’s been a fair amount of debate about how NZ gets better faster broadband. This isn’t a simple proposition and much of it has been made even more complex because of political policies, poor press leading to general acceptance that Telecom is ‘bad’ (just look at the sensationalist title to this) , ignorance and a real clouding of issues. 

So lets separate out the issues. Jim Donovan provides a nice synopsis of the issues as Rod Drury sees them. In my opinion there is a lot of issues tied up even in this.

Firstly can we accept the fact that Telecom is a public company and as such will try its best to make a profit for its shareholders, (which incidentally includes just about everyone in NZ with a managed fund, the point being you are doing yourselves out of your retirement dosh!). The implications of this are that they are legally obliged to invest their shareholders money to get the best return possible…which may not always be what people think is ‘good’ for the country as a whole.
Having multiple international trade routes is different from national data speeds. It’s a damn good idea and should just happen ala Google.

Next, lets address national data speeds. There's a lot of apples with pears comparisons with other nations out there. These nations don’t have out population levels or distribution, so doing this isn’t that valuable. Benchmarks are good, but how about making them meaningful (as opposed to a political weapon).

Lets look at broadband. Everyone is talking about fast ‘broadband’, but what they really mean is fast internet connections – give me the webpage i want faster, upload my stuff faster…. Semantic, but important difference.

Broadband as in common use means ADSL connection. ADSL is effectively compressed data travelling down the same copper as you use for a phone line.  Broadband in other countries means other things like cable, Fibre and other technologies. The whole broadband thing became quite topical when the government noticed that people might be pointing the finger at them for our slow movement down the OECD averages for income and wealth. They also noted that the countries moving up that list had higher penetration of faster internet technologies than us and viola, it became an election issue. If we take a stick to Telecom, make them the bad guy people won’t point at us anymore. This conveniently neglected other things like company tax, RnD, incentives and funding for start ups, tax breaks for international tech companies etc. Anyways, the end result was that in a knee jerk reaction to get the monkey off its back Telecom agreed  to invest in its fixed line business to the tune of 1.4bn. The point of this investment is to shorten the loop between the point where the core network (fibre) stops and the copper (last 2km – the bit to your home) starts. This shortening reduces the distance impact and will provide greater speeds (10mbps) to the home and …. no one will be happy with the result. It still won’t be fast enough (here for religious screaming from the left, here for business impact)

This type of disappointment will mean more Telecom bashing, closely followed by the realisation you need to reduce the loop to about 800m. That means more cabinets (i’m told 3 times as many, and another $700mill). And get this, this additional investment will only give data speeds of up to 20mbps… more disappointment !!! Which gets you to the point where you realise you need Fibre to the home. I heard that the last time Telecom looked at that it was gonna cost circa $10bn to deliver. So that’s just not going to happen (as Paul Reynolds has already said).

 

Or, you try a different approach.

Think about the world we live in, most people have telephone they carry around with them (called a mobile), notebook sales outstrip desktops, pda’s, ipods, Wifi in the home… its all about untethering the cable…or simply being mobile. Why then are we trying to solve the issue with redundant technology when the requirement is just for fast internet speeds. 

Here’s my hypothesis. The network you think of as mobile, isn’t really mobile. It’s a fixed backhaul network with cell towers attached at the end to deliver the last mile.  If you think about it, its identical to your home wifi network and we love those!

 {mosimage}

 

Why then don’t we leverage the fibre to the cabinet programme, turn all those cabinets into a cell site and start thinking about fast mobile data technologies like LTE. I know its not a ratified standard (others are tho and they are quite quick!), but it is already demo’d as doing 150mbps. That’s 15 times what cabinetisation is gonna deliver to the home…. Isn’t it about fast internet, not copper or fibre. I know there is a pricing issue, but scale will bring that down….

 

Thoughts?

A new PR stance from Telecom

I was stoked to see this piece from Telecom CEO Paul Reynolds in the NZ herald. 

Paul basically takes exception to another formula based whinge trotted out by Chris Barton and does so with  a fact based counter. 

Nice work Paul!! 

PR from Telecom has been woeful for way too long. Yes you've done what any public company would do t maximise profits, sometimes this has annoyed people. But the worst thing has been the limp wristed "no comment" approach to the public shellacking.  Get some back bone!

Good on the herald for trying to put a balanced view out there too.  

Wake up call for us all

 

I’ve been wearing a pedometer for the last couple of days. The point of this is to measure exactly how much (or in my case how little) exercise you do on a daily basis.  And then motivate you to do  100 000 steps a day.

The target is 10 000 steps (8km or 5 miles). If you do this amount of steps you are supposed to get physical and mental health benefits (more here on the official NZ website, and here). Things like better spinal health, less fat, less stress, less heart disease etc…

As a knowledge worker who regularly eats lunch at his desk, who’s main activity is typing and walking to the coffee machine, i’m currently clocking up just 4000 steps on days when i don’t go to the gym or train.  Thats appalling!

While I do other stuff to keep fit, i know lots who don’t.

So the call to action, if you do read this blog, quietly reflect on how much exercise you do on daily basis. Give your belly a pinch while no one is looking, bit pudgy? Does your back ache? Is your belt out a notch from last year? I genuinely like having readers, you are what makes blogging worth while for me. So i ask you to think about putting a little walk into your day, every day so you can stick around.

 

In case you are interested, for those days when i don’t train & clock up just 40% of my daily quota, my daily routine looks something like this;

Spend 45 mins in the morning running round getting myself and kids ready.

Walk to car / bike and drive to work, walk to desk.

Work,

walk to coffee machine a couple of times,

walk to sandwich bar, buy lunch

put a few bathroom breaks in there

Walk to car / bike and drive home,

Run round after kids some more and while fixing dinner….

 

Sound familiar?

 

 

Microsoft’s picture of a unified future…

And no it has nothing to do with Vista….

BUT, it does have everything to do with Microsoft Mesh and MS's S+S strategy. Gianpaolo from the development team outlines a simple S+S example here.

I love Office 2007, the interface is clean, efficient and now very familiar. Far, far, far superior to any web based productivity tools I tested. The problem of course was collaboration and anywhere access. How do I share documents with others and/or how do I access my docs from anywhere. Now I use Office Live workspaces in conjunction to Office. The combination of the two is very appealing:

I use Office (Word, Excel, Powerpoint) locally to author a document, presentation or spreadsheet and Office Live workspace in the cloud to collaborate with others and as an anywhere access store.

MS's view of interconnectedness between offline and online worlds, (on premise and cloud computing) requires some sort of synchronisation. This framework is essential for them to retain their incumbent desktop business while paying homage to the growing movement toward SaaS & into cloud computing.

Couple this with some IP based unified communications elements and you get all the functions depicted in the future piece. I've watched that video twice, and possibly like many of you found it to be a little surreal. But have a long think about the elements to achieve that.

Ubiquitous networks, unified communications (yip MS is into Telco, more in this bit), shared workspaces, cloud based storage and fileshare. Not that furturistic really…

Is the collaboration war just Google v Microsoft?

Pop quiz.

Who is the second largest software company in the world?

Who is the second largest provider of on-premise email & collaboration software?

 
The answer to both is IBM. The interesting thing about IBM is that they have been virtually anonymous on the SaaS front. Up until now that is.

I recently attended a seminar co-hosted by IBM & Saugatuck on SaaS. For the most part this was a bit of a disappointment (I’ll describe the IBM play in more detail below). The most interesting thing was the declaration of IBM’s own SaaS plans code named ‘bluehouse’. Interestingly this isn’t top secret, IBM has told the world all about it, it just hasn’t been picked up.

 

Collaboration services delivered on the Web
"Bluehouse" is the code name for a future software as a service offering from IBM designed for companies with five to 500 employees. "Bluehouse" extends the value of the Lotus Foundations family by providing extranet collaboration services for open social networking, instant messaging, file sharing, project management and web conferencing.

The suite outlined by IBM is very comprehensive, much more impressive than MS’s somewhat disappointing announcement of last week & includes email, unified Comms, document shaving, social network applications, video collaboration & a bit more.

Various aspects of blue house are very interesting. Firstly in a SaaS world the barriers that notes has in getting into an entrenched MS go away. Secondly brand value means that to many corporates this is a credible alternative Thirdly IBM hasn’t really got a lot to loose. This article (which is 3 yrs old) claims notes had 23% market share (which just feels way too high). The point is IBM is loosing the email race. But now with SaaS they could tank the price of email etc & get back in the game in fairly short order. Fascinating play that should definite spice up the email wars.

As an interesting aside. Go to the Software top 100 site & type in Google…. What docs that tell you???

 
More on the IBM SaaS model.

 
IBM appear to have done the math & realised that SaaS is actually quite threatening to their core hardware & software business. The rationale? In a SaaS world the ISV builds their ‘stack’ only once & will likely never move. That is the buying decision for H/W & S/W is centralised & baked in. So vendors like themselves miss out on all the business on-prem software drive & if they don’t get the ISV on their platforms ( DB2 , websphere , hardware etc) at initiation there’s no way back in.

So IBM’s play is to get to the SaaS vendors at start-up. Kinda boring but pretty real I guess.

 

 

Scale benefits in action

I’ve been thinking a bit more about SaaS. & scale. One of the assertions I made in my previous post was that companies that achieve scale get more profit.  I wrote a piece previously on SaaS provider profitability in it I put this diagram from Mckinseys

 {mosimage}

The key element to note here is that both traditional and SaaS businesses are less profitable by a factor of 2 until they reach a certain revenue point, in this instance $1.2b.

 
If you look at the recent financial announcement from SF.com, they are clearly getting into the Economies of Scale (EoS) zone. As a snapshot, PROFIT is going up faster than revenue. This could be from a lot of things, all benefits of scale

  • ·        Brand recognition. People, a lot of people have now heard of SF. That means selling and marketing expenses should come down. By they way, having lots of people know who you are is scale in marketing terms
  • ·        Partner programs. SF are now so topical, they have others selling for them.
  • ·        PaaS, the interesting thing about EoS, its driven by volume. PaaS has given its providers a commercially viable way of increasing their volume very quickly
  • ·        Reduced development. I know SF put out a new release every quarter, but after 9 years or so you would have to assume that they a) have cracked the architecture and b) broken the back of their development..i mean how much more CRM functionality can you add?

 

To me this diagram graphically reinforces the benefits of a scale and particularly the PaaS and potentially gives Salesforce.com a huge advantage.

 
What isn’t clear is if PaaS drive scale and profitability benefits to its other subscribers. For instance, Bob at Smothspan really takes SF to task on its PaaS pricing

I don’t think Salesforce.com, of all players, “gets” some aspects of the Business Model.  If they did, they would radically alter the pricing on the Platform-as-a-Service offering, because the current pricing, even the radically revised pricing, is completely off target for a SaaS vendor.  The service is priced at $50 a month in its normal configuration.  Let me explain why that’s crazy. ….. Salesforce themselves get by for a lot less. ….Most SaaS players charge $50 or less each month for their service, so this math will almost never work. 

What struck me at the time was the assertion that SF could do this at a lot less than $50. My reasoning went like this, the SF marketing folks would know their costs, be charged with making some profit and hence do a mark up on the price. I did wonder if  this meant that SF themselves hadn’t actually achieved the scale benefits? Perhaps they are playing a strategic game here. Giving others an ecosystem that allows them to subsist but marginalises their profits.

I searched for the pricing of other platform providers to see if this SF price was way outta wack but didn’t find anything. Anyone in the PaaS game that reads this is welcome to comment.

As a final comment, two things strike me. 1) the PaaS provider market is about to heat up – just look at the number of SaaS companies coming online… they all need a platform and these guys could do very well out of this and 2) SF shares should be in high demand . Why? they look like they are at a profit inflection point,  they don’t really have a SaaS or PaaS competitor of note within any sort of striking distance and finally i referr you back to the diagram. Large software companies (showing clear signs of EoS ) simply make more EBITDA.

(The unreasonablemen are not share brokers, you should consult a professional before purchasing any shares)