Disruptive Tendencies

Mobile Internet: Fundy-esque!

(Original published at http://www.von.com/blogs/guest/2009/06/mobile-internet-fundy-esque.aspx )

In 1963, JFK is credited with having observed that, “A rising tide raises all ships.” The evidence is overwhelming that the mobile Internet tide is unprecedented in scale and that it’s coming in fast. Anyone, or any company trying to resist, inevitably will be washed away.

The launch of the Palm Pre this past week has given the industry an opportunity to debate whether the Pre is an iPhone killer. David Pogue, of the New York Times, has described the Sprint-Nextel/Palm pairing as “a pair of sad sack losers team up to defeat the smug athletic golden boy,” going on the suggest that it’s the “Palm Pre vs. iPhone.”

To its credit, Time presents a much more balanced view, pointing out that “Palm doesn't need to steal any of its competitors' customers to thrive.” This seems to be the view being (wisely) espoused by Jon Rubinstein, executive chairman of Palm Inc. as well, who rightly notes, in the same article, that the smartphone market is “large and expanding.”

Rubinstein is right in suggesting that the smartphone market is not zero-sum. Yes, there is a heightened need for device manufacturers to deliver a compelling user experience. Apple has set the bar extremely high, but the fact remains that there are “4 billion mobile phones in the world today, after all, and Palm says only about 10% of them are smart phones. During the next few years, that number may reach 50%. Morgan Stanley Research even described the migration to Internet-connected mobile devices as ‘one of the biggest opportunities in the history of the technology industry.’"

I would argue that Apple will continue to maintain its market share on the platform and device sides even as this market grows for one simple reason: iTunes. None of the other vendors has delivered a seamless content and application management platform from the desktop to the device, coupled with an accepted micro-transaction platform. Microsoft had an opportunity to do so with Windows Media Player, but was so tied up in antitrust litigation, it missed the window of opportunity and was left in the dust.

Apple’s the poster child; the launch of iPhone 3G S makes it even more so. Palm’s the underdog. But what of the other 800 pound gorillas?

“Google: Expect 18 Android Phones by Year’s End,” “BlackBerry Storm 2 could hit as early as June,” “HTC: Touch Pro 2 coming to North America,” “Samsung Unveils World's First 12 Megapixel Camera Phone,” etc.

Throw in Netbooks, gaming devices, cameras and you’ve got a rising tide of mobile data that is unprecedented. Dare I say, it is even Fundy-esque*!

That’s my .02!

Martin Suter

(*Canada’s Bay of Fundy purportedly has the highest tides in the world.)

Martin Suter is vice president of business development at BelAir Networks, the global market share leader in service provider Wi-Fi, enabling 3G data offload for wireless carriers, quad-play for cable operators, and managed WLAN business services. Previously, Martin was the CEO at Cohda Wireless, where he raised the company’s profile and negotiated a licensing deal with a Fortune 100 vendor in its core franchise. Prior to Cohda, he was vice president of business development at MeshNetworks Inc., a classic tech transfer/disruptive technology success story that achieved a major liquidity event for its investors in Q4/2004 with its acquisition by Motorola. Martin also was responsible for building several high profile alliances with and for leading technology companies, including Fujitsu, Microsoft, Netscape, Sun Microsystems, and Teradata. Additionally, Martin has successfully negotiated technology transfer, distribution and/or licensing deals with companies like 3Com, BioChem Pharma, Dow Chemical, Exodus, Fujitsu, IBM, Microsoft, Motorola, Netscape and Sun.

US Immigration Policy & Global Competitiveness

A line from a poem, “The New Colossus”, by the nineteenth-century American poet Emma Lazarus, appears on a plaque at the base of the Statue of Liberty. It ends with Liberty herself speaking:

“Give me your tired, your poor,

Your huddled masses yearning to breathe free,

The wretched refuse of your teeming shore.

Send these, the homeless, tempest-tossed, to me:

I lift my lamp beside the golden door.”

 

While this may have sufficed as American immigration policy pre-WWI, when a strong back and a desire to work was all that was necessary to build out the nation’s infrastructure, it doesn’t cut it today. And yet, in many ways, these sentiments continue to be reflected by US immigration policy in the 21^st century.

America is slipping by most meaningful, objective measures: Education, healthcare, productivity, GDP per capita, trade deficits, etc. I was at a private lecture, a couple of years ago, at which Gene Kranz (“Failure is Not An Option”) was the guest speaker. He decried the situation in fairly stark terms by saying that there will not be enough US aerospace engineering graduates to backfill the positions vacated by retiring NASA engineers. How are we going to beat the Chinese to the moon or continue to push the boundaries of exploration with a manned mission to Mars if we can’t fully staff NASA?

The US has many different visa classes. The H1B is an employer-sponsored visa specifically for those positions that require advanced degrees. However, the number of H1Bs available each year is a fraction of the demand, meaning that one’s chances of getting a visa are reduced to a lottery. Companies like Google and Microsoft have been vocal in their view that their ability to fully staff in the US is negatively impacted by the inadequate quota levels of available H1B visas and have gone so far as to open substantial R&D offices in Vancouver, as well as in places like India, China & Russia.

While getting an H1B is a milestone for many professionals, it is limited in terms of time (3 year term, 6 years max), and does not allow for spouses or children to work in the US. Nor is it a path to US citizenship – that path is through a Green Card.

There are essentially two ways to get a coveted Green Card – sponsorship by a family member already resident in the US, or sponsorship by an employer. The family sponsored applicants need not have any advanced skills or education – only a desire to reside in the US and a family member capable of sponsoring them. And while we cling to the belief that it is possible to live the American Dream, the reality is that many of these Green Card holders have neither the education nor the skills necessary to help America improve its competitiveness in a frictionless, flat world.

I speak from personal experience when I say that the path to Green Card for educated professionals is not trivial. Many potential Green Card applicants may also be H1B visa holders, at least the lucky few to have gotten one. The perception continues to be propagated that a Green Card applicant can’t be in the country to fill a position that an American is capable of doing. The first step is for the employer to demonstrate to the Department of Labor that no American meets the minimum qualifications laid out for that position. Not that they are more qualified than the prospective immigrant, simply that they meet the minimum qualifications. This is a very low bar to set and as a result, many highly qualified non-US citizens that want to live, raise their families and pay taxes in the US are not able to do so.

The sad fact is that these jobs are being created elsewhere, as the production of “bits” has very different location requirements than does the production of “atoms”. American leadership in technology and its competitive advantage are evaporating, and what’s unfortunate is that many of the people that could help stop this slide, have been lined up at the door, asking politely to get in.  However, too many are turned away and prevented from doing so.

Immigration needs to be managed, but the pool of potential immigrants is a tremendous resource to be tapped. An enlightened immigration policy would be aligned with a clearly defined set of national priorities. Want to improve competitiveness and GDP? Make it easier for educated professionals to live and work in the country. Let their spouses, many of which are also highly educated, work and contribute as well. And most importantly, so doing will allow their children to be educated, work and stay in the US as well. Professionals are net producers and help to grow the national economy and the tax base not takers.

So continue to let in the tired, poor and huddled masses, but make it easier for those of us that are neither tired, nor poor, but who desire to be productive members of the US economy to stay in the country for more than six years.

That’s my .02!

Martin Suter

(martin.suter@iplicensing.net

Cheering for Microsoft: Wink, wink, nudge, nudge

About four weeks ago, I blogged about Microsoft's bid for Yahoo (849: Is that miles or light years?). One of the key points that I tried to make was that the anti-Microsoft culture in the Valley is so deeply ingrained that it borders on the religious. There was a great article in today's Times (Hostility Has Its Rewards) that also touches on this same point, by an unnamed VC, no less:

"Yahoo is “under attack from Darth Vader” one venture capitalist told me."

The Dark Side. The Borg. Microsoft.

The Valley, and by extension Yahoo, will resist assimilation. It's in their water supply. It's in their DNA.

The article quotes Larry Ellison extensively and credits him with legitimizing and validating the hostile approach to takeovers. It goes on to suggest that he's even cheering for Microsoft to prevail. Of course he is!

Your biggest competitor is spending $44 billion and untold senior management cycles moving into a completely different sandbox than you're playing in. With Microsoft's time, attention and money diverted from the enterprise and business applications markets, Oracle laughs all the way to the bank.

"You go, Steve!" Wink, wink, nudge, nudge...

That's my .02!

Martin Suter

(martin.suter@iplicensing.net)

Not smart enough for my " Smart Phone " , I guess

Last summer, at contract renewal time, I migrated from a Blackberry to a Windows Mobile Smart Phone (AT&T 8525 made by HTC). It had gotten good reviews, and I liked the slide out QWERTY keypad, so I took the plunge.

Besides the dismal battery life, the move has been mostly a bust, and today I'm dusting off my "old" Blackberry and taking a step forward by taking a step backwards.

"Why?", you might ask...

To make a long story short, complexity.

Short on device memory, I have spent (literally) hours on-line trying to figure out how to free up memory. I want to move a single file (PIM.vol) from my local memory to the SD card, and to then have the sync engine sync with it in its new location...Did I say that I've spent hours trying to find out how to do this?

The "solution" is to download a 3rd-party Registry Editor, and to then find and change several registry entries, re-boot a couple of times and then cross your fingers. Now I consider myself to be fairly technical, but why is this my problem? Why should I be mucking around in low-level registry entries to hack a fix when I should be able to open up Windows Explorer and drag the PIM.vol file from one place to another and then have the applications figure it out.

I'm not the only guy with this issue. I came across hundreds of entries from people with the same problem. How many of them will still be Windows Mobile device customers or Google Mobile customers is anybody's guess, but I'm betting that people won't have to hack their registry with a Google device.

Smart is not designing something that only engineers can figure out, smart is designing something that everyone can figure out.

C'mon Microsoft, you can do better...No, you NEED to do better. What's the old maxim about it costing 10X to get a new customer than to keep existing ones? If you lose/alienate your early adopters, it will be very difficult, and maybe impossible, to gain back this market share.

That's my .02!

Martin

(martin.suter@iplicensing.net)

Microsoft & Interop in Action

Earlier this morning, Microsoft brought out all the big guns to make a major announcement around, what it called, "Strategic Changes in Technology and Business Practices to Expand Interoperability". Its 3 guiding interoperability principles are:

• Open connections
• Standards support
• Data portability

Now I've often felt that Microsoft has never been given (nor taken) enough credit for its interoperability efforts and its support for standards. With its entree into the enterprise in the late 90's, Microsoft acknowledged implicitly and explicitly that IT is, by its very nature, heterogeneous. Active Directory uses LDAP and Kerberos. Office 2007 has moved to XML as a standard file format. Even in consumer applications like Windows Media Player, where Microsoft supports its own proprietary media formats, it does an equally good job of playing .mp3 or .avi files as well.

Notwithstanding all that, today's announcement is an important one, if only to further assuage the EU and the Open Source community that Microsoft continues to increase its transparency.

As I spent time digesting this announcement on Microsoft.com, I came across a free download - Windows Live Writer, a very cool, free, blogging application that allows me to do WYSIWYG blog authouring and save it offline. No more creating Word docs on planes and then cutting and pasting to the web. What's even more impressive, is that it seamlessly integrates with WordPress, my Linux-based hosted blog. The set-up process scanned my site, uploaded all the relevant formatting and gives me a far richer, more flexible authouring platform. It has optional Plug-Ins, which are downloadable from the Windows Live site. To date, there are 80 3rd-party plug-ins, including plug-ins for Firefox, RealPlayer, Flickr, Picassa and even Google functionality.

So just to get this straight, I can create an XML blog article on my Windows laptop, insert Google capabilities (if I so chose), save it to NTFS locally and publish it to a Linux server. Who knew?!?

Interoperability in action. It rocks.

That's my .02!

Martin Suter
(martin.suter@iplicensing.net)

849: Is that miles or light years?

It’s only 849 miles from Redmond to Palo Alto, but that might as well be light years.

An article in today’s New York Times asserts that the biggest hurdle in the integration of Microsoft & Yahoo will be the clash of cultures. I think they’re being politically correct. It’s bigger than that. It’s a religious war.

During the mid-90’s, I was fortunate to have a front row seat as the Internet took off. Whether it was sitting in meetings with Mark Andreesen and Jim Barksdale or sharing a stage with Scott McNeely in front of thousands of fans, it was heady stuff. I spent 1995-97 within the “ABM” alliance (Anything but Microsoft), and bought into the standard Valley exhortations that Redmond represented “the dark side”.

But in late-1997, things changed for me. I joined another early-stage start-up (FastLane), was given a blank sheet of paper, and the vague task of creating a strategic alliance with Microsoft. My first visit to Redmond was in October 1997, and I will admit that the hair stood up on the back of my neck. I felt like an impostor and wondered whether I had really crossed over to the dark side.

As we took the company from zero to Active Directory poster child over the next 3 years, I spent between 2-3 weeks/month on campus, working across the organization. By the time FastLane was acquired in Q3/2000, I was as deeply embedded in the Redmond culture as I had been in the Valley’s just a few years previous. I was able to expound on Microsoft’s position on the DOJ anti-trust lawsuit and its .NET strategy in great detail. I had drank the Microsoft Kool-Aid. Perhaps I had been assimilated.

So what of the Yahoo takeover?

The average Yahoo employee has gotten out of bed every day believing that Redmond equates to the dark side. Their peers, with whom they drink at Gordon Biersch or against whom they play Ultimate, all believe the same thing. They have spent their careers trying to disprove that “Resistance is Futile”. So how do you convert someone for whom the battle has taken on quasi-religious overtones? A more fundamental question is “Should you?”

As I have stated in previous posts (“The Open Source Red Herring”), I have a ton of respect for Microsoft and that many in the Valley hide their motives behind the pseudo-altruistic cloak of “open source”. However, I would also suggest that, perhaps, Microsoft has met its match with the Internet. It’s been difficult to watch from the sidelines, as Microsoft has touted web architectures and web services (.NET) for a decade now. But there has been a tremendous disconnect between its words and its actions in this regard. It’s easy to see why, as the Web is potentially disruptive to its 2 most profitable franchises: Windows and Office.

But unfortunately, when Microsoft takes a close look in the mirror, it must admit to itself that it still struggles to “get” the web. Salesforce.com got the web and the power of SaaS. Google got the web and the power of advertising. Yahoo got the web and the stickiness of subscriptions. Add in Facebook, YouTube, and most of Web 2.0, and Microsoft doesn’t even earn “fast follower” status.

Perhaps its failure, to truly lead on the Web, is cultural and, ultimately, intractable. Perhaps the gravitational pull of the web in the Valley is too strong, even for Microsoft, to try and move it into its Redmond orbit.  Spinning out its Internet properties with some cash, and merging with Yahoo rather than trying to assimilate it into Redmond, may be Microsoft’s wormhole through cyberspace.

The answer may lie, not in bringing the Valley to Redmond, but in carving out a piece of Redmond, and letting it leave home and move to the Valley.

That’s my .02 for today!

Martin

(martin.suter@iplicensing.net)

Conflicting Goals in Asymmetrical Deals: Market Exclusivity

How many people have considered that Microsoft is, at its core, a licensing company? And the licensing deal that essentially created the entire industry was the non-exclusive license to IBM for DOS in the 80’s. How different a company would Microsoft have been had they signed an exclusive licensing deal? Chances are that it wouldn’t still be around. Bill Gates certainly wouldn't have become the richest guy in the world. As a licensing guy, I can only speculate on whether it was IBM's negotiating naivete or Microsoft's chutzpah that led to the deal being structured as it was.

Having sat on both sides of the table on various occasions, I have frequently found myself in a position where I’ve been able to help get to consensus because I understand where the conflicts may be and have been able to work through them.

Licensees almost always contend that they require some form of market exclusivity for competitive advantage. “Why would I sign a deal with you today if, tomorrow, my competitors can do the same thing?”

Licensors are thinking the exact opposite, “I can’t put all my eggs in one basket? I want to capture as much of the market opportunity as is possible, not be limited to a fraction of it.”

Perhaps even more importantly, what is the impact on the company’s potential for a liquidity event for its investors? Remember, once you’ve granted exclusive rights to a 3^rd-party, that prevents not only you, but any acquiring company, from pursuing that space. This may take a whole category of company off the list of potential acquirers at a later date. Try explaining that one to your investors!

So how do you reconcile these two positions?

The “need” for market exclusivity can often be a catalyst for M&A discussions, especially if the technology being licensed is the core franchise around which you’ve begun to build the company, or if the breadth of market exclusivity on the table prevents you from extracting value in other markets. But once again, these can be tricky waters to navigate. A technology acquisition requires you to consider valuation through a very realistic lens. The acquiring company will do an estimated build cost (# of person years x fully loaded cost per person year, around $200K per), and then offer a multiple based on their assessment of the value of time-to-market and your IP position, typically 3X-7X. As the inventor/entrepreneur, you need to be very realistic about their ability to get close enough to replicating that which you’ve built. Pride can get in the way, but do you really believe that Microsoft/Qualcomm/Oracle/Cisco engineers couldn’t do it?

If M&A discussions aren’t an option, then, in most cases, non-exclusivity should be the preferred path. One of the things, that the licensee doesn’t want to happen, is to invest its time and resources creating demand for a key feature, only to have a competitor come in and erode their margins selling the same widget at a reduced cost. A concession, that can help address this, is a form of price protection. In this type of clause, the licensor will agree to not license for license in comparable deals. The concept of comparability is key here. The consideration must be for similar product types, in similar quantities over a similar time period. If a subsequent licensee is pays a lesser royalty rate (or other form of consideration), a reduction in royalty rate will be accorded to the original licensee as well.

So, you’ve now heard that M&A is not an option at this time and non-exclusive rights aren’t either. Under what conditions can exclusivity make sense? My answer is twofold: Money solves a lot of problems, and that it is possible to tightly constrain the scope of a license, thus preserving your ability to license to others or for an acquiring company to practice in any field but the restricted field for which you’ve granted exclusivity.

How do you constrain the license grants? By placing boxes around the grants…I’ll explain more next time.

That’s my .02!

Martin Suter

(martin.suter@iplicensing.net)

The Open Source Red Herring

The biggest problem that I have with the open source ecosystem is that it obfuscates its commercial motives behind this banner of altruism. The attempted distinction between commercial vs. open-source, with the implication that open source is somehow not commercial, is a red herring.

Open-source is also commercial. Look at the companies behind Linux - IBM, Google, Oracle, Sun, Novell, Red Hat. Does anyone really believe their support of Linux is altruistic or that they’re motivated by the distribution of “free” software? If profit is not their motive, someone better tell their shareholders!

In the mid-80’s, the Canadian government reduced the patent protection afforded to pharmaceutical companies from 20 years to 10. From this, tremendous wealth was created for the owners of two generic drug manufacturers, Apotex and Novopharm. Were these companies acting out of the interest of the general population or were they parasitic offspring from a flawed premise? Each of these companies chose to remain private, and therefore able to keep their financial records away from public scrutiny, while the “commercial” pharmaceutical companies opened their books to the market, and to criticism. The owners of the generics became billionaires, not because they were running charities, but because they were able to monetize others’ IP and risk capital.

Sure, Big Pharma is profitable, but it is not at the expense of society. Rather, it is frequently to the benefit of society. Look at how the invention of H2 receptor antagonists changed the treatment of ulcers and reflux esophagitis. Twenty five years ago, ulcers often required surgical intervention, but Tagamet changed the rules of the game. Did the profit that SKF made come at the expense of society or did the invention of a disruptive technology (if you were a GI surgeon!) warrant these profits?

Under what terms does Google license Linux? How much does it “give back”? I’m suggesting that it is highly selective as to what it “gives back” to the open source community, and makes these decisions based on its own self-interest, not out of some altruistic motive. Google search algorithms are deeply guarded secrets, and its vaunted server farm architecture is “proprietary”. Is there anything wrong with this? Of course not. Just don’t pretend that you’re somehow better than the “commercial” vendors because you promote open source development opportunistically.

"This is what [Summer of Code] is really about: infecting students with the free software spirit, giving them the opportunity to grow into a community like ours."

There's another more subtle benefit, as DiBona explains. Thanks to the Summer of Code, "Google now knows all the people working on all these software projects, on which it depends," he says. "That's incredibly useful to us. Every once in a while we'll come out with a new API and there'll be some projects in the open source world that might be useful in either using that API or being a customer. You can just call them up and say, 'hey guys, it's Google, we're you're pal,' and let them just check it out." (http://redmondmag.com/features/article.asp?editorialsid=2395)

I have never heard, nor do I ever expect to hear, any allusions from Microsoft that it is anything but a profit-driven, commercial software vendor. As a shareholder, I expect nothing less.That’s my .02!

Martin

Facebook - UC for the Web 2.0 Crowd?

Some days I feel old. I can still remember getting excited about the move up to an IBM Selectric (with AutoCorrect!) from my first Brother manual typewriter. I remember standing in line at school in 1980 to run my punch cards through the reader and being handed inches of paper to parse through. I remember receiving my first fax, a handwritten letter from my father, and being blown away. None of these were seminal moments, except perhaps for me personally, but then as I began my career in technology, I’ve been fortunate to be on the bleeding edge of some major disruptions.

The first time I experienced the Web, with Netscape Navigator 1.0, was one of those moments. “How can you build a business model on ‘free’?” was a question that most of us in application software were asking ourselves when Navigator shipped, but then Google figured it out, in spades. The first time I heard Scott McNealy describe how the network is the computer in 1995, and I spoke with James Gosling at the first JavaOne conference about the implications of Java were two of those moments. The first time that I spoke with Peter Stanforth in 1990 about the implications for wireless mesh networking was yet another.

But this week, I had a doozy. In fact, I would dare label it an epiphany. But you’ll have to read on to find out what it is.

In 1996, Sun brought a guest speaker into its sales conference in Key West. Unfortunately, I can’t recall his name or title, but he was from a group within Nike that was focused on observing inner city kids, whom they considered to be the alpha trendsetters in fashion and function. The lesson I think we can all take away is that watching how kids use technology today can give us clues about what we (as mature, responsible adults) can expect to be doing in the future. Isn’t it amazing to watch people’s behaviors on planes? The first thing everyone does as soon as the plane lands is turn on their “cell phones” (multi-modal communicators would be more accurate), and begin texting. Irrespective of age, or the limitations imposed by SMS, “Generation Text” showed all of us that you can communicate effectively using a telephone keypad, abbreviations and your thumbs. Who would have thought that 30, 40 or 50-somethings would be typing away on their phones? In fact, I’m ROTFL just thinking about it.

I’m lucky to have two siblings in their early twenties to help me understand how to be relevant with my two teenage sons. I was introduced to Facebook in the early days by my kid brother and sister, and am amazed at what appears to be exponential growth. Notwithstanding the business model uncertainty, look at Facebook through the lens of a kid today. What is it?

Isn’t Facebook really the communications portal for kids today? I’m guessing most kids today have never used Outlook, and why would they?

Facebook contains their contacts, admittedly the “social” subset of what would be in my Outlook contact cards, but it is moving towards providing different views/access levels by categories. It offers “Presence”, rudimentary today, but that will change. Kids don’t use email anymore, they send Messages in Facebook. It’s similar to email but different, with real time notification (find me, follow me) and with the ability to respond via SMS. It has asynchronous chat via Wall postings and video communications (non-real time) through SuperWall. It allows me to stay on top of my communications via RSS feeds and SMS notifications.

Facebook is a social unified communications platform. Maybe this is what Microsoft saw when it recently made a half billion dollar investment in the company.

However, for all of its considerable strengths, Facebook’s biggest shortcoming today is real time, or synchronous communications, which is where my epiphany comes in.

Facebook should buy Skype.

Tomorrow.

I recently re-installed Skype (after taking a year break following the purchase of a new laptop), and am amazed at how it has stealthily and totally taken over my Web experience, including password protected applications like SharePoint. It’s not intrusive, it’s simply there. Everywhere. On every Web page with a phone number, Skype has found it, and turned that static number into an immediate click-to-call opportunity. Skype also has IM, Conference calling, Voice mail, Call forwarding. Now if you could tightly couple these features with the evolving capabilities of Facebook, what more would kids today need?

Email is dead.

Telephony is dead.

The transport layer is irrelevant.

Facebook + Skype is UC for Web 2.0.

Those of us who rely on UC today know that Facebook is not CEPB for the enterprise, but we can do much worse than to watch and learn from our kids.

That my .02! Be careful out there…

Martin Suter