Tech thoughts for 2013

Last year, we saw three trends making lots of noise and a fourth one closely following – Cloud Computing, Big Data, Mobility, and Social networking for the enterprise. Let me comment on each one as we enter 2013.

In cloud computing, the focus shifts to Platform as a Service (PaaS) as SaaS is now accepted into the mainstream. CRM and HR applications dominate the space with SalesForce.com and Workday as leaders. Microsoft, for example, is evolving its Windows Azure from a PaaS to Infrastructure-as-a-service (IaaS). Last year, it added persistent-state virtual machine support to Azure, allowing it to accommodate a wider variety of software, including Linux. Microsoft also introduced Hadoop for Azure and support for MapReduce. Amazon’s AWS stack now blurs the boundary between PaaS and IaaS. SalesForce.com wants to be a PaaS player via its Force.com platform for developing any SaaS offering. Besides CRM/HR cloud apps., we have seen emergence of financial apps for midsize companies – Adaptive Planning, Anaplan, Host Analytics, and Tidemark are some example companies.

In Big Data, the focus will shift more to analytics and data visualization. The other key trend is “data in motion”, where capture and analysis can be done for split-second decisions. The post-Hadoop era has started and we see a host of new players offering near-realtime data reduction and analysis. This trend will accelerate. A set of NewSQL players (not NoSQL) are adding scale and performance to Postgres or MySQL, that can also be offered as a cloud service. Relational databases like IBM’s DB2 and Oracle will dominate the enterprise space, given its long years of proven robustness and reliability. However extreme scale in the order of petabytes will attract newer solutions.

Mobility is a given, thanks to the outselling of iPads over PC’s. Last year iPad sales  exceeded Lenovo’s number of PC sales. Cloud computing assumes user devices like iPad, Android, and smart-phones for users. Apple boasts over 700,000 iOS applications. Microsoft has a lot of catching to do with its slow sales of Surface RT. Going forward, every enterprise application must design its UI to the form factors of mobile devices. This will be a price of entry for any vendor. Gone are the drop-down icons on Windows as UI.

Social networking has grown a great deal for consumers, but enterprises are still struggling to figure out the proper usage and business benefits. Social will come into the organization through the back door (much like how PC’s entered the business during the 1980s and 1990s). A communication director may test out a company page on Facebook or customers complaining about or praising your company on their Twitter profiles or traditional enterprise applications being updated with social capabilities, there will be social. Hence it may be worthwhile your company should have some policy around social. I think enterprise applications will integrate more social features. Someone said that Facebook will matter less, but Twitter and Pinterest will be of more significance.

Welcome to 2013.

Microsoft buys Yammer

Social networking has become a big force in the consumer space, less so in the enterprise world. Yammer is one of the companies providing social networking solutions for the enterprise. It’s tagline says, “Yammer is a private social network for your company – collaborate securely across departments, geographies, content and business applications”.

So why did Microsoft pay $1.2B in cash to buy this company? Interestingly Yammer will be part of the Office product unit. Are they going to integrate it to the new Office product?

It does not look like the plan as we see the official verbiage - “The acquisition of Yammer adds best-in-class enterprise social networking to Microsoft’s growing portfolio of complementary cloud services; world-class talent that knows how to deliver rapid innovation in the cloud; and a unique adoption model that appeals directly to end users.” 

Microsoft is expanding its enterprise reach (Share Point has done well) by adding new cloud functions offered by Yammer. It was experimenting with a form of social networking inside Office called Office Talk, but now it may not see the light of the day as a product.

This acquisition will follow the Skype model, left to its own and not be part of the mainstream solutions. Yammer claims 5 million users which is impressive give its short life.

First Jive went public and now Yammer gets acquired for a high premium. SalesForec.com introduced Chatter, a trusted employee social network. It seems social networking is finding its way inside the enterprise finally.

Yahoo – the CEO drama continues

Four CEOs in five years! Yahoo was a symbol of innovation and success in its first few years of life. Founded by two Stanford Ph.D. students (Yang and Filo), Yahoo defined the Internet era of communities and sharing. It still has an enviable community using various services like email, finance, news, etc. It has lost much advertising dollars to Google. Terry Semel came from Hollywood and wanted to make it a media company. That did not work. Terry flew in every week on a private jet from LA to San Francisco and was driven in a limo to work every day. His compensation was way higher than many other CEOs at similar valley companies. Jerry Yang returned as CEO for the second time and botched up a lucrative offer from Microsoft. Yang was no Steve Jobs on his second return to the company he founded. He turned down the Microsoft offer to buy Yahoo at $47 per share (current share is $15.50). There was indeed an “identity” crisis at Yahoo.

Then came Carol Bartz and she talked tough and tried to straighten out the confusion, but results did not show any positive impact. She was let go last year, after being fired over phone from the board chairman. Then the board picked Scott Thompson, a well-reputed executive from Paypal (eBay) to head the company just a few months ago. He started reducing redundancy and bring clarity to Yahoo’s core business. He let go 2000 employees recently. Several top skills left the company. As he was settling in, came the news that his resume had information on his degree that is not right. Most likely that error existed for a while, but one disgruntled investor questioned his integrity and the board on not doing due diligence before hiring him as CEO. Yahoo and Scott did a poor job responding to this and the result was his departure yesterday.

With all the business problems at Yahoo and its anaemic growth, a strong leader is needed to refocus the company on what it is best at – innovating new solutions for keeping the community loyal. After all, Yahoo gave many technologies such as Hadoop and HDFS in managing Big data. Without a strong execution-oriented CEO,  it will fade away like many dot-com era companies.

It is hard to believe that Yahoo was once valued at $100B (current valuation $18.9B).

Post-Facebook – Micro Social Networks

I am on Facebook, but not an active user at all. Also I am reluctant to share too much personal stuff with friends. Then there are long-lost friends and family members popping up with Facebook requests to connect. I do not feel anxious to connect as it would increase more “gossip” time I want to avoid.

But then, Facebook with 900 million users is heading for it’s much-anticipated IPO in 2 weeks. The prediction is that it will be a $100B valuation on the first day of treading. Now people like me who are less enthusiastic users have some alternative choices appearing. Three such companies have started attracting users – Path, FamilyLeaf, and Pair. These micro-social network sites foster “sharing that is intimate by design”.

Let us talk about the anthropologist Robin Dunbar of Oxford University, who has done research on social behavior of humans. He says, social networks are like concentric circles and 150 seems to be the outer bound, meaning that is the effective neurological limit the human brain can handle. In other words, 150 is the maximum number of “friends” and this is called the “Dunbar Number”. Then he says 50 is the number of “trusted friends”, 15 are “good friends”, and 5 are “best friends”.

An average Facebook user in the US has 245 friends, well above the Dunbar number. Then this number gets mixed up with family members, friends, and workplace colleagues. Users sometimes share stuff to certain friends they did not want to.

This has led to the creation of a new start-up called Path by Dave Morin, ex Facebook employee. He says, “Facebook has made socializing on the Internet normal. But now there is an opportunity to return to intimate socializing.” He started with an upper limit of 50 friends per user and last year increased it to 150. It is available only on smart-phones and boasts over one million users already. Its user has an average of 40 friends.

FamilyLeaf is restricted to family members only and even more restrictive. Pair, started by Canadians just connects to one friend, hence the name. It is available only on smart-phones. These two companies were funded by Y Combinator from Silicon valley.

It is interesting to see how the social networking is entering its next phase.

The Fourth Paradigm in Science

We all remember the late Jim Gray, the great computer scientist and Turing award winner. During the last several years of his research work at Microsoft, he focused on data-intensive computing and called it the Fourth Paradigm in scientific discovery. In a special book dedicated to the memory of Jim, Bill Gates commented, “The impact of Jim Gray’s thinking is continuing to get people to think in a new way about how data and software are redefining what it means to do science.”

So what is the Fourth Paradigm? Here is the explanation.

1. Thousand years ago – Experimental Science
– Description of natural phenomena
2. Last few hundred years – Theoretical Science
– Newton’s Laws, Maxwell’s Equations…
3. Last few decades – Computational Science
– Simulation of complex phenomena
4. Today – Data-Intensive Science (unify theory, experiment, & simulation)

Scientists are overwhelmed with data sets from many different sources such as data captured by instruments, data generated by simulations, and data generated by sensor networks.

Jim Gray named it “eScience’ where IT (Information Technology) meets Science. It is the set of tools and technologies to support data federation and collaboration for analysis, data mining, data visualization and exploration, and for scholarly communication and dissemination. He laid out the principles, fondly called Gray’s law of data engineering:

• —Scientific computing is revolving around data
• —Need scale-out solution for analysis
• —Take the analysis to the data!
• —Start with “20 queries”
• —Go from “working to working”

Interestingly, all these apply to the commercial world of Big Data. Only the scientific world has been grappling with these problems longer. Given the proliferation of devices and incoming data in petabytes, the need for tools to do analytics is of the highest priority. No wonder, 2012′s biggest buzzword is Big Data.

We miss you Jim and your pioneering thoughts on DISC (Data Intensive Scalable Computing)!

Leadership at IBM – Sam Palmisano

Sam Palmisano took over IBM’s CEO role back in 2002 from Gerstner who was brought in to restore IBM from its historic decline during the early 1990s. I was an employee of IBM for 16 years until the year 1992. I left early in 1992 and by the end of the year people were asking me how did I know that such decline was coming. My answer was that I had no idea and I really agonized over the wisdom of leaving IBM, a great company by any measure.

Palmisano went into the second phase of “value creation” and changing IBM’s course in several ways. He said that the world is instrumented, interconnected, and intelligent and hence IBM’s new solutions have to address that. Here are some of the key decisions during his tenure:

• Acquisition of Price Waterhouse Coopers in 2002 for $3.5B, injecting business solutions services for large clients
• Selling of the PC business to Lenovo for $1.75B back in 2004-2005 to get out of the consumer hardware commodity business. Again to refocus on large enterprises.
• Selling of the storage business to Hitachi, which was not yielding great profits
• Increasing the R&D budget by 20% to a whopping $6B per year, to refocus on innovation. A new research lab came up in Brazil, the ninth such lab across the globe.
• Introduction of several initiatives like Smarter Planet in 2008, Watson supercomputer last year (answering questions posed in natural language for speed, accuracy, and confidence. It trumped in the Jeopardy game against two smart humans), Corporate Services Corps to address hard issues with clients across the globe, etc.
• Cutting $8B cost to make IBM operationally trim

What were the results of such moves? Well, during his tenure, IBM’s earnings quadrupled and the  market cap went up above Microsoft last September(first time since 1996) to $214B, just behind Apple’s. So shareholders are happy and even Warren Buffet (who never buys technology stocks) bought significant chunk of IBM stock late last year.

Like a true leader in IBM’s tradition, Palmisano celebrated the 100th. birthday of a great company and reminded everyone of the basic principles of its founder Thomas Watson Senior. In October, 2011, he named Virginia Rometty as his successor as the new CEO starting this month and him serving as chairman of the board.

IBM’s sustainability as a great company is exemplary in the world.  Many of today’s high-flying valley technology companies can learn from IBM’s leadership and value system.

Big Shift to Enterprise Cloud Software

One of the big shifts happening in the enterprise software business is the adoption of the Cloud. This is already the dominant model for the consumer Internet space (e.g. Google, Facebook). The overall myth was that large companies are so concerned about security and privacy of data that they will be reluctant to let go of running these applications in-house. Then about 3 years back, Oracle’s CEO ridiculed the cloud as vapor. But the landscape has surely changed and will change even faster going into 2012. Why do I say that?

Recently SAP bought Success Factors at a very high valuation and many saw that as a desperate move to get into the Cloud. Oracle also bought RightNow in the same vain and there is a strong possibility that Oracle will acquire NetSuite in the next twelve months (NetSuite addresses mostly the SMB market). SalesForce.com (SFDC) has been growing and its valuation has gone quite high. The new entrant Workday (founded by the founders of Peoplesoft) has been doing very well. Someone said it is valued at almost $2B with yearly booking rate of $300M. Not bad for a five year old company. Workday addresses the HR space, but is moving to financial applications as well. It wants to be known as an “ERP Replacement” company, not just an “HR Company”.

Most of Workday customers are the large enterprises such as Tyco, AIG, Flextronics, etc. These customers are replacing legacy applications from SAP and Oracle with Workday’s SaaS suite offered through the Cloud. The advantages are obvious for the customers – same version always, new functions added more frequently, vendor takes care of upgrades, less cost paid to SI’s. The traditional applications typically require a 5 to 6 times expense (over product license cost) on consultants (SI’s) who keep customizing the apps. Workday claims their customers have a 90% reduction on SI cost, which is a big deal.

The challenge for the enterprise Cloud vendors is the revenue model, where they do not get the hefty license dollars up front. Hence their investment (both capex and opex) is quite high. For example, Workday has taken investment of $250M to date, counting the last round. But if they can sustain like SFDC, then there is a thriving growth business. By the way, Google has a growing enterprise business and currently brings $1B revenue which is not bad at all. They clearly are focused to make this part grow faster in future.

This is not good news for legacy enterprise application companies like SAP and Oracle. They have to re-invent (or acquisitions like Success Factors and RightNow) quickly to catch up with this shift to the Cloud by large enterprises. Oracle is more likely to ride this bandwagon sooner than SAP. As per the SI’s, they need to re-invent also to at least keep their current clients happy. That means they have to shift from “customization” of code to more reconfiguration of business processes.

Amazon’s Kindle Fire

Today, Amazon’s CEO Jeff Bezos announced the new tablet called Kindle Fire, considered to provide some competition to Apple’s iPad finally. None others including HP, Nokia, Samsung, and RIM have been able to rise up to the standards of iPad so far.

So what’s exciting about Kindle Fire? First and foremost is its price of $199. With a dual core chip and fine display, it is probably losing money or has a razor-thin margin. But here are some of its salient features:

• It is called a media tablet that pulls together all of Amazon’s media services – Amazon Web Services, Instant Video, Kindle books, Amazon MP3 music store, cloud storage and Android App store.
• Yes, it is the best Android device so far
• It introduces a new mobile browser called Silk which uses Amazon EC2 to load pages faster
• It is WiFi only, no 3G announced yet
• All media is backed up and synced wirelessly in the cloud

The essence of iPad’s success is its design and usability combined with the myriad applications available. Someone said it will be a war between Amazon’s cloud and Apple’s cloud. Amazon has pioneered cloud services better than anyone in the industry, so their credibility to deliver cloud services is very high.

Kindle Fire can have books, but if that is all you need, then go for the $99 Kindle Touch. However, for an extra $100, see all the media stuff you can get. Bezos repeated this morning – a premium product at non-premium price. The Android developer community can add lots of applications over time.

Amazon’s media services include 18 million digital books, movies, songs, apps and games. All these are accessible via the new media tablet Kindle Fire.

Steve Jobs’s resignation as Apple CEO

Yesterday, on August 24, 2011, Steve Jobs resigned from Apple as its CEO. He will stay as chairman of the board, handing over the CEO mantle to Tim Cook. Even though this was sort of expected ever since Steve went on his medical leave early this year, the news of his resignation came as a shock – that it finally happened.

Much has been written since last 24 hours on his legacy and brilliance in the tech industry, his obsession with elegant design and simplification for users. He was way ahead of everyone else in this industry by not a year or two, maybe ten years. I love this poster of his words, so profound. Guy Kawasaki said that Steve was made of a different operating system than the standard entrepreneur/innovator.

I love his quotes, specially the following in 1996-97 on Microsoft:

“The only problem with Microsoft is they just have no taste. They have absolutely no taste. And I don’t mean that in a small way, I mean that in a big way, in the sense that they don’t think of original ideas, and they don’t bring much culture into their products.”

“I am saddened, not by Microsoft’s success — I have no problem with their success. They’ve earned their success, for the most part. I have a problem with the fact that they just make really third-rate products.” [Triumph of the Nerds, 1996]

“I wish him the best, I really do. I just think he and Microsoft are a bit narrow. He’d be a broader guy if he had dropped acid once or gone off to an ashram when he was younger.” [On Bill Gates, The New York Times, Jan. 12, 1997]

Look at what he said back in 1996 on the PC industry, so prophetic:

“The desktop computer industry is dead. Innovation has virtually ceased. Microsoft dominates with very little innovation. That’s over. Apple lost. The desktop market has entered the dark ages, and it’s going to be in the dark ages for the next 10 years, or certainly for the rest of this decade.

“It’s like when IBM drove a lot of innovation out of the computer industry before the microprocessor came along. Eventually, Microsoft will crumble because of complacency, and maybe some new things will grow. But until that happens, until there’s some fundamental technology shift, it’s just over.” [Wired, February 1996]

Back in 1985, he saw the future we see today:

“The most compelling reason for most people to buy a computer for the home will be to link it to a nationwide communications network. We’re just in the beginning stages of what will be a truly remarkable breakthrough for most people––as remarkable as the telephone.” [Playboy, Feb. 1, 1985]

What a remarkable leader! He shaped six industries – desktop, movie animation, music, mobile telephone, tablets, and desktop publishing. His second coming to Apple, on the verge of bankruptcy, transformed Apple to be the most valuable industry this year. Apple users are a cult and they view Jobs as their God.  Such transformational leadership is rare. Eric Schmidt said yesterday that Steve is the best CEO in last 25 years.

Yet we feel so sad about his health over last few years since the detection of cancer and subsequent liver transplant. He is a Buddhist by choice and had visited India (Varanasi) in his twenties for self-discovery.

The following quote is very profound,  “Being the richest man in the cemetery doesn’t matter to me … Going to bed at night saying we’ve done something wonderful… that’s what matters to me.” [The Wall Street Journal, May 25, 1993].

Steve, we pray that you keep well for a long time inspiring everyone.

Chemistry of Social Networks

Over the weekend I was reading an interview with Reid Hoffman, founder of LinkedIn and a partner at Greylock ventures. He made some interesting observations that social networks do best when they tap into one of the seven deadly sins.

Facebook is ego. Zynga is sloth. LinkedIn is greed. Twitter is wrath or lust (as in the case of congressman Anthony Weiner)? With Facebook it is about vanity, and how people choose to present themselves to their friends. It is the feeling of being connected. The trick is to exploit the importance of deep universal, psychological structure in people’s minds.  Zynga is about fun. Fun is important and to have the ability to do something fun for 10 to 15 minutes that is right at your fingertips and involves your friends is better than Television (in terms of social connectivity). With LinkedIn, it is taking control of your economic destiny and improving how you operate as a professional to develop a competitive advantage. As per Reid Hoffman, these are fundamentals for having a fulfilling quality of life.He thinks it is always about scale – whether it is online gaming as  in Zynga or at Groupon, a functioning marketplace for local goods and services that works on discounts and daily-deal kind of basis.

Well, Reid Hoffman matters these days as he is one of the most connected entrepreneurs in the valley. He led the Series A financing of Friendster in 1997; he founded LinkedIn which recently had the IPO at $8B valuation; he was part of the first round of financing in Facebook; plus he has investments in more than 100 other startups (both personal and via Greylock).

I also liked his characterization of “data” in social networking. If we call this social networking world as Web 3.0, then data is the “oxygen” or driving force. There are three kinds of data: explicit data, implicit data, and analytic data. Explicit data is where you contribute your profile. Implicit data is created by how you act online. And analytic data is information companies generate through an analysis of explicit and implicit data. For example, LinkedIn creates a picture that shows your skills and what skills most apply to you. This was compiled from explicit data you entered and the people you are connected to, but it is actually not a function of your activities, like answering questions on LinkedIn which was gathered through analytics.

Data is always the oxygen of any system. It’s importance is even more pronounced in social networking world of today and tomorrow.