Friday, December 21, 2007

Wooden horses ....

Amazon has made a really smart move by releasing DevPay. They have in effect created a SaaS (Software as a Service) platform (EC2 / S3 / SimpleDB / ASQS) for others to build SaaS products in. They also provide those SaaS companies (or providers) with a utility mechanism for charging their customers.

It's highly seductive sales story, you can imagine the sort of pitch:

Not only do we minimise your risk and the costs associated with infrastructure start-up and scaling but we also provide you with a simple mechanism for charging your clients. If no-one uses your creation, it costs you nothing and the more people use your service then the more you get paid.

Yes please, I'll buy one .... wow ...... wait. There's a huge gotcha here. Before EC2 / S3 / SimpleDB or DevPay, I was involved in Zimki and we covered the same ground.

Let's say you use DevPay and you decide to take your system out of this environment. Unless DevPay is an open service, then along with any migration costs you are going to have to build a payment service, create a mechanism of charging and then explain this to your customers. That's a lot of pain.

OK, but why would I wish to leave such a wonderful service?

Well the ability to easily leave a service and move to another service is what maintains competition in a market place, thus ensuring that prices for a commodity remain competitive. Now the nightmare scenario for any future SaaS provider is :-

  • To have their systems provided on a utility computing cloud.
  • To be in competition with other SaaS providers on the same or on different utility computing clouds
  • To not be able to move from one cloud to another.

In such a scenario, as a SaaS provider you NEED to enforce lock-in on your customers. If your customers can move services freely (which they will want) then you will face price competition, however since YOU cannot move services freely then your supplier doesn't face price competition.

Eventually all your prices will probably end up matching your suppliers and all your profit would hence be given away in price competition. The Warren Buffet Loom story is a worthy read here.

We considered this scenario for Zimki and the use of a utility billing service to create lock-in. We believed you could even open source everything else and create lock-in with this one little piece. Of course, if you want to create an ecosystem of providers and disrupt a whole industry then you need to open source everything.

Amazon is now that industry.

The last thing to note with a utility charging service, is that it can provide a very useful way of identifying revenue potential of any company using the service. Ideally for the provider of a utility charging service, you want customers of SaaS systems who are billed through your service to be able to sign up to multiple SaaS providers with same account (users would probably argue for the same for reasons of simplicity). This enables the owner of the utility charging service to not only estimate the revenue potential and hence value of the SaaS companies using its service but also cross selling potential. All excellent information for use in a good acquisition strategy.

Even at this seasonal time, be thoughtful of the gifts that others bring .... especially in business.

Thursday, December 20, 2007

Hyperlinking ...

More and more people seem to be discovering connections between a wide variety of themes such as enterprise 2.0, web 2.0, SOA, commodification, BPO, cost, community, commoditisation, knowledge management, architecture of participation, worth, freedom of expression and enquiry, competitive advantage, cost of doing business, radical innovation, ubiquity, barriers to entry, open source, open innovation markets, XaaS, organisational structure and issues with outsourcing.

This is all good news, as these are all intertwined themes and should be explored together.

Let me show a simple example of such connections. Innovations whether radical or incremental are the main long term source of competitive advantage and can occur across all organisational functions of a business. Hence you will constantly get incremental and radical innovations in the operation of a utility computing environment. However if computing infrastructure is increasingly seen as a CODB (cost of doing business) due to its ubiquity, then such innovations will trickle through to consumers via price competition between such providers, assuming you have a competitive utility computing market. Obviously for providers there will be a constant battle in improving operations.

So I recently came across a post by Andew Mulholland who blogs for CapGemini that "Competitive advantage is shifting from the cost management of transactions in the back office to business optimisation in the front office and the external market."

Whilst this specific premise is highly questionable, the overall post "Mesh working rather than Matrix working" is relatively interesting.

Why interesting? Well, you can literally read how Andy is making the connections to some of the themes above. It's almost a written diary, as he tries to "tie together the pieces".

I find it fascinating that he talks about the " Mesh of people and systems is potentially a never ending huge open environment extending externally as well as internally rather than the closed internal world of Matrix working." which implies a constantly free-forming and fluid organisational structure. Whilst "the relationships in Matrix working are always pre determined, fully defined and use known data." implies a more structured approach.

This suggest a need for an organisational structure to match a change from uncertainty to certainty and from undefined to defined. Now this is something that I would agree with.

I also noticed he blogged recently about value vs cost. Now, I'm not actually interested in whether I find his analysis convincing but rather that he makes a strong distinction between cost and value (or worth), which is something I would agree with.

Andy also seems to be exploring the XaaS world, barriers to participation, the distinction between CA and CODB and the need for different mechanisms of management and governance. All fascinating areas - an overview of my thoughts on these subjects can be found in my web 2.0 talk.

Interesting person - I'm curious to which connections he will make.

I'm starting to see why Richard George used the term hyperlink when describing making connections between things.

Of course, you always start with amateurs (it's a novel and new field) and then the professionals (amateurs with experience) come in later on to tidy up the mess. It's the same with any innovation - whether it's a product or a process.

Tuesday, December 18, 2007

Hundreds of millions have heard of Google Docs ...

According to this study, 73.2% of Americans have never heard of web based productivity suites like Google Docs.

Hang on, that means 26.8% have!

Now assuming this refers only to the population of internet users, and that you can extrapolate (huge assumption) this figure to the entire continent of 350 million internet users - that means at least 93 million people.

Hang on, now assuming you can extrapolate this (massive assumption) for the rest of the world (the America's account for 28.2% of world internet usage) that means around 330 million people worldwide have heard of web based productivity suites like Google Doc!

They're kidding right? Google Docs was only added to Google Apps at the beginning of this year - I thought this stuff was supposed to be new.

Picked up the story from Dennis Howlett and Nick Carr.

Patently marvellous ...

For a long time I've argued that patents make no sense from a societal viewpoint when the time of independent discovery is less than the length of the patent and where alternative means of disseminating information for benefit exists (such as Open Source, Scientific Journals etc) - for more see here and here.

Patents can act as a spur for innovation but also as a choke-hold. As commoditisation of communication, open source and other factors have accelerated the rate and diffusion of innovation then the length of term is becoming even more problematic.

So today, whilst casually researching another issue, I came across this beautiful paper from Rufus Pollock on optimal copyright length.

Around and around ....

Mixing up my James'.

One is James McGovern and the other is James Governor of RedMonk.

Anyway .... in total I thought the James' had very good questions.

1 - McGovern. "When will we stand up and have enough courage to ask ourselves whether we should be pursuing SOA, BPM, ECM, CMMi, Six Sigma, IT outsourcing, Business Rules, ESB, etc strategies all at the same time?"

Well I happen to believe the issue is not that we are pursuing such strategies but whether we are pursuing them across a function or for the correct stage of an activity.

In July last year I blogged about commoditisation as a force for change, the cost / value relationship being broken in IT and how the main issue was that not all IT was the same. Over the last year I've come back several times to that theme of managing two polar opposites in focus and the transition from static to dynamic - however it was my exploration of the XaaS stack and discussions with Jenny Ambrozek that finally convinced me the issue was purely organisational.

2 - Governor. "don't we need to stop for a moment and consider the learning curve of both producers and consumers of our grand strategies?"

Yes, I believe we do (examples see the extended S-Curve and my talk at Web 2.0 Berlin.). The transition from idea to commodity and from source of competitive advantage to cost of doing business, not only affects the characteristics of any activity but also how it should be managed.

3 - Governor. "Could it be that Mcafee’s thesis, often used as a pushback against Carr, actually supports it?"

In May, I blogged about how the effects of open source and commoditsation drives innovation and causes more disruption and hence how McAfee's thesis support this. I see no reason to change that view.

These are three outstanding questions that the James' have raised, and they deserve serious attention. I've summarised my viewpoint before in my Web 2.0 Berlin and FOWA talks.

Those who know me, have heard me going on and on an on about commoditisation (from manufacturing to IT) for almost a decade ... I promise, once I've finished the book .... I'll change the record completely.

Howl at the moon ...

My first article "The sum of all fears" has been published in the Butler Group Review - it's a review of the underlying processes behind web 2.0. Obviously I'm delighted and hopefully my second article will also be out soon.

Anyway, I thought I'd take some time to write a little more about the book I'm writing on understanding your landscape, coherence and its origin. It all stems from conflicts which I'd noticed in the business world. Be lean and mean but yet be a great company to work for; be innovative and high speed but plan in detail; create value but focus on cost. Combine this with concerns over aligning to the business strategy and most organisations seem fairly schizophrenic (multiple changing and overriding personality types) or at least bipolar (mood swings between extremes).

Let's look at the business strategy first. Most business strategies to me are very noticeable for what they miss out rather than what they include. Any business is a mass of potential competitive advantage (CA), transitional and cost of doing business (CODB) activities. However most business strategies emphasise the differential, the competitive advantage whereas the cost of doing business is often diminished.

Now let's bring that skewed strategy down to the level of a function such as IT. As said before a function is a mass of connected activities (products and processes) with each activity at its own stage of its own S-Curve of evolution between idea and ubiquity, from novel and new to commonplace, from uncertain to certain, from undefined to defined, from dynamic to static and from barely repeatable to easily repeatable.

Most organisational functions seem completely unaware of what stage of evolution their activities are at, even assuming they are fully aware of what activities they do or what their users actually need in the first place. Most functions would have a hard time splitting their activities into potential CA / Transitional and CODB.

As any activity moves through its S-Curve then the characteristics of that activity change and the methodologies, culture, finance and governance needed to manage that activity change as well. Most organisations seem unaware of this and manage by function rather than by stage of evolution.

To this recipe for disorder we need to add the latest trends. For example outsourcing, a sensible option if you are outsourcing a commoditised and ubiquitous activity to an environment containing multiple providers and second sourcing options. A fairly hit and miss affair if you are outsourcing a function or parts of a function without any knowledge of the stages of the activities that it contains. In the latter case you are likely to be outsourcing innovative activities with appropriate skills and capabilities along with commoditised activities. The net result of this reduces any benefits from outsourcing and in some cases can actually weaken the organisation's position. There are similar problems when it comes to corporate innovation (all these ideas are wrapped up in the framework which I've spoken about at various conferences). These problems are solvable but you need to understand your own landscape and for some reason, which evades my attention, most seem to be actively ignoring it. To the cooking pot of confusion, now add a splash of skewed business plan and hey presto ....

You have a situation in which you have lots of activities (which you may or may not be fully aware of) that you are often trying to manage with the wrong methods (as you are unaware of stage and how to govern by stage) in order to fit in with a skewed business strategy (which ignores most of what you do and what your user might need) whilst dealing with a bewildering array of trends from the outside environment for which no-one ever seems to give you a straight answer (as neither you nor anyone else is in a position to say what the effect is on your organisation without knowing the above).

Each time I read that paragraph, I feel shudders of arrogance and a dreadful feeling that I'm getting it all wrong. There are lots of smart people out there, lots of good business schools, lots of great thinkers but I keep feeling like the kid pointing at the naked emperor or the villager shouting "he's the werewolf!"

Now, I've been poring through the history books and every time I have come across a company which has moved away from a functional organisational design to one based around the evolutionary stage of activity - it has had dramatic positive effects. Unfortunately, this move has always been coincidental to some other activity and organisations have tended to lapse back into a functional approach over time. The more I research I do, the more evidence I gather. I am now more convinced than ever that the issues surrounding corporate innovation, outsourcing, alignment with business strategy and a host of other conflicts are all primarily due to a monumental howler in organisational design.

Before you call me barking mad ... I've been called those words at various points over the last decade when I've talked about commoditisation of IT, commoditisation of manufacturing processes, spime scripts, 3D printing, competitive utility computing markets, biological manufacturing systems, dynamic vs static methodologies, patents vs innovations, utility computing and others. To quote myself (from The sum of all fears) :-

"Innovations are dynamic problems and require dynamic methodologies such as agile development and a more worth focused VC-like approach to financing. By contrast, the use of utility services requires a focus on cost, standards and static methodologies. Unless you intend to stop innovating and give up on the long term source of profit for any organisation, then the IT department must find a way to manage both of these extremes. As commoditisation is ongoing, you’ll also need to continuously deal with the transition between these two extremes." 

I have the advantage that I've lived and breathed in an organisation that was designed around these three different stages of evolution. In fact, I was the one who re-organised the company. However, I'm no werewolf and I'm no seer - I just like history books - and so what worked for me may not work for you. But there isn't one idea in the above list whose origin can't be traced back over thirty years ago and yet we keep on repeating the same old problems.

Monday, December 17, 2007

Wishful thinking ...

Apparently despite all historical precedents, economics will decide to take a quick detour on the process of commoditisation when it comes to the utility provision of computer resources and we will all end up buying more servers.

I bet you we won't.

'tis the season to be jolly ...

Disasters happen.

In the XaaS world it could be your service provider closing down or some sort of security breach as happened with Sales Force or an outage which causes data loss as happened with EC2.

That's why I talked about the need for Patration, which of course everyone knows means:

“the freedom and portability to move from one service provider to another without hinderance or boundaries".

(James Urquhart has a more sensible term, which is less likely to cause arguments with English teachers, in Software Fluidity.)

Even if your provider is under an obligation to return your data to you in a usable format, it is at the very least damn expensive and time consuming if you have nowhere to go. What you need is choice, competition and portability among multiple providers.

I happen to agree with some of Christofer Hoff's predictions. I feel that 2008 is going to be the year where some of us get a refresher course on those painful second sourcing lessons.

Sunday, December 16, 2007

Finished ... just in time to start again

Just finished my latest article - phew. Which of course allows me to get back to writing my book, some consultancy work I need to finish and preparing my talks for 2008.

When I've finished my book I'll publish it under Creative Commons. However I thought I'd outline here where I'm going with it. Obviously as I'm writing it I do tend to refine things as I go along. It's all based upon the stuff I've been talking about over the years - so it probably won't be a surprise to anyone.

Coherence : an uncommon sense for a common sense world

Chapter 1 : Problem. An overview of the issues surrounding innovation, the growth of participation in many industries, managing by numbers, outsourcing and several paradoxes of modern economic life.

Chapter 2 : Definition. Sorting through the tangled mess of today means first getting some clear definitions of what terms actually mean. An idea is not a synonym for innovation and neither are synonymous with invention. Ubiquity is not a source of competitive advantage and commodification is not the same as commoditisation.

Chapter 3 : Example. Today, IT is under assault from a maelstrom of terms and concepts - from web 2.0 to enterprise 2.0, from utility computing to open standards, from XaaS to agile development. In this chapter we explore all these issues and characterise them according to our definitions.

Chapter 4 : Hypothesis. Our characterisation of IT points to an underlying framework, from invention to idea, from idea to innovation, from innovation to commodity. This framework describes how the characteristics of processes and products change during the transition from idea to commodity as well as the drivers for such transitions.

Chapter 5 : Concurrency. This framework is not peculiar to IT and examples of this can be seen in many industries from pharmaceuticals to music to finance. What was however specific to IT was the growth and profound impact of an 'open' meme. This meme has spread.

Chapter 6 : Prediction. Using the framework we predict a number of events for the future from the commoditisation of the manufacturing process, the growth of competitive utility markets and government regulation. We consider where this resurgent renaissance is heading.

Chapter 7 : Conflict. The framework provides an ordered overview on a bloody battlefield. We examine some of the generic conflicts of interest - Cost vs Worth, Dynamic vs Static, Emergent vs Declarative - as well as how allies can become bitter enemies - Patent vs Innovation. The largest conflict though is Organisation vs Innovation.

Chapter 8 : Organisation vs Innovation. One of the most startling aspects of the framework is that it shows a direct conflict between the common sense approach of modern organisation and the real world. Most firms are organised by function, however each function is a mass of different activities. The framework proposes that every activity has its own S-Curve of transition from idea to commodity, and that each function is nothing more than a mass of activities at different stages of their own extended S-Curves. This causes a conflict, as the ideal method of management changes with stage of activity and not with function. Management by function would appear to be the cause of the problems outlined in chapter 1 - from the difficulty in managing innovation to outsourcing. The chapter demonstrates a more effective approach to organisational structure based not on function but on stage of activity.

Chapter 9 : Coherence. Using the framework and structure, a range of generic strategies are outlined for dealing with the different characteristics of any organisational activity as it moves through various stage of the extended S-Curve. From innovation, to competitive advantage to cost of doing business. These strategies show how to manage the maelstrom of todays terminology and the issues surrounding innovation, outsourcing, participation and the economic paradoxes.

I'm looking for some more proof readers - so if you are interested, please contact me.

SaaS and OSS a natural fit.

An article in talks about SaaS and OSS as a natural fit rather than the SaaS vs OSS debate that some have been peddling.

This is good news.

I also note that Amazon has made the next logical step with SimpleDB - a web service for running queries on structured data in real time.

Apparently SimpleDB "requires no schema, automatically indexes your data and provides a simple API for storage and access." and "you organize your structured data into domains and can run queries across all of the data stored in a particular domain".

Though this is interesting, I would hardly consider it the most revolutionary or seriously disruptive idea, since Libapi (Zimki's predecessor) was doing this circa Dec'05. The next "disruptive" step would logically be an application framework to tie all the bits together.

Any real disruption won't occur until we get an open source environment and an ecosystem of providers e.g. a SaaS and OSS play.

There is still plenty of room for some company to "disrupt" Amazon's new world.

Friday, December 14, 2007

Which blogs do I read?

Someone asked me recently which blogs would I recommend to keep up with the world of utility computing?

Generally, I find James Urquhart, Rich Miller and Nick Carr cover most of the topics you need to be interested in.

Wednesday, December 12, 2007

Oh no, not again ....

It looks like the meme game is spreading around again. This time it's an eight things meme following on in the same spirit as - 4 / 5 / 6 meme ... what happened to 7 meme?

Do people not like the number 7? What has it done?

Once again I'm delighted and honoured to be invited to tell all those little bits of info which I don't reveal on Facebook / Twitter / Blogger etc.

I will of course do so with my usual speed and gusto.

Awesome ....

Movable type has just been open sourced.

Six Apart have some smart cookies.

MTOS is one of the only open source blogging tools with built-in support for an unlimited number of blogs, an unlimited number of authors, and sign-in with OpenID, with no plugins needed.

Ben and Mena were really committed to setting the standard that Movable Type would always be open

Excellent. I'll now have to move my blog to a MT SaaS provider (free or not). At least that way, I can always know that if I need to move my data - I can. Oh, as for standard? I think there is a good chance that MT will fast become that blogging platform standard and portability for blogs will be based around it.

Thanks to David for pointing this one out.

Gartner calls for more duck friendly IT.

Well actually, not quite.

What they actually say, hot on the heels of those Anderson bods, is that IT should adopt more green strategies and how that SaaS has the potential to be much more environmentally friendly.

As a former active environmentalist (back in the early 1990s when I had hair) and as a proud keeper of ducks, I obviously support their move.


Fabrication technologies also have the possibility to be more environmentally friendly as well.

Though I'm not involved with the environmental movement today, I obviously have concerns about such issues. At ETech in Mar' 2007 and OSCON we demonstrated a mashup of GoogleMaps and a Carbon offset calculator in Zimki. A more impressive system is Will Carter's OffSetr which uses Dopplr data and provides cumulative effects of your networks.

I do however oppose the idea of widespread use of tradeable carbon permits as this is a mechanism for social exclusion. A more equitable system would be based upon non-transferable personal share which gives rise to an annual carbon quota. That quota (or part of) can be sold on an open market, but the the right to that share cannot be transferred.

I am also fully aware that such as system is a bit of disaster for anyone living in the richer countries, as we produce far too much carbon per capita and under such a system we'd be forced to share more with the rest of the world.

I also believe that each country should pay for the cumulative damage it has caused so far.

I also believe that the likelihood of the richest countries agreeing to such things are relatively small, and hence any 3rd world country should avoid tradeable permits and pollute as much as is necessary to build their economies in order to avoid lifelong servitude and hence force richer countries to negotiate reasonably.

I'm fully aware of all the risks of inaction and I stopped working in the environmental field when it became obvious that change would only happen as a result of severe consequences. At which point it is a guessing game.

Still anything to improve the lot of ducks is a good thing in my book.

Of mice and servants ...

Thanks to Rob for this .... 8 data principles of Open Government

Of course it is an "open" group itself? No, of course not!

Only "members" can post comments.

[Addition : Though I joined the mailing list on the 12th Dec, I was unable to post for some reason. I assumed that the membership list was restricted in some manner. It now appears that membership is open for all to join and that my original view was wrong - see comments. My apologies to the Open Government group.]

Hmmm, doesn't seem very open to me. I'm certainly not voting for you.

Openness starts at home.

Oh and on their eight principles, getting the data is great but if you don't know what it means and how it was collected then it really is rather useless - even if it is machine readable, free of license etc.

Of mice and men ....

Interesting discussion about commoditisation of IT and governance at Monash University.

Also I came across this bit of a stink with Apple and Nokia removing an open media format from HTML5.

Hmmm, so an example of an open standard but with my data in a proprietary format? J5 has put forward the argument that open formats, open standards and open source are necessary for an open web.

This can be simplified for a ubiquitous software service in which you have more than a transient relationship. If you want freedom, if you want data portability, if you want to avoid lock-in, if you want choice and competition then :


I put the terms in bold, because:

  • WITHOUT OPEN SOURCE you will end up with ....
  • NO CHOICE as you will be ...
  • LOCKED-IN to a vendor as ....
  • DATA PORTABILITY is more than just APIs and formats.
  • No open source .... NO FREEDOM

For an old database hound like myself, these discussions seem reminiscent of the once promised land of ANSI SQL. So I've lifted the following from wikipedia.

Reasons for lack of portability

Popular implementations of SQL commonly omit support for basic features of Standard SQL, such as the DATE or TIME data types, preferring variations of their own. As a result, SQL code can rarely be ported between database systems without modifications.

There are several reasons for this lack of portability between database systems:

* The complexity and size of the SQL standard means that most databases do not implement the entire standard.

* The standard does not specify database behavior in several important areas (e.g. indexes), leaving it up to implementations of the database to decide how to behave.

* The SQL standard precisely specifies the syntax that a conforming database system must implement. However, the standard's specification of the semantics of language constructs is less well-defined, leading to areas of ambiguity.

* Many database vendors have large existing customer bases; where the SQL standard conflicts with the prior behavior of the vendor's database, the vendor may be unwilling to break backward compatibility.

The areas of concern are always behaviour, ambiguity, formats and completeness.

The belief that open standards and open data formats alone will lead to data portability and that companies won't attempt to subvert this to this their own ends, reminds me of John Maynard Keynes quote.

"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone."

It's a nice plan but I feel it only get us so far ....

Tuesday, December 11, 2007

Dopplr for everyone ...

Dopplr is no longer in private beta and was officially launched at Le Web 3. Whoops, I thought it had launched ages ago - well as least I can now say congrats!

If you don't use it, you have friends all over the world and you travel ... then you should give it a go.

Carry on regardless ....

The underlying processes of commoditisation behind web 2.0, E2.0 and Webever x.0 are very real and their impact in reducing the barriers to participation are significant. This doesn't mean people can't get carried away with this (see video below and thanks to Ian for spotting this.)

Unfortunately the video has been pulled from YouTube - it was very funny. For more on the story see here.

Monday, December 10, 2007

Picking a fight ...

It seems that groups like Data Portability Org believe that Open Standards (e.g. APIs) are sufficient to create portability. I've long argued that open standards are necessary but not sufficient for this. If you want portability you will need open sourced implementations of such standards.

Why does the phrase "standardized Data Portability is the next great frontier for the web" feel like a re-run of the SQL saga?

I wonder what odds I can get on us ending up with implementations that "are inconsistent and, usually, incompatible between vendors".

Don't get me wrong, open standards are better than none but if you want portability (whether for your data or your application) then open standards are not going to be enough.

Friday, December 07, 2007

Understanding knowledge

I was talking with Dennis Howlett recently about the codification and subsequent commoditisation of knowledge, when I came across the TrueKnowledge web site. It's a startup company run by William Tunstall-Pedoe, someone I knew from Cambridge.

It's a small world. Watch the video.

Thursday, December 06, 2007

What conversation?

In todays world, in many industries, the conversation between the company and the customer is critical. Being incompetent, hypocritical and downright rude is not a good way to build a strong relationship.

I suspect a company like Virgin Media, the source of Suw's complaint (see above link), will probably come up with the usual statements - it's just one customer, it was unfortunate, it was an issue with the service company and all our other customers are happy. You can see from her post there is already some buck passing.

These statements are just like the attempts to redefine copying as theft. Of course copying isn't theft, it's just a license infringement. You repeat the phrase enough times and people start to accept it though deep down you know something isn't quite right.

Well copying is not theft, it's a license infringement. Suw is not just a customer, she is a Virgin Media customer and if this is the way they treat her then there is no reason to suspect that they won't mistreat others too.

A quick search on Facebook for "Virgin" shows that four of the first five groups were negative and "Virgin tech support sucks" was the mildest. Are they having problems?

Wednesday, December 05, 2007

Operations as a source of competitive advantage

I've just been reading Jesse's Operations is a source of competitive advantage.

As system operations are ubiquitous and common they should not be a source of strategic value. As Peter Nickolov quite correctly said in the comments "Operations is a price of entry and should *not* be a differentiator."

Despite this, there is always a silver lining. Firstly there are always huge cost advantages in any industry where everyone else is doing a poor job of it (unfortunately they tend to be short lived). Secondly, there are always incremental innovations which can provide further cost advantages (again, short lived)

So can operations be a source of competitive advantage? Well the short answer is Yes, but the long term answer is No - unless of course you are in the business of utility provision of computing resources.

For the rest of us though, my electricity provider being cheaper than yours is not a source of competitive advantage - it's a deviation which will quickly be resolved.

Call for participation

X-Tech has a CFP out for “The Web on the Move” - focusing on the emerging portability of data, applications and identity on the internet.

Market or Lock-in? You decide.

Brian Suda has sent me a link to a conversation between Bruce Schneier and Marcus Ranum, in which Bruce says:

"By 2017, people and organizations won't be buying computers and connectivity the way they are today. The world will be dominated by telcos, large ISPs and systems integration companies, and computing will look a lot like a utility. Companies will be selling services, not products: email services, application services, entertainment services. We're starting to see this trend today, and it's going to take off in the next 10 years. Where this affects security is that by 2017, people and organizations won't have a lot of control over their security."

Well, unsurprisingly I agree. The threat is that companies are going to find themselves locked in. Before someone shouts "open standards" - I don't believe they are sufficient to ensure portability.

However companies can act in a way to overcome this problem - the answer to this lies in the prisoners dilemma.

First, let's assume that much of IT is ubiquitous and of little strategic value. The only real advantage that can be gained is through efficiency and for this reason various XaaS providers look attractive. However, the downside to this is the risk of lock-in and the lack of any portability and choice between providers.

Secondly, if there was portability and choice between providers then there would exist a competitive market. Such a market would reduce the cost of XaaS to the consumers, however for the producers their product would be a commodity. Providers are unlikely to do this despite there being very good strategic reasons for being the first mover.

So the situation here is that consumers (i.e. companies) of XaaS want to adopt it in order to gain efficiencies and hence some operational advantage (no matter how short lived) but they don't want the lock-in. In order to do this, providers would have to work against their natural instincts.

If we assume that eventually all companies would move to XaaS and that IT is predominantly a cost of doing business, then the best move for companies would be to collectively move to a portable XaaS market. Of course, this requires collective agreement and hence we have the issue of the prisoners dilemma with providers trying to entice companies over.

So I take interest in organisations like DataPortability and suggest that there is a need for such an organisation to act as a trusted intermediary on behalf of all customers (companies included) and to push forward the concepts of a portable XaaS market. I also believe it is about time that companies who are consumers of such IT work in concert through such intermediaries to ensure that their interests are served.

The alternative, well it's just like Bruce says, the world would be dominated by "telcos, large ISPs and systems integration".

It doesn't have to be, there is an opportunity here to create a functioning market through open source. Of course, if we do head down the direction which Bruce is concerned about ... we will eventually end up with Government intervention.

Principles of Organisation

As most of my friends know, I'm currently hidden away in the British Library writing about:-

  • Commoditisation, commodification and creative destruction.
  • How organisations are a mass of S-Curves.
  • Managing from invention to innovation.
  • Managing from innovation to ubiquity.
  • Organising around stage of activity rather than function.
  • What sort of firm are you - physical or human capital intensive?.
  • What 2.0 means.

It's an enormous amount of work and extends upon the framework I use in my presentations. So yes, I'm writing a book and yes, I'll be releasing it Creative Commons 3.0 attribution when I'm finished.

However, two things happened today which I must respond to. The first thing was that I read Suw's post and the second was that someone asked me about the "ideal of ubiquitous knowledge in large organisations."

This is an interesting idea. To explore this, I first need to discuss two main emerging types of firm - physical capital intensive and the other is human capital intensive.

As an example of a physical capital intensive firm - I'll use wikipedia. The key controlling element for any members (whether its paid employee or its voluntary members who gain value through reputation or some other social or actualising need) of this "firm" is access to the physical infrastructure which creates wikipedia.

If a member of wikipedia leaves - the impact on wikipedia is minimal. Conversely if wikipedia denies access to the system to an individual - the impact to that individual is significant as setting up a new wikipedia requires huge physical capital.

Wikipedia is an example of a physical capital intensive firm and can exert influence on its members by controlling access to the physical assets or infrastructure. It is the infrastructure that binds this group together.

Human capital intensive firms are controlled or bound together through access to high value human capital. For example Barristers Chambers, where pupils often work for very little (if at all) and are mentored by the chamber in a sort of master / apprenticeship relationship. As the apprentice acquires more human capital then rewards are increased and eventually they become masters themselves. The advantage for the masters is they offload menial work to the apprentices whilst concentrating on the high value and more rewarding work. It's an exchange.

This sort of structure exists in many fields, and the firms depend upon creating an umbrella group to not only support this, but also to create a brand and provide suitable compensation to keep the group together.

So let's look at the "ideal of ubiquitous knowledge in large organisations".

Ubiquitous knowledge requires its codification, however codification almost always leads to commoditisation as knowledge rarely remains within the boundaries of one firm. Now commoditisation and ubiquity of knowledge is fine if you are a physical capital intensive firm - such as wikipedia. However what if you're a human capital intensive firm? What if "how to win every legal case" could be codified? The firm's reason for existence has gone as setting up a new firm requires very little physical capital and there is no human capital to be acquired by joining another.

Fortunately, tacit knowledge comes to the rescue. Not all knowledge can be codified, for example creative writing and debate.

So in general:-

  • human capital intensive firms are fine, as long as knowledge cannot be commoditised
  • physical capital intensive firms are fine, as long as the physical infrastructure cannot be commoditised

So if we look at the Web 2.0 and Enterprise 2.0 worlds, hopefully you'll understand why I have been going on about commoditisation so much.

So referring to Suw's post - if you are a content broadcaster, then you used to be physical capital intensive as the infrastructure needed for production and distribution was far from cheap. Such physical assets meant that a content broadcaster, say a record producer, controlled what was produced and controlled the artists by access to these assets. These days anyone can produce and distribute music. Firms that are based upon physical capital cannot exist in this market - the best you can hope to be is some form of syndicated provider giving some value add.

However, music and song writing still contain tacit knowledge even if the result of this can be easily reproduced. So there is the opportunity for new types of organisations based principally upon human capital. Master songwriters or Master Musician type chambers (otherwise known as Bands). Obviously you need reputation, revenue being generated by providing access to services (for example gigs) and secondary revenue streams (for example physical merchandise)

The music is just a way of building recognition and a following. It's an unfortunate tune if you're a record producer or a mediocre journalist / artist / musician.

However, this brings up another point. The "ideal of ubiquitous knowledge in large organisations" is only ideal if you happen to be a physical capital intensive firm. If you're a human capital intensive firm or a "we don't know what we are" type firm, then a rush towards Enterprise 2.0, Web 2.0 and codification of knowledge could in fact be reducing the lifespan of your firm.

A little knowledge is a very dangerous thing.

Interesting news .... comes in threes.

Make has published an Open Hardware Gift Guide - magic.

Suw is thinking about microeconomics and business models for creative .... aha another person who will slowly succumb to the allure of commoditisation.

Finally, inkjets start being used in LCD manufacture.

Sunday, December 02, 2007

Phew .... sanity restored.

These days I do very little in the 3D printing world except keep tabs on how the industry is progressing. Awareness of the field is becoming more mainstream now, though I'm not sure if people have really thought through all the consequences yet.

For anyone who is interested, I've created a video (below) of the last fabrication talk I gave back at EuroOscon in Sept. 2006. It covers the usual suspects of fabrication, ducks, open hardware, environment, commoditisation and spime script.

Of course, these talks are never quite the same without the sound of the audience.

Back in 2002/03 when I undertook a development program at the IMD, I really hammered home the point about 3D printing. Most people didn't believe it then and thought I was somewhat odd. They nicknamed me "crazy guy".

Back in 2000 when I talked about it, people always looked at me as though I was mad, and I mean genuinely "mad".

Before that date, people always acted as though I was telling some sort of joke and had forgotten to add the punchline. We never usually got to the "you're mad" stage.

So I must admit I was delighted to recently receive an email from my tutor saying he was reading an article about 3D printing in the NYT. Also, today, I came across Tom Easton's blog in which he says he is going to look at writing a book on the impact of 3D printing and the effects on business models (aka commoditisation of the manufacturing process).

It's amazing how quickly things spread and sanity is restored.

I really hope Tom puts 3D printing firmly on the map, the same way Nick Carr did with commoditisation of IT.

Saturday, December 01, 2007

Open standards are not enough ...

In the XaaS world, if you want to increase Patration - the freedom and portability to move from one service provider to another without hinderance or boundaries - I've long argued that open standards are necessary but not sufficient.

You also need a network of providers complying to these open standards. This is most likely to happen if you have open sourced systems which implement such standards.

In the long run this should be norm for the XaaS world since "the fastest way to achieve a standard is not through committee, conversation or whitepapers but through the release and adoption of not only a standard but also an operational means of achieving a standard".

Most of my arguments come from my research in the area of commoditisation of software and the the impact of open source in this area.

I'm glad to read this article by Ross Gardler that also argues that open standards are not enough to prevent lock-in.