An open letter to Congress on SOPA / PIPA - from Aliens4SOPA

To understand the impact of SOPA / PIPA we need to get rid of some very basic misunderstandings.

First, explosions of industrial creativity DON'T follow the invention of a technology but its commoditisation i.e. it wasn't the invention of electricity but Edison's introduction of utility services for electricity that created an economic boom that led to recorded music, modern movies, consumer electronics and even Silicon Valley.

Electricity is an essential component of these industries and it had to be provided as a standard component before they could flourish.

Now the internet commoditises the means of mass communication i.e. mass communication existed beforehand but the internet turned it into a standard component. Hence we've seen an explosion of industrial creativity based upon this component i.e. Google, Facebook, Twitter etc.

Each time an activity - whether electricity or mass communication or trade - is commoditised, we see explosions of creativity, the formation of future industry and the disruption of past industry. As Edison commoditised electricity provision, new industries formed and past industries such as Gas lighting companies were disrupted.

Those past industries had a choice. They could either consolidate, acquire and adapt which is what they did or they could have tried to get Congress to pass legislation to stifle the electricity market. Had those Gas Lighting Companies succeeded in doing that, then Edison and those future industries such as Hollywood, Silicon Valley, General Electric would never have formed in the US. Instead they would have formed somewhere else and the US would be a fraction of the economic power that it is today.

SOPA is simply an attempt by past industries who face disruption AND refuse to adapt, to persuade Congress to legislate in favour of past models. Its effect will be the same as Gas Lighting companies persuading Congress to legislate against electricity. It's an economic blunder.

You live in global economic market and you compete against other nations. If because of concerns over piracy the US makes such an economic blunder, then as competing nations we will act like pirates by plundering your future. If we don't, China will.

We will happily take Silicon Valley off your hands. Send it to London, we would love it.

We will happily have those jobs, those future industries. If you don't want it, we do.

They key point to understand is the internet is an essential component for future industry just like electricity. Mess with that at your peril.

Of course, Media industries complain about a changing world, they've been crying wolf for decades : "8 track tapes and piracy will destroy recorded music", "video and piracy will destroy the film industry", "internet and piracy will destroy …" blah blah blah blah blah.

Adapt or die is all I'm going to say and if you don't want those future industries please send them to us where we would care for them. So as Alien from a competing nation, I'm all for Congress destroying the US economic future. Go for it.

As they say, fortune favours the brave or more aptly :-

"OUR FORTUNE IS FAVOURED BY CONGRESS CHARGING BLINDLY INTO AN ECONOMIC ABYSS"

We love you Congress.

PS if you could also persuade the Murdoch empire to shift permanently to the US that would be cool too. We've been giving them hints in the UK but I'm not sure they've got the message.

Spotting the Next generation ...

For the best part of a decade I've worked on how business activities evolve from genesis through to products to commodity. As activities evolve then practices (such as management methods) that are applied also have to change which is why one size never fits all.

I've also demonstrated how this process of evolution creates a cycle, with commoditisation enabling further genesis (as in innovation of new activities) and the importance of inertia barriers in regulating this cycle.

These cycles also appear at the macro-economic scale and they're known as Kondratiev waves, however even more localised cycles (i.e. specific to an industry) tend to be associated with organisational change.

Hence with the commoditisation of the means of mass communication (i.e. the internet), new forms of organisation appeared known as Web 2.0. These companies had different activities, practices, strategies and structure to the more traditional, enterprise organisations that existed before.

In general terms, this cycle of evolution and its interaction with inertia barriers creates three economic eras - peace, war and build. During the peace era, sustaining change is particularly high, companies fight to maintain their relative position and inertia barriers to change help support the status quo.

The war era occurs when an activity evolves from one state (such as products or rental services) to another (such as commodity or utility services) and during this time disruptive change dominates whilst inertia barriers become a hindrance to survival. Companies literally are fighting to survive, often against their own internal culture and inertia to change.

So during the last IT war, caused by the evolution of the means of mass communication, these new web 2.0 organisations formed and the rate of disruptive change was high. Those traditional, more enterprise like companies that were impacted but survived the war had adapted and learnt many of the lessons of web 2.0. Today, social networking, social media, rich internet applications are the norm.

However, cloud computing - which is nothing more than the evolution of a wide range of activities from products (and rental services) to commodity (and utility services) - has initiated a new era of war.

The models predicted (and this is what we found) that there are three main forms of IT organisation in the wild - the traditional enterprise who have adapted, the web 2.0 players and a new breed of Next generation companies. The practices, activities, strategies and organisational memes of these Next generation are the ones which will tend to diffuse and dominate our industry.

The underlying framework, models and principles of how this works is part of a report I'm finishing for the LEF. Including in-depth surveys of over a hundred companies, it provides a reasonable hypothesis of organisation evolution across activities, practices and strategies. I say reasonable because it's more than postulation as there is data that demonstrates the pattern but this is not peer reviewed, the sample sizes are small and hence its only a reasonable hypothesis and requires a good dose of scepticism.

I'm not going to go through the report but I thought it might be useful to just comment on how to identify the Next generation in general terms.

If your organisation :-

• embraces change and is acutely aware of inertia barriers
• has primary goals based upon disruption of existing markets and growing ecosystems rather than a focus on profitability and growth into emerging geographical markets
• views commoditisation not as a liability but an opportunity
• operates through small, highly empowered teams building and creating services
• builds and exploits ecosystems by enabling others to build upon its services
• uses data analytics rather than metrics to determine action
• continually challenges and removes processes
• understands evolution and avoids one size fits all mentality
• builds distributed systems designed for failure that use commodity IT where possible
• considers itself to be as, if not more, efficient than Amazon
• games behaviour both internally and externally
• views culture as malleable and focuses on talent density
• views open source as a tactical weapon
• is seen by others to be simultaneously highly innovative, customer focused and efficient despite what Porter said on the subject

... then you're Next generation. If this isn't you, you're not. If you're not, then just hope this war doesn't stretch into your industry or that IT isn't a major barrier to entry into your space or this hypothesis is completely wrong.

I've provided a comparison between the traditional enterprise and the next generation in the following table.

Along with retail, media, travel firms and others who have already suffered in the last war - we should see software products & hosting, insurance and retail banking dragged firmly into this one.
Of course, along with this war era comes a build era, a golden age where the genesis of new activities flourishes and we see periods of frenzied growth.

The cycle is continuous, and the next major war after this one should be related to the commoditisation of the manufacturing process itself ... now, that'll be a big one. For me, this is personally important as it creates an opportunity to test the hypothesis.

What we should see as the means of manufacturing becomes more of a commodity (driven by 3D printing, printed electronics and hybrid printers) is a high degree of disruption in manufacturing industries as inertia barriers to change are broken by new entrants whose practices will be remarkably different from the existing players. The practices of these Next Next generation of company will diffuse and become the norm.

If this hold true, then I'll have enough to finally put the work up for peer review - having initial data (covering 4,000 data points), a hypothesis which describes a pattern from that initial data and has been preliminarily shown to exist in this current war through a survey (providing in total over 6,000 data points across 100 companies) and finally a pattern which is predictive.

If it doesn't and is falsified then it's back to the drawing board. The downside is I'll have to wait many years (possibly as much as a decade) before the next war starts ... if only companies were more like bacteria that I could grow in a lab.

Larry offers Hotel California ...

According to CW, Larry recently raged over Salesforce describing it as a roach motel and pleading the case for interoperability. He's just given a gift horse to some fairly smart operators and this time Larry's forgotten to fill it with any of his own soldiers.

First, some background which everyone knows already, so I'll keep it short :-

• Activities evolve and our industry has been shifting from a product to a utility service world. This has been clear for the last 6+ years, Salesforce knows this and they've been positioning themselves in that future space.


• Past success always acts as an inhibitor to future survival, it creates an inertia barrier to change. This is why Amazon and not some hosting company encumbered by an existing business model made the break into IaaS. This has been crystal clear for 4+ years. Salesforce knows this, it's why Oracle has been slow to react to the change.


• In this future world, competitive markets will become key to solving those outsourcing risks such as pricing competition, second sourcing options and loss of strategic control. Such markets will require multiple providers, access to code and data (i.e. standard data formats and APIs) and semantic interoperability. The latter point is only solvable with complex systems through running code and unless the market intends to be a captured markets (i.e. dependent upon one vendor) then that code will have to be open source. This has been clear for the last 5+ years. Everyone knows this just a lot of people refuse to believe it usually because of inertia barriers which have become institutionalised.


• Critical in this new world is the development of ecosystems as these enable a company to solve the innovation paradox and simultaneously appear more innovative and highly efficient. This has been blindingly obvious for 3+ years. More details on common models such as ILC can be found here. Salesforce knows this, they've been playing an acquisition game around their own ecosystem and sending market signals because of this.

• With a large enough ecosystem, you can create network effects through aggregated data e.g. market reports. This can be used as a soft form of lock-in i.e. even if you open source an entire system, your service still maintains an advantage simply because of the number of people using it. In other words, you can be entirely open but in effect create lock-in (i.e. gravity) for your service because of the benefits that being within that ecosystem brings. This has been painfully obvious for the last 3+ years.

• Salesforce has also been playing a tower and moat ploy, building a tower of core revenue surrounded by a moat of high barriers to entry and devoid of differential value. Attacking Salesforce is a tough call for anyone, hence I suspect Larry's aim to make interoperability his calling card.

Salesforce has the ecosystem to play an aggregated data game i.e. free market reports for an industry based upon aggregated data or free comparison KPIs to your sales team effectiveness etc. Given the smart plays Salesforce has been making, you can bet your bottom dollar they've got lots of this in the pipeline.

Salesforce could also use open source as a tactical weapon in this space. They could open source the entire system and say "come and compete", "run it yourself" with full knowledge that those who build it for themselves and take the private road will eventually switch to public, whilst those setting up as public providers will lack the ecosystem and hence any aggregated data benefits. Salesforce is also smart enough to know that this game could be played against them, so they'll have to go down that route at some point. Hence you can pretty much bet your bottom dollar they've been working on this.

Larry has walked into a huge trap. He's just called out interoperability as the key differentiator for his service but as we all know the real issue is portability which requires semantic interoperability and running code. All Salesforce has to do is start launching more aggregated data services and open source the entire system under a banners of "Freedom in the cloud", "Run it yourself for Free" and Larry is left standing with the high cost proprietary service with no real portability (except between one licensed version of Oracle and another).

It's difficult to see how Oracle's strategists could have been more tweedledum or tweedledee as currently they are primed to become the industry's example of Hotel California (you can go anywhere you like as long as you're paying fees to Oracle?).

Now, open sourcing won't be easy for SFDC because they have an existing service, security professionals will be concerned over exposing security weaknesses, lawyers will have their usual collywobbles over IP and financial controllers will gasp at writing down a technology asset.

However Benioff like Maritz (you don't think CloudFoundry doesn't have a grand strategic purpose do you?) is generally a shrewd player. It all boils down to a question of timing and willingness to play the end game but we could be expecting checkmate to Salesforce in the near future.

Bad move Larry ... really bad. Oracle will be lucky to make it out of 2020 with this standard of play.

Bank Recapitalisation ... Pirate Style

After much ado, the European Union seems to have been badgered into emergency action in order to re-capitalise the banking system due to its over exposure to instruments based on sovereign debt and the reliance on the dollar. I'm not a fan of this, this is just another monetarists prayer to the altar of "no sodding evidence whatsoever" and as usual the taxpayer will foot the bill.

Naturally, there will be wormtongues who will claim it was a Keynesian approach when it all goes spectacular wrong ... that is par for the course for economic banter.

So given that we're going to re-capitalise the banks, let us at least try and arrange the situation in the interest of the taxpayer. First, re-capitalisation should be forced and not voluntary and the capital ratio set by Basel should be raised to 30%. Next the banks should be given two options - either raise the money yourself or borrow from us, the nice friendly EU.

Of course, being the lender of last resort, there will be a couple of strings attached to the capital we lend (oh and lend is the operative word). Hence :-

1. The entire capital lent will need to be repaid annually over 5 yrs at EU base interest rates or average EU inflation (whichever is higher) + 10%.
2. The EU takes precedence over all other debtors and the entire banks assets will be used to underwrite the loan
3. A sum of Bank equity equal to capital lent will be paid to EU as our "setting up administration fee"
4. Late payment will incur an APR of 200% plus a penalty of 50% on any remaining capital.
5. No dividends will be paid until the entire loan is repaid
6. Upon final repayment of the loan, another sum of Bank equity equal to the capital + interest + any late payment fees will be paid over to the EU as our "closing administration free"
7. If you don't like the terms then go raise the capital yourself on the open market.

Now, I'm not actually advocating such draconian terms but I'm arguing for the EU and our Gov to stop acting like they're just pawns in this global game and start acting like pirates. The banking system is an essential vehicle for our economic system but like all things, it should be managed in the wider interest of society.

Why I believe AAPL will crumble ...

Earlier this year, at the height of Apple fever, I made a bet that Apple will be in Chapter 11 by the end of 2017. I thought I'd explain my reasoning because it's not what most people would suspect.

First, the problem with Apple in my view was Jobs. Whilst Steve Jobs was outstanding at creative leadership, that is only part of the battle for creating a sustainable company. An exclusive focus on creative leadership always leads to failure as the genesis of new activities (i.e. innovation) might be high worth but it's unstable and uncertain.

The problem for Apple started in my view from a major strategic blunder - it didn't open source iOS, it didn't feel it needed to, it was building the entire stack. By not doing so it enabled Android to thrive. Apple gave oxygen to the formation of a competitive ecosystem of hardware providers to develop around Google's new weapon (and Google had every reason to do this because of the threat that IOS exposed to Google's value chain of data).

As that ecosystem develops, Apple will find itself in a stand alone innovation game against it. The pressure will build for ever more outstanding and exciting breakthroughs in technology which Apple has delivered with the iPad. Unfortunately, this pressure will continue and such breakthroughs by their very nature (chaotic) are uncertain and every company in this position before has failed.

Take Commodore and the Commodore64 which was vastly more influential than the iPad. The C64 transformed a world where computers were rooms owned by huge corporations into personal computers. In terms of consumerization, the C64 was dramatic.

Commodore and Apple both tried to lead this new world through constant innovation but were hammered by the more commodity based ecosystem approach of "IBM PC compatible". Commodore died and Apple barely survived but unfortunately it seems to have failed to learn that lesson.

So once again, we find ourselves in a world where Apple is pushed into the high risk stand alone innovation game against a growing, more commodity focused, ecosystem. That ecosystem will enable rapid innovation of higher order systems, it will outstrip Apple once again and I suspect that Cook (the new Apple CEO) knows this.

The only viable defence against such an ecosystem play is to build a bigger ecosystem (which is tough as a stand-alone) or to buy up the supply chain and use patents to slow your competitors. The latter Apple has done but such moves only slow the change, they don't stop it.

It can give you breathing space though to find that next breakthrough or to work out how to build a bigger ecosystem. However, the problem is often expectation i.e. your customer expect that breakthrough continuously.

I've not listened to Apple's latest press release but if its lacks any breakthroughs and dazzling tech (which I strongly suspect) then markets and fans will slowly turn against Cook and cry "bring Jobs back". Markets always do this, they always want more of the past.

Into this current fray, Amazon will certainly push with its normal approach of commoditising an industry and building an ecosystem around itself. If Google and the greater ecosystem around Android have been waiting for this moment, then they'll shortly strike at Apple - a flood of patent attacks.

Apple will start to turn inwards and the market pressure on Cook will intensify. They'll go from looking for that next breakthrough to needing it. Culture will start to change, it may start to buckle.

Apple's core business will be undermined by the commodity players whose technology will rapidly catch up and overtake, assuming Google can get them to work in a common interest. Soon Android devices will be everywhere. If Apple's patent and supply chain protection measures fail, if a concerted patent attack against Apple is successful then this will happen sooner.

At this point, with margins under pressure, markets under attack, the gloss peeling off the Apple logo and the culture starting to decline then the markets will go after Cook - "it was his fault" they'll say. Of course it wasn't Cook's fault, Jobs made the blunder with an excessive focus on creative leadership creating a high margin but unsustainable business.

Cook might pull out a miracle and maybe they've got some tech they've been keeping back in preparation to dazzle. Maybe he'll help Apple create that sustainable company which balances both innovation and commodity by dealing with the constant flow between them.

I doubt it, markets never think that hard nor give that much time. Cook is more likely to end up as the next Leo Apotheker ... and as for Apple well it didn't learn the lesson first time around, I don't suspect Google and Amazon will let it have a third go.

That's my view, that's my reasoning and that's why I made my prediction. Of course, the prediction assumed Jobs would still be the CEO and maybe Cook can change things by correcting those errors. Should be interesting to find out.

-- Update 13th February 2014

One of the key parts of the above scenario depended upon an aggressive share buyback in order to sustain market value / perception. I was expecting this to be around $100 billion. It turns out that buyback is much less than I anticipated (around $54 billion in the last two years) though Icahn was pushing for closer to $90 billion. This cutting back on the buyback is a fabulous move and gives AAPL a lot more breathing room. Cook is doing an excellent job.

-- Update 17th January 2015

Cook still continues to perform an outstanding job. There's the usual grumbles about the "lack of innovation" along with certain investors demanding a "larger cash buy back" but Cook has played a strong game, focusing more on the growth of the ecosystem, using supply chains effectively ... it's all good. Really impressive and adds many years to that company.

-- Update 30th April 2016

Cook has been truly remarkable. Apple is in a stable and strong position. Obviously some investors are unhappy about not getting big share buybacks or the lack of stellar growth but since they are just interested in a quick buck who cares. Well done Cook. Exceptional.

Culture eats strategy ... where's the data?

I find irksome the management mantra that is commonly spouted of "Culture eats strategy for breakfast" because no-one ever seems to be able to justify the statement with data. I thought I'll pen a few thoughts on this.

An organisation consists of a mass of people, activities and practices combined with reserves of physical, financial, human and social capital. It's the interaction of the former three which impacts the latter either positively or negatively.

Culture results from the interaction of people with social (e.g beliefs, values, reputation) and human (e.g. skills, knowledge, myths) capital. In much the same way, the business itself can be described through the interaction of people, activities and practices with various forms of capital.

Strategy, is simply a plan of action, an intention and an aim e.g. it's the act of trying to achieve a particular goal or result. Either something has a strategy or we leave it to chance, randomness and accident.

We often talk about product strategy, marketing strategy, business strategy and organisational strategy but equally (if not in many cases more) important is cultural strategy. If you don't aim or plan to develop a particular culture, you'll end up with something by accident and that is not necessarily a good thing.

In recent years, the creation, building, "gaming" and planning of culture has become an increasingly more visible topic. Few have highlighted this trend as much as Zappos and Tony Hseih's work on delivering happiness. Be under no doubts, you can plan to build a specific culture.

Once a culture has formed it can certainly impact what business, product and marketing strategies you can effectively deploy in much the same way that past product strategies often impact future product strategies through inertia such as concerns over cannibalisation etc. In some cases, a future product strategy may require you to plan a new culture by spinning-off a group from the main corporate body.

As a rule of thumb your future strategies are impacted by today's strategies.

Whilst I can see some modicum of merit in bland arguments such as culture trumps products in certain industries, the culture eats strategy argument appears entirely misguided because you can plan to create or change a culture. Your strategy might require you to create a new group, to focus on happiness or to game the system - it doesn't have to be random or accidental.

To cut a long story short, the "Culture eats strategy" statement hypothesises that :-

unplanned, random and accidental [lacking strategy] culture eats for breakfast having a plan, intention or aim [for culture].

... I'm sorry I don't buy that, especially unless backed up by considerable amounts of data to counter examples such as Netflix and Zappos which show the opposite.

The counter hypothesis is that having a strategy for culture, organisation, business, product, marketing etc is better than not having one i.e. strategy eats all for breakfast, lunch and tea. In other words having a plan of action, aim or intention to achieve a goal is better than relying on randomness, accident and fate to do the same.

Now, the counter hypothesis would appear to be an obvious truth which is dangerous in itself. So, I'll start the process of collecting data and let's find out whether the "Culture eats Strategy" brigade have a leg to stand on. I doubt they do but then I might be pleasantly surprised.

Strata Conference

The O'Reilly Strata Conference NYC has now finished and I have to say it was a blast. The standard of speakers, corridor chat and the general environment was exceptionally high. If you're interested in speaking, they've already opened up the request for proposals for the Feb'12 event, so get writing.

There was something magical about the event in NYC created by a convergence of people, technology and ideas. I haven't seen a conference with this much buzz and excitement since ETech. You can guess that I was truly impressed, it was O'Reilly at its finest and that's a tall order given the very high standard of their conferences. If you missed the conference, then you can find many videos from the event on the O'Reilly channel.

I was also fortunate enough to be asked to speak, the video of my talk is below. In my session I covered commoditisation, innovation and the role of big data by examining some of my new research into the evolution of organisations. As per normal, the title of the talk is my usual Situation Normal, Everything Must Change and the talk itself is different from any other previous example i.e. the title applies to the talk itself.

By the way, if you have enjoyed my talks and you're interested in helping out with my research then please take 20 minutes to complete my online survey, as that would be really appreciated.

OSCON 2010: "Situation Normal, Everything Must Change"

The abuse of innovation.

Innovation is a term which is widely abused and this abuse prevents us from seeing patterns in how business activities evolve.

It is difficult to see what changes when everything is called an innovation in the same manner that it's difficult to see the difference between commodification (assignment of economic value) vs commoditisation (shift from imperfect to perfect undifferentiated competition) because of the catch-all nature of the term commodification (i.e. it's used to mean both).

Take for example the utility provision of computing infrastructure (as per Amazon) - is it an innovation?

When it comes to computing infrastructure, the innovation of modern computing probably started with the Z3 in 1941. This act of innovation created an entirely new class of activity - computing infrastructure - which has evolved over time through various stages with custom built examples (LEO etc), products (IBM 650 and onwards) and eventually led to commodity and utility provision. For reference, the full cycle is innovation, custom built, product (with rental services) and commodity (with utility services).

Two things should be noted, firstly that the pathway of evolution is common for activities (and knowledge) though it's not a time based sequence. Secondly, the innovation of the Z3 created a new class of activity rather than evolved an existing class (as with the first phone, the first radio, the first ...)

When it comes to the shift from products to utility, this simply represents an evolution of an activity and not the creation of a new form i.e. infrastructure existed before Amazon. However, it is perfectly true to say that this evolution enables (through creative destruction) and accelerates (through componentisation) the innovation of higher order systems i.e. as infrastructure has evolved we've seen an explosion of innovation in big data, mash-ups etc. This is perfectly normal as commoditisation (the common term used to describe this evolution) creates a cycle with innovation.

So, we have a difference between innovation of a new activity and evolution of an existing activity - both of which we unfortunately call innovation.

To complicate matters there's also the consumer and provider perspective. Whilst electricity is a commodity provided through utility services to consumers, behind the interface (the plug) has been a world of innovation of novel activities (wind farms, solar power, geothermal etc) aiming to create some form of operational advantage. However, it is worth noting that this provider innovation doesn't suddenly turn a consumer commodity into an innovation.

Finally we have terms like sustaining and disruptive innovation. As an activity evolves, in many cases changes to the activity (such as feature differentiation in the product stage) are sustaining and occasionally they are disruptive.

When an activity evolves across a boundary i.e. shifts from products to utility services (as with cloud) then this shift is generally disruptive because the incumbents have huge inertia to the change caused by their past success in the previous stage of evolution (i.e. product or rental vendors).

So the pattern we have is :-

1. Innovation of a genuinely new activity which is distinct from the evolution it enables.
2. Evolution of an activity to custom-built, product (rental) to commodity (utility services). This process is commonly called commoditisation.
3. Sustaining changes dominating within domains (i.e. product)
4. Disruptive changes dominating between domains causing a discontinuity with the past (i.e. product to utility services)
5. Enablement and acceleration of the innovation of higher order systems through commoditisation of lower order subsystems (i.e. creative destruction and componentisation)
6. A difference between consumer and provider perspective.

Now, the problem with the abuse of the term innovation is we end up with :-

1. Breakthrough Innovation
2. Feature, Product and Service Innovation
3. Sustaining Innovation
4. Disruptive Innovation
5. Loads of Innovation (paradigm shift etc)
6. It's my product, of course it's an Innovation ...

We normally shorten this to Innovation, Innovation, Innovation, Innovation, Innovation and Innovation.

Or in other words Innovation.

You have no hope with spotting the pattern under such circumstances and it's no wonder that people get confused with this subject. This has severe impacts on management practices but that's a post for another day.

As for Amazon's EC2, it represents an evolution of an existing activity which is disruptive, will enable breakthrough innovation of higher order systems and for the provider has probably involved a mix of different types of innovative pursuits in operations.

I hate to give up on words, however "innovation" has become so widely abused as to be meaningless. For the future I'm tempted to use the word "Genesis" to describe the creation of a new activity and to put "innovation" in my book of pointless words along with "Cloud" etc.

Hosting Con Keynote

I was very fortunate to be asked to give the opening keynote at Hosting Con 2011 covering commoditisation, business evolution, leadership and what the various tactical plays in the cloud computing space mean to hosting companies. The audience was fantastic, I had a great time and despite using excessive numbers of slides, no-one was hurt in the process.

Continuing on the theme from my OSCON tutorial, I've uploaded a summary set of slides which are highly condensed but give a taster to what we covered.

Alas, there's no video and as per usual I'm six years into writing my book and around 30% of the way there. The subject matter keeps on giving me more areas of interest to explore, so don't hold your breath for me to finish any time soon.

Summary of Hosting Con 2011 keynote

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OSCON Tutorial

I gave a three hour tutorial at OSCON on innovation, commoditisation, business evolution, organisation, leadership and various tactical plays in the cloud computing space. The talk was a blast, I really enjoyed it and judging by the feedback it hit some home runs with many of the audience.

However, the presentation is 1,041 slides long and so - I'm not uploading that or creating a video. Instead I've made a summary presentation which covers the main points.

Be warned, it's highly condensed.

Situation Normal Everything Must Change

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Is Microsoft's biggest enemy … Microsoft?

Last year at OSCON, I examined mechanisms by which a company could use technology evolution to disrupt an existing player with minimal fear of retaliation. To quote myself :-

"it's the incumbents existing model which will protect you"

This year at OSCON, I'll be giving a three hour tutorial which will explore the entire subject of organisational warfare in far more detail. To give a taster of what is to come, I thought I'd expand upon some of the reasonings behind the above statement.

Anyone who has been following my public presentations over the last seven years or has been exposed to my exploration of this subject over the last decade+ will be well versed in much of this practice. For those uninitiated in this field, I'll start with some basics.

All business activities evolve through a common lifecycle and Cloud Computing is simply an example of this. Unfortunately, whilst we know how things will change, we cannot say when. The pattern of evolution is independent of time which is why the lifecycle graphs that I use have no time axis. But then they could never have a time axis, the future is an information barrier we cannot see past.

Fortunately, there are also barriers to the process of evolution and these give us a sense of when things will happen. In order for an activity to evolve from the domain of products to that of utility services then the following four factors are required - concept, suitability, technology and change in attitude. These factors are our "clue" that change will happen.

So we can predict how things will change, just not when - at least not with any great accuracy.

As any business activity evolves along its lifecycle its characteristics change from more chaotic (e.g. appearance of constantly changing, highly uncertain) to more linear (e.g. appearance of being defined, predictable, measurable). Using this change of characteristics we can develop organisational models which cope with evolution. An example of this is the Innovate-Leverage-Commoditise (ILC) pattern which can be found with many cloud companies.

So we can predict what will happen and though we can't predict precisely when, we can design an organisation around evolution.

There are two tactical plays that I'd like to discuss which can be used in such an environment. The first is around creative leadership, think Steve Jobs' Apple. The other is around disruptive leadership for which the best example would probably be Amazon.

Amazon is a company which rarely seems to create a new activity but instead specialises in commoditising activities and disrupting existing players. Infrastructure existed before EC2, book distributors existed before Amazon.com and the paperback existed well before the kindle. Amazon is extremely good at the disruption game.

To illustrate this disruption play further, figure 1 provides a rough tactical map of Salesforce. Whilst the incumbents are firmly entrenched in the product world for provision of CRM (& sales automation), Salesforce has commoditised this activity through provision of a standardised service. It also appears to be operating an ILC pattern i.e. core services around which a growing ecosystem is used to encourage innovation and identify new successful patterns which are then subsequently commoditised to core services - hence innovate, leverage and commoditise. This model is little different from Amazon's play in the infrastructure space.

Figure 1 - Tactical Map of Salesforce (click on image for higher resolution)

On closer inspection, Salesforce seems to be doing more than just commoditisation with an ILC pattern, as can be clearly seen from Radian's 6 acquisition. They also seem to be operating a tower and moat strategy, i.e. creating a tower of revenue (the service) around which is built a moat devoid of differential value with high barriers to entry. When their competitors finally wake up and realise that the future world of CRM is in this service space, they'll discover a new player dominating this space who has not only removed many of the opportunities to differentiate (e.g. social CRM, mobile CRM) but built a large ecosystem that creates high rates of new innovation. This should be a fairly fatal combination.

But, how is Salesforce able to get away with this? Why was it that Amazon and not a hosting company created this future world of infrastructure provision? The answer would appear to be … inertia.

The existing players in the CRM world are stifled by their very own success in the product world. This past success creates an inertia barrier to change. Whilst the causes of the inertia barrier can be traced back to the early stages of a companies formation, by the time a company is of a reasonable size it is often embedded in the organisation, culture and reinforced by external financial markets. Figure 2 provides an overview of this.

Figure 2 - Causes of Inertia (click on image for higher resolution)

So, back to the question about Microsoft. Whilst Microsoft is now making some strong moves into the service world, the problem for MSFT is this space is being even more aggressively commoditised through open plays. Whether it's VMware's necessary play into open source platform with CloudFoundry or the Openstack attempt to out-commoditise Amazon's out-commoditising of the existing industry.

Both efforts attempt to exploit the natural end state for ubiquitous and well defined IT activities i.e. good enough components provided through a marketplace of providers based upon common open source reference models. Both efforts will seek to create higher order revenue streams such as assurance, exchange, marketplaces and brokers alongside the normal business of being a service provider. 

Whilst MSFT has made much of a fanfare about its recent moves into the cloud, it was a probably a significant internal battle for MSFT just to make the change from products to services. However, this new world is likely to be rapidly commoditised to marketplaces based around open source and hence the real question becomes whether MSFT will be able to make the further change necessary to survive in that world?

Microsoft's future business should be intertwined with open source in the domain of utility services. Unfortunately, the last group of people who are usually willing to accept such a change are those who have built careers in the previous domain e.g. products. The bad news for Microsoft is that group probably includes a large chunk of its own organisation. Hence Microsoft itself is probably its own greatest threat to future survival.

Or as the great Bill Gates once noted:-

"Success is a lousy teacher."

That's one of those basic lessons which often gets forgotten in business. In this world of competition, there are two fronts to fight on. The external front includes those competitors who attempt to either gain a creative leadership position or to disrupt your existing model. The other front is internal and against your own past success.

Which is why in my latest research I've been looking into the web 2.0 world to see if we can't find techniques, strategies and methods for managing IT and the business more effectively in a continually changing world. Of course, I already know that there exists significant competitive advantage in organisational design and the application of cybernetic management as was demonstrated through my successes, failures and experimentation with Fotango during '01-'07. The real question for me is how widespread have equivalent practices become and who is pushing the envelope with culture, organisation, ecosystems and a complex adaptive approach?

-- Update 25 August 2013

Some two and bit years later, the New York Times has published an article on "Needed at Microsoft: A Catch-Up Artist".  The article talks about how “Microsoft does have a financial problem, and it’s been the fear of losing those massive profits from Windows and Office” i.e. inertia and goes on to propose they need a catch-up artist. 

When I wrote the above post in July 2011, these concepts and how to play them had been well established for many years (I personally had used the inertia of competitors as an advantage in Fotango in 2005 and Canonical in 2008).  Inertia is of course, highly problematic if a change is unpredictable (e.g. a change in value networks such as cable versus hydraulic excavators) and this will often lead to what is called "Disruptive Innovation".  However, corporate inertia is more than solvable if you are aware that a highly predictable and inevitable change is going to hit you. 

What I've subsequently discovered is that most companies don't seem to be aware of highly predictable changes and are often disrupted by things which shouldn't disrupt them. Yes, these changes get lumbered under the term "Disruptive Innovation" but in reality they are a class of highly predictable changes which were defendable against.  Cloud computing is an example of this.

Being disrupted by cloud (something which was predicted back in 1966) and was screaming loud in terms of weak signals in the early to mid 2000s is pretty shocking.  This is an issue beyond inertia (and denial) and it is better described as corporate blindness. 

From my experience, corporate blindness is fairly rife. The impact can be reduced through mapping of a landscape or other mechanisms to improve situational awareness especially when combined with some understanding of economic play.  Whilst I like the NYT article, in today's competitive landscape just being aware of inertia and that your own success inhibits your future survival isn't going to enable you to compete against some of the tough players out there.

Oh, and don't get me started on OpenStack.

-- Update 12th February 2015

Microsoft seems to be really turning the corner, they've increasingly adopted a more open route and seem to be overcoming inertia. This is fabulous to see. They've a top notch CEO in Satya Nadella.

Tim Cook has done a tremendous job with Apple, rebalancing it to a more ecosystem focused future. Truly exceptional CEO in my book and up there with Jeff Bezos.

Oh, and don't get me started on OpenStack. What a wasted opportunity.

IT Extremists

The problem with any transition is that inevitably you end up with extremists, cloud computing and IT are no exception. I thought I'd say a few words on the subject.

I'll start with highlighting some points regarding the curve which I use to describe the underlying transition (evolution) behind cloud. I'm not going to simplify the graph quite as much as I normally do but then I'll assume it's not the first time readers have seen this.

Figure 1 - Lifecycle (click on image for higher resolution)

The points I'll highlight are :-

1. IT isn't one thing it's a mass of activities (the blue crosses)
2. All activities are undergoing evolution (commonly known as commoditisation) from innovation to commodity.
3. As activities shift towards more of a commodity, the value is in the service and not the bits. Hence the use open source has naturally advantages particularly in provision of a marketplace of service providers.
4. Commoditisation of an activity not only enables innovation of new activities (creative destruction), it can accelerate the rate of innovation (componentisation) of higher order systems and even accelerate the process of evolution of all activities (increase communication, participation etc).
5. Commoditisation of an activity can result in increased consumption of that activity through price elasticity, long tail of unmet demand, increased agility and co-evolution of new industries. These are the principle causes of Jevons' paradox.
6. As an activity evolves between different stages risks occur including disruption (including previous relationships, political capital & investment), transition (including confusion, governance & trust) and outsourcing risks (including suitability, loss of strategic control and lack of pricing competition.
7. Benefits of the evolution of an activity are standard and include increased efficiencies (including economies of scale, balancing of heterogeneous demand etc), ability of user to focus on core activities, increased rates of agility and tighter linking between expenditure and consumption.
8. Within a competitive ecosystem, adoption of a more evolved model creates pressure for others to adopt (Red Queen Hypothesis).
9. The process of evolution is itself driven by end user and supplier competition.
10. The general properties of an activity changes as it evolves from innovation (i.e. dynamic, deviates, uncertain, source of potential advantage, differential) to more of a commodity (i.e.repeated, standard, defined, operational efficiency, cost of doing business).

The above is a summary of some of the effects, however I'll use this to demonstrate the extremist views that appear in our IT field.

Private vs Public Cloud: in all other industries which have undergone this transition, a hybrid form (i.e. public + private) appeared and then the balance between the two extremes shifted towards more public provision as marketplaces developed. Whilst private provision didn't achieve (in general) the efficiencies of public provision, it can be used to mitigate transitional and outsourcing risks. Cloud computing is no exception, hybrid forms will appear purely for the reasons of balancing benefits vs risks and over time the balance between private and public will shift towards public provision as marketplaces form. Beware ideologists saying cloud will develop as just one or the other, history is not on their side

Commoditisation vs Innovation: the beauty of commoditisation is that it enables and accelerates the rate of innovation of higher order systems. The development of commodity provision of electricity resulted in an explosion of innovation in things which consumed electricity. This process is behind our amazing technological progress over the last two hundred years. Beware those who say commoditisation will stifle innovation, history says the reverse.

IT is becoming a commodity vs IT isn't becoming a commodity: IT isn't one thing, it's a mass of activities. Some of those activities are becoming a commodity and new activities (i.e. innovations) are appearing all the time. Beware those describing the future of IT as though it's one thing.

Open Source vs Proprietary : each technique has a domain in which it has certain advantages. Open source has a peculiarly powerful advantage in accelerating the evolution of an activity towards being a commodity, a domain where open source has natural strengths. The two approaches are not mutually exclusive i.e. both can be used. However, as activities become provided through utility services, the economics of the product world doesn't apply i.e. most of the wealthy service companies in the future will be primarily using open source and happily buying up open source and proprietary groups. This is diametrically opposed to the current product world where proprietary product groups buy up open source companies. Beware the open source vs proprietary viewpoint and the application of old product ideas to the future.

I could go on all night and pick on a mass of subjects including Agile vs Six Sigma, Networked vs Hiearchical, Push vs Pull, Dynamic vs Linear ... but I won't. I'll just say that in general where there exists two opposite extremes, the answer normally involves a bit of both.

The cloud ... it's a triangle, damn it.

In 2006, I talked about the growth of utility computing and how distinct industries were being created. I used the ideas of componentisation to subdivide the computing stack into discrete layers.

In 2007, I formalised these three layers into hardware, framework and software. I used the following diagram at various conferences (from Web 2.0 to OSCON to FOWA) to describe utility computing as the transition of the computing stack from a product to a service based economy.

The shift of the computing stack

Then in early 2008, I added a bit more colour to my computing stack diagram to tart things up. But, alas the simple days of utility computing have been replaced by the cloud and its confusion of metaphors.

So, I was not that surprised to receive a very tongue in cheek email telling me that I was wrong about the cloud because it is a triangle (see diagram) .

How the cloud has changed ...

Apparently the source of this triangular insight is Michael Sheehan's post.

Oh no, did I got the colour, shape and names wrong? Who cares, it's not important unless of course the Appistry joke about Michael trademarking the triangle becomes true. In this case just use the rectangle (it's prior art and creative commons).

Alternatively, why not have a go and try experimenting with circles, dodecahedrons, the colour purple and paisley? Believe me you can't make any more of a mess than today's thought leaders.

As for my predictions for the future of cloud in 2009/10. Well, more and more analysts will start talking about the shift of IT from a product to a service based economy, there will be increasing user pressure for second sourcing options and growing demand for standards at various layers of the computing stack based upon operational open sourced code.

Don't ask me what name or shape it'll be, but as for the colour then judging by how much conflict there is in the cloud I'll take a stab at blood red.

Why the cloud is unavoidable.

This is really old stuff, but I feel it's worth repeating.

The importance of "cloud" computing to business is far beyond simple cost savings, allocation of resources, capex to opex conversion and economies of scale. These are the obvious reasons for considering the cloud and they are little more than a follow my leader game caused by the commoditisation of IT. As more competitors adopt the cloud it will create cost competitive pressures for others to follow. Consumers of IT will need simply to adapt to this change in order to retain their relative competitive positions (this is known as the red queen effect).

It's a very old merry-go-round caused by the usual transition of the once novel and new field of IT infrastucture to more of a commodity. It will have all the trappings of past transitions from the cries of users for second sourcing options, the battles over standards and portability, the usual formation of exchanges, brokerages, marketplaces and the confusion created by vendors as they attempt to prevent their industry being commoditised.

However buried in all this is one truly interesting aspect known as componentisation. From the work of Herbert Simon's and his theory of hierarchy, we know that the speed of evolution of any system is directly related to the organisation of its subsystems. Take a moment to consider how fast it is to build an application today using a database and a development platform and then compare this to how slow it would be to build the same application if you had to first start designing the cpu, I/O and memory.

Componentisation can make an incredible difference and the more organised the subsystems are, the faster it is to build new and adapt old systems.

The computing stack, from the applications we write, to the platforms we build upon, to the operating systems we use are now moving from a product to a service based economy. This change can be clearly seen from a quick scan of what is hot today. Software as a Service, Web Services, Mashing up Data Services, Hardware as a Service, Service oriented architecture ... it's all the same thing.

The shift towards services will also lead to standardisation of lower orders of the computing stack to internet provided components. A consequence of this will be an acceleration in the speed at which new IT systems can be built and modified. The world of IT and business on the web is about to get a whole lot faster.

It should be remembered that the battle for survival of any company revolves around the non-trivial task of balancing the needs of adaptation (changes to the market, the red queen effect) and innovation (creative destruction). However, it is these two effects of adaptation (through maintaining cost competitiveness and matching increased competitor agility to adapt to changes) and innovation (an ability to bring new ideas to market more quickly) which will force any business to choose cloud.

You don't have a choice, you never did. The cat is well and truly out of the bag and the old way is in decline. If you think that "cloud" is simply about more efficient and lower cost provision of IT then prepare yourself for a rude awakening.

You might think that cloud computing won't effect you, but it will if you use any form of IT infrastructure. Unfortunately, at different layers of the computing stack, various companies are preparing a gilded cage for you to walk into.

You should already be thinking about the cloud and your first words to any vendor should be:-

• "Show me the alternative providers running a similar service not owned by you and how easy is it to switch between your service, their service and one I want to run myself?"


• "Am I dependent upon any particularly vendor with these services?"

Note for Self - that's a lot of talking.

For a number of years, I've been talking about how activities transition from innovation to commodity or more simply put how yesterday's hot stuff becomes today's boredom.

I undertook a piece of research into this field and found what appears to be an S-Curve relationship between the ubiquity (how common an activity is) and the certainty of an activity (approximated from the quantity of information published)

Now every presentation I give is slightly different. Each mashes up (thanks to Dennis for that) different parts from earlier presentations as well as new elements from my research. Well, I'm considering an entirely new style of presentation, so I've decided to write down the list of the themes I've covered and to use this as a basis for my new work. I thought, I'd keep a record of the list here (see below).

It's a lot, however there is a whole bunch of stuff that I've known about and barely touched upon. So next year, I'm going to provide a high speed, kitten based, mash-up of a presentation. It will contain an initial introduction and then fifty five themes, with the audience choosing which ones they want. I've got a nifty new way of doing this including bonus sections ... should be fun.

I've also been asked by numerous people whether I'm coming back to the U.S. to present again? I will probably do a presentation or two, on behalf of Canonical, for various cloud issues but regarding my management theory presentations that's strictly U.K / Europe based. The cost of travel and accommodation in the U.S. is simply too expensive.

Theme List

1. It's not just products that get commoditised but processes and all other forms of activities.
2. How an activity's characteristics change from innovation to commodity, no matter what it is.
3. Why management is complex and why there are no magic bullet solutions.
4. Why outsourcing often fails.
5. Why good management often leads to the death of a company.
6. How companies evolve between various stages from disorganisation to getting it together and finally "we need more innovation".
7. The inefficiency of organisational structure where similar types of activities are grouped together (such as marketing and IT) rather than the stages of an activity's lifecycle (transitional, commodity, first mover)
8. Why you need to constantly adapt to changes in the market place in order to just stand still and survive today (the business equivalent of the Red Queen Hypothesis)
9. The difference between commodification and commoditisation.
10. Why you need to constantly innovate in order to survive tomorrow (creative destruction)
11. Why commoditisation is both friend and foe.
12. Why change is the norm.
13. Why you need to constantly balance creative destruction and adaptation in an organisation and how this leads to a paradox of order and disorder. The innovation paradox.
14. Why Google's 20% rule was an efficient way of balancing this paradox and a continual source of competitive advantage.
15. Why marketing and branding for a vendor constantly creates a disadvantage for their consumers.
16. The shift of IT from a product to a service based economy (what we used to call utility computing many years ago, and now is unfortunately called cloud computing.)
17. Why open source standards are an essential part of our future.
18. Why organisations only exist in the intersection between people and activities and how traditional forms of management are inefficient.
19. The need for more dynamic methods of management.
20. The limits of ROI and why it is only suitable for certain stages of an activity's lifecycle.
21. Why you can't plan the future and why every organisation needs some chaos.
22. Why today's organisational structures often fail people and why innovation is not everyone's job.
23. How strategy varies with lifecycle.
24. Why innovation markets will only work for post-event inventions and discoveries.
25. The limits of open source and closed source technology and the domains where those techniques are particularly strong.
26. Why fortune favours the brave and how the future value of an activity is inversely proportional to the certainty we have about it.
27. Why transparency and portability matter in cloud computing.
28. Why you have no choice in the long run over whether you adopt cloud computing.
29. Why fuzziness in processes is valuable information.
30. Why single methods of project management (for example six sigma, prince 2 or agile) are inefficient and often harmful
31. Why getting it wrong doesn't matter as long as everyone else is getting it wrong.
32. Why web 2.0 is important and why now.
33. Why commoditisation leads to more innovation and a faster rate of evolution (extension from Herbert Simon's work on the Theory of Hierarchy)
34. The difference between innovation and product or service innovation (whether radical, incremental or disruptive)
35. Why KPI's and attempts to make management easy can seriously damage your wealth (extension from Ashby's law of Requisite Variety)
36. The three accelerators of innovation in web 2.0 - network effects, componentisation and bridging the divide between opportunity and ability.
37. How the growth of 3D printing and the commoditisation of manufacturing processes will create new languages.
38. Why IT organisations are under increasing organisational stress as they try to balance the needs of commoditisation and innovation.
39. Why competitive life just seems to get faster and faster.
40. Why the transition from one domain (such as products or services or bespoke) to another causes major disruption.
41. The difference between ideas, invention, discovery and innovation.
42. The effects and failure of organisations to deal with the commoditisation of human, physical and social capital.
43. How social networks allow us to challenge traditional views of management.
44. Why organisations need pioneers, colonisers and town planners.
45. Why the role of the enterprise architecture is so important and never completed.
46. Why organisations should use both X & Y managers and something in between (the XY Manager).
47. The problem with patents and why the length of term of a patent should vary according to the innovation and how long society could be expected to independently discover it.
48. Why tailor made can be bad for the consumer.
49. Why failing and gambling are important management traits.

The other six ... well, I've got to have some surprises. However, just like the other stuff in this list, they are not new ideas just old ideas repackaged.

Finally .... I have connection again!

After five weeks, I finally have connection again. There is lots I'd like to talk about but it's late, so I'll have to wait until this weekend.

However, I will note that there seems to be a growing argument that open standards will provide portability in the cloud world. This idea is seriously flawed and there is a far simpler way to ensure portability between one cloud environment and another. The solution is for both providers to offer an identical service.

The simplest way this can be achieved is if the standard for the service is not a written specification but an operational open sourced stack built with portability in mind. It doesn't matter what layer of the computing stack you're talking about.

I used identical because if the standard is an open sourced stack then there is nothing preventing a provider making operational improvements in the code whilst still maintaining exactly the same functionality. This is why GPLv3 and not AGPL is so important for the cloud world.

Back in 2006-7, I described this concept as an open sourced standard but you can think of it as an open pattern (thanks to Doug Neal) with competition around service provision. By providing the service as an open sourced standard, you can not only solve the issue of portability but also provide a faster means of implementing and hence achieving a defacto standard.

Of course a focus on service provision is in line with the shift of IT from a product to a service based economy, which is what cloud computing is really all about. I covered many of these subjects back at OSCON in 2007.

Whilst none of these ideas are new, the lack of portability is a result of the normal jostle of competitors in an emerging market. This will continue to provide a clear stumbling block for adoption and prevent the formation of functioning exchanges and brokerages.

I suspect that open standards will continue to be cited as a possible solution but the problem with these standards is that they define what can be done, not what can't be done. Product differentiation is the mortal enemy of portability.

Of course, you could achieve portability with a proprietary stack but only if consumers and providers are willing to sacrifice a major element of strategic control to a technology vendor. I wouldn't be surprised if Microsoft achieves this with Azure.

Of course, the simplest answer to all of these problems is open source. In less than a decade, I suspect you will find that the entire cloud world is either based upon open sourced stacks with provider competition around Price and QoS or we'll have ended up with government regulation.

How do you want your cloud?

As I've said before, I don't make predictions. So here is my non-prediction for next year.

When the Azure services platform is launched, we will see the creation of an ecosystem based upon the following concepts:-

1. build and release applications to Microsoft's own cloud environment providing Azure and the Azure Services.
2. build and release applications to a number of different ISPs providing Azure and specific Azure Services (i.e. SQL, .Net and Sharepoint services).
3. purchase server versions of Azure and specific Azure services for your own infrastructure.
4. buy a ready made scaleable "Azure" container cloud from Dell, for all those large data centre needs of yours.

Since the common component in all of this will be the Azure platform itself, then migration between all these options will be easy as pie through the Windows Azure Fabric Controller. If this happens, then the lower orders of the computing stack will end up becoming less visible and the hypervisor wars will become an afterthought. It could be Game, Set and Match to MSFT for the next ten years.

This vision however is only possible, if the network effect parts of Azure actually work (I'll post about that some other time) and the advantages of componentisation through an acceleration in business innovation are realised.

Of course, all of this will create a huge dependancy for all parties concerned on this technology layer but without a clear cut alternative, the pressure to adopt could be immense. The real battleground for the "cloud" has always been in building an ecosystem around the framework layer of the computing stack.

Anyway, this is not a prediction but simply what I would do in order to create a closed marketplace. Naturally, I'd prefer the market to be open and it'll be interesting to see how this pans out.

Interoperability is not enough

Sam Ramji said: "My team's focus has been on making sure that this platform treats open source development technologies as first-class citizens" and here are some of the quoted examples :-

• A developer using the Eclipse IDE can write a C# application that runs on Windows Azure
• Gallery, the leading PHP photo application, can access Windows Azure cloud storage
• A blog engine hosted on Windows Azure can authenticate users with OpenID.

This is excellent news but as I've said many times before, what we require is portability (or what I used to call patration)

In a service world, lock-in is not solved by interoperability alone. You require portability of your code and data from one framework provided by a large computing vendor, to another or to your own machines. This is my basic minimum in order for me to be happy with a cloud service.

This can be achieved with a closed stack (adopted by many providers) or an entirely open framework, however in the cloud computing world the frameworks (Azure, Google App Engine, Zembley, Jaxer, ReasonablySmart, 10Gen etc) are the potential standards that allow for portability & interoperability between these providers. This is what you need in order to overcome the current lack of second sourcing options.

In the service world, specifications and open standards are not enough. In a service world, standards need to be actual pieces of operational code. Whilst a "standard" can be a closed technology, it obviously creates dependencies of all the participants in a marketplace on the technology vendor who owns that "standard".

If you're going to compete on service, compete on service but don't try and convince us that either a proprietary technology is open because it uses some open standards or a proprietary technology doesn't create lock-in in the service world.

There will always be some CIOs who will rush head long into a gilded cage, I suspect most will be considering how to deal with second sourcing issues.

I wandered lonely as a cloud ...

First wander ...

Over the last few days, there has been a lot of to and fro between Tim O'Reilly and Nick Carr over cloud computing. I'm sure more is to follow.

The debate over network effects at the hardware (what is commonly called Infrastructure as a Service) level of the stack (from bare bones to virtualised images to operating system) is of little value to me. The shift of the computing stack from product to services will inevitably accelerate the process by which these lower level orders of the computing stack become invisible. The lower levels will find themselves pushed to a low-margin standardised high-volume business based entirely upon open source.

What interests me is that the argument for portability, interoperability and transparency in the "cloud" will inevitably shift to the framework (development platform, messaging system, database, templating system and so forth) level of the stack (or what is commonly called Platform as a Service).

The framework layer will consolidate to a few large marketplaces with each marketplace based upon a standard framework. A few of these frameworks will be proprietary but most will be open sourced. For each standard framework there will be many homogeneous providers with portability between them.

This framework layer (which Tim hints at) is where the real battleground is. This is where the real network effects are. This is where the trillion dollar company exists. Why on earth do you think I started Zimki back in 2005-7? Why do you think MSFT is releasing Azure?

Anyone still needing help to work out where all this is heading, just think about Ballmer's comment on enabling "Microsoft partners to create their own cloud infrastructure", think about a marketplace of ISP's all providing the same framework, think about how over the last decade the lower levels of the computing stack have become invisible to most developers and then go read my old blog post.

However, a marketplace based upon a proprietary cloud technology vendor has lots of attractions from the acceleration of innovation (through componentisation) to the more mundane capex to opex conversion. James Governor said in a recent tweet that "no amount of assertive statements from thought leaders will prevent customers from adopting proprietary technology". He is absolutely right. This is a gilded cage that some CIOs are not going to walk but rush into.

My only advise is that if you're the CEO of a company and your CIO is talking cloud, find someone with a senior level background in manufacturing to check their reasoning. If you hear the words "lacks second sourcing" then consider upgrading the CIO. It'll pay in the long run.

[For reference, my reasoning for Zimki was derived from Tim's earlier work on Infoware and the Open Source paradigm shift]

[Dennis Howlett has a really interesting piece on this whole topic.]

Second wander ...

When I worked for Canon (2001-2007), along with Zimki, utility computing and open source, I used to write endless reports about the dangers of mobile phones to the camera business, the future of 3D printing & fabrication technologies along with being fairly vociferous against SED. I've always believed it to be dangerous to focus exclusively on the core or with what you are comfortable with. That's a lesson I learned from reading Schumpeter.

This is especially true during recessionary times. It should never be forgotten that such times do create opportunities, not just for industry but government as a whole.

Despite the neocons desperate denials, as we've seen from the banking fiasco, the laissez faire school of economic lunacy has turned out to be a house of cards. However, there is always a silver lining. Our Government appears to be slowly turning away from the mumbled dribblings on money supply of those Chicago School ephors and back to an eminently more sensible and direct Keynesian approach of investment.

This is good news ... assuming it lasts.

Beyond the positive buy-out and part nationalisation of banks and the promises of public building works, the government should look towards bolder measures including the wholesale plunder and pillage of the weakest industrial sectors to the benefit of society.

The building industry and auditing professions are prime-time to be pushed towards nationalisation and bought up on the cheap and invested in. There are lots of measures such as the enforced auction of land banks with unused planning permissions which could be introduced in order to assist with this transfer.

Furthermore, since lots of parents are no longer sending their little darlings to those expensive private schools, a quick dropping of the charitable tax status plus a few extra regulatory burdens should force a few of these schools towards bankruptcy. Picking these up on the cheap would be an excellent way to bolster the national education system. This is to say nothing of the potential to buy-up private hospitals on the cheap.

If the government sets her mind to it, it could make a nice little earner. Despite the nay-sayers professing doom should the government take such action, there will always be plenty of entrepreneurs keen to rebuild after we get through these tough times. A bit of piracy might also help with social mobility, for people to go up others also have to come down.

A Keynesian approach of control, intervention and ruthlessness and a mix of the skull and cross bones combined with a healthy dash of "ahoy there, me mateys!" is what we need. In the long run, it is also the only sensible way forward.

[Update Nov 2012 - Alas those pesky monetarists weren't quite as dead as I hoped QED QE.]

Third wander ...

As any biologist or sociologist will tell you, the fastest growth of any population is normally the generation before it collapses due to environmental degradation. The "golden" age always happens just before the fall. It happens with populations from bacteria to wolves. It also happened with the Mayans and the Romans.

We're next.

The laissez faire ephors would have us praying to the invisible fable that is the pareto optimality whilst we burn and plunder natural resources and ponder how we can turn the vast reserves of methyl hydrates into a viable source of fuel. I'd rather trust to reason than such gods of future-discounting lunacy.

This is why the latest debate that the worldwide limit of 450 ppm CO2 (a level which will cause runaway climate warming) is not achievable in economic terms is just madness. We've discounted the future long enough. Without a hospitable environment there are no future trillion dollar companies. Without a hospitable environment there is no economy.

Our choice is simple. Either we choose to do something on a grand enough scale or we choose to let nature decide our fate. Whilst many are hopeful that serendipity will conjure up some magic to solve our problems, I fear that many Mayans and Romans probably did the same.

Whilst I'm all for a gamble, if the upside is more gadgets and the downside is possible extinction ... it just doesn't seem worth it.