The King is Dead, Long Live the King

Much has been written recently about the continued success of powerful technology companies such as Google, Facebook and Apple. These companies are reshaping the entire landscape of computing and telecommunications; how we talk to one another, how we gather information, how we entertain ourselves, and are leading the way toward a new way of human connection and interaction. As these companies ascend in prominence, many pundits have been simultaneously predicting the demise, and possible death, to the once all-powerful tech giant Microsoft. The PC is being replaced by tablets, smartphones and tablet/smartphone hybrids. As that happens, these pundits predict, the billion plus users of the Windows OS will stop buying from Microsoft and will begin using operating systems developed by Google, Apple, RIM, Nokia and others. This past summer, in an attempt to fight back, Microsoft decided to enter the smartphone business with Kin, which turned out to be one of the most disastrous new product introductions in the history of the technology industry. Microsoft pulled the plug on the ill-fated product less than a month after it was introduced. Again, the pundits had a field day with this news, using it as further evidence of Microsoft's decline. So it might be easy to dismiss the lumbering giant as a dinosaur headed for extinction. But not so fast. At this year's CES, video game consoles, along with smartphones and tablets, are center stage. And no company's video game console is selling more units in the US than Microsoft's Xbox, which moved 1.37 million units in November alone. The new Kinect accessory for the Xbox sold more than 8 million units in its first 60 days on the market. On the smartphone front Microsoft launched its Windows Phone 7, or WP7, in October and according to the company it has sold more than 1.5 million units in the first six weeks. In addition, the WP7 had more than 5000 apps available in the marketplace and reached that number 3 times faster than Google did with its Android OS. The analyst firm IDC says, "it is precisely the broad launch and sure-footed execution that allows us to predict long-term success for WP7 at this early stage." So obviously Microsoft learned a thing or two from its misstep with Kin. Microsoft's search engine, Bing, is now the power behind Yahoo Search and achieved its highest levels of success to date late in 2010, and the company expects Bing growth to continue. And with what might be Microsoft's biggest bet of all, cloud computing, the company seems to be fairing quite well as evidenced by its recent wins of federal, state, and local government contracts. Sure, Microsoft isn't perfect, and it is no longer the industry behemoth it was a decade ago, but it is still a force with which to be reckoned. It is a company with more than a $200 billion market cap and more than $35 billion in cash on hand. And with all of the momentum of the company's smartphones, game consoles and cloud computing, I think it would be unwise to count Microsoft out of the game quite yet.

The Generation Gap is Shrinking When it Comes to Digital Privacy

More and more people, across generations, are learning the hard way that the posting of certain kinds of personal information on social networks can be a bad idea.

As we age, do we become more private?  Do we become more protective as we accumulate more things in our lives, like a reputation built over a lifetime, material wealth or opinions we'd rather not share with the world but only with the closest of friends?

If the results from a new report from technology and market research firm Forrester Research, Inc. hold true, then the answer to these questions is "yes."

Credit social media with helping to bridge the generation gap among Baby Boomers, Gen Xers and even Millennials (to some extent, anyway) on at least one important issue -- digital privacy.

It appears that no matter how old we are, we spend some time worrying about social media-related privacy.  And the older we are, the more time we spend worrying about it.

While 18 to 29 year-olds -- aka Millennials -- are the least concerned (as you might expect since the use of social media is in their DNA), even their privacy concerns increased over a year ago, according to the Forrester report.

Baby Boomers, as you might assume, are the most concerned about social media-related privacy --especially the older boomers, aged 54 to 64.  Their privacy concerns jumped from 32% to 50% in a single year.  Younger boomers (44 to 53 years of age...and includes me!) express somewhat less concern and are more closely aligned with the attitudes toward online privacy as Gen Xers (30 - 43).  With that said, privacy concerns for both younger Boomers and Gen X also increased over 2009.

Companies like Google and Facebook are constantly in the news due to digital privacy issues.  Google recently created a privacy-centric fund and donated $8.5M to it largely as a result of the mishandling of its Google Buzz launch last February.  And Facebook, it seems, is forever digging out of the privacy holes it creates for itself.

Social media is evolving and so too are users' attitudes toward it. Backlash against social networks dictating privacy policies to customers is growing stronger. 

Older Gen Xers aren't too far away from the half way point in their lives.  And as Sid Yadav of VentureBeat points out, it would behoove Facebook to "figure out a middle ground on privacy before its first users reach middle age."

You Know It's Real When It Enters the "Trough"

In August, Gartner Group released its annual Hype Cycle on Emerging Technologies. We here at 3Point Communications were awaiting the release of this year's Hype Cycle because we were particularly interested to find out if cloud computing -- which had been at the "Peak of Inflated Expectations" in 2009 -- would begin its descent into what Gartner terms the "Trough of Disillusionment."

You see, the ultimate goal of any emerging technology is to become an accepted technology as quickly as possible, go mainstream, thus lowering the cost of production. It is then that the investment in the new technology can be recouped and profits realized. This doesn't happen until the emerging technology makes the perilous trip through the Trough.

Some emerging technologies enter the Trough of Disillusionment never to be seen again, such as broadband over power lines, while others, such as interactive TV and speech recognition, are well on they way to mainstream adoption.

It is our belief that cloud computing will quickly become standard operating procedure for businesses and consumers alike, and this was confirmed by Gartner's recent report which has cloud computing going mainstream within 2-5 years. So seeing cloud computing entering the Trough was a welcome sight.

Here are five reasons we think cloud computing is here to stay:

1. It's already here. If you've used a photo-sharing site such as Shutterfly or accessed email on a friend's PC, then you've already tapped into the power of cloud computing. These simple applications, and countless others like them, don't exist on your PC, laptop or mobile device, they "live" in the cloud and are accessed on an as-needed basis. On the business front everything from email to CRM to customer support has migrated to the cloud. Not every company has moved every application from internal IT systems to the cloud, but the trend is well underway and in our opinion inevitable.
2. Cloud computing saves money. When businesses move infrastructure, platforms and software applications to the cloud, they save money. If your core business is not IT, why invest resources, time and money in owning and managing an infrastructure? A good example is Recovery.gov, the first government-wide system moved to the cloud, which expects to save $700,000 in its first budget cycle with more savings to follow.
3. Cloud computing is more secure than people realize. The number one concern among CIO and IT professionals is security when moving a company's data and resources to the cloud. But in many cases, cloud-based security is more secure than a company's internal systems. For example, an Aberdeen Group report found that a company's email security may improve by as much as 53% when moved to the cloud.
4. Going mobile. With the success of Apple's iPad, new tablets hitting the market, smartphones and other mobile devices, businesses and consumers are both accessing information on the go. These devices simply don't have the storage capacity or internal power to house thousands of apps. Rather, mobile devices are portals into the world of cloud computing. And IDC predicts that more than a quarter of a billion smartphones will be sold this year and numbers will increase next year by 10% or more. All will access the cloud.
5. Money talks. Amazon, Google, Microsoft, HP, IBM, Cisco, CA, Oracle and thousands of other companies big and small, are investing billions of dollars in cloud computing. Some, like Microsoft, have made bold claims that cloud computing must be the future of the company if it is to survive and thrive. With this much momentum behind the cloud, it is only a matter of time before it becomes mainstream.

We would interested in your thoughts on cloud computing. Are you there yet? Have you begun the journey? Or is something holding you back?

For the record, 3Point Communications embraces cloud computing and uses cloud-based applications to manage and run our business.

Connecting the Dots

I'm surprised it took so long for the mainstream media to connect the dots on recent acquisition activity here in Silicon Valley. For those of us steeped in both cloud computing and mobile telecommunications, the pattern has been clear for a long time. Nonetheless, I found it encouraging that the Valley's newspaper of record, the San Jose Mercury News, finally reported on the trend in a front page story today.

If you haven't been following the M&A action here in tech's heartland, let me do a quick recap.

• HP just today acquired 3Par for $2.4B after a fierce bidding war with Dell. 3Par's products combine virtualization software and hardware to increase storage capacity and lower operating costs, making them ideal for cloud computing applications. Also this year, HP acquired 3Com, Palm and Fortify Software.
• Intel acquired McAfee on August 19 and then 10 days later acquired Infineon. McAfee makes security software which is a critical element for both cloud computing and mobile telecom. Infineon makes wireless chip sets for three primary markets, security, communications and energy efficiency.
• Google has made a number of smaller acquisitions this year including Aardvark, a social media search engine for $50M, AdMob, a mobile advertising platform that's particularly popular with iPhone app developers, ITA Software, a flight information software company, and just last month, Slide, a social application company.
• In addition, Cisco Systems acquired Tandberg for $3.3B and Oracle acquired Sun Microsystems for $7.4B

The recent Silicon Valley acquisition frenzy, which has already seen five billion-dollar plus acquisitions this year, illustrates two irreversable trends in technology -- cloud computing and mobile telecommunications.

According to the IEEE, by 2014 smartphones and other mobile devices, such as Apple's iPad, will send and receive more data each month than they did in all of 2009. More than 75% of that information will come from Internet traffic and nearly all of the balance will come from audio and video streaming.

A big part of the increase in mobile data will come from cloud computing applications. Utility software (such as maps) will lead the way, followed closely by productivity tools (especially for sales, data sharing and collaboration), then social networking and search.

A senior analyst at ABI Research, a telecom analyst firm in Oyster Bay, NY, predicts that the number of people subscribing to mobile cloud computing applications will rise from 71 million today to more than a billion by 2014.

Asia will lead the way with the largest number of mobile cloud computing app subscribers, but North America will bring in nearly as much revenue because high-paying enterprises will have a larger slice of the pie here.

So it's no wonder that Silicon Valley tech companies are scrambling to acquire companies and technology that will give them an edge in either cloud computing or mobile telecommunications, or both. And if the month of August was any indication, there will likely be several more billion-dollar acquisitions before the end of 2010.

Do You ooVoo?

Skype's announcement of its S-1 filing earlier this week is exciting and welcoming news especially during a period when the global economic picture for the remainder of 2010 is looking rather bleak.  If anything, the announcement was at least a distraction from the Fed's comments that the economy is slowing, the recovery remains sluggish and the threat of deflation looms.  That combined with recently reported unemployment statistics means the announcement of the pending Skype initial public offering (IPO) could not have come at a better time.

The announcement put a smile on my face, but to be honest, it only takes a hint of good news to do that these days.

There are tens of thousands of news stories and blogs posted this week covering Skype's S-1 filing from every conceivable angle.  "Is Skype's Filing Premature?"  "Will Investor's Buy if Customers are Hooked for Free?" "Is the Skype IPO Really Such a Hot Deal?' 

But I didn't see many posts about Skype's competition, specifically in the video communications space. So I thought I'd spend a little time on one competitor in particular.

First of all, I do Skype -- occasionally.  And 100 percent of my Skype calls are of the free video call variety.  That's another thing - Skype as a verb.  "Hey, let's Skype when you get back to the office."  Or, "Skype me when you get settled in Singapore."

You know your company has made it when your company name is used as a verb.  Like Skype. Like Google.

But also like ooVoo, a Skype competitor.  "Do you ooVoo?"   "Why yes, I actually do ooVoo?"

ooVoo is a New York-based video communication service company.  Its customer base pales in comparison to Skype's though the company claims it is adding more than 600,000 customers each month.

The 3Point team has been using ooVoo for quite some time and with great results.

The video and sound quality is truly amazing, for free or otherwise. I encourage you to give it a try.  I find it's a lot easier and more natural to have a conversation using ooVoo's video communications solution than Skype's.  Apparently, so do 8 out of 10 Skype users who participated in an ooVoo blind study.

You can read more about the results of the study here and then you can decide for yourself by downloading ooVoo's free application.

With that said, I'm ecstatic about Skype's plan for an IPO.  Skype released the first public beta version of its software seven years ago this month and since then it has worked doggedly to build a strong global brand and excellent products.  By announcing it's S-1 filing now, it has pumped some life into what is traditionally one of the slowest investment months of the year.  And it keeps 2010 on track as a rebound year for tech IPOs and IPOs in general. 

In a self-serving but related note, if you haven't had a chance to download our eBook on "Communicating as a Newly Public Company," there are some good tips in it and you can get it here.

Cloud Computing is Sitting in the Catbird Seat

Cloud Computing is sitting in the technology catbird seat.  

Earlier this week, two leading technology companies betting their businesses on the promise of cloud computing -- EMC, Inc. and VMware -- reported strong second quarter earnings.

For EMC, this was its third consecutive quarter of record revenue growth.  The company's operating cash flow is at an all-time high.

And server virtualization leader, VMware, exceeded analysts expectations with strong second quarter profit and sales results as well.

Google, who along with VMware constitutes half of the so-called Four Horsemen of Cloud Computing, also announced last week that it too grew second quarter and revenue profits -- although profits fell short of the street's expectations.

On the company's earnings call, EMC execs said that sales of its solutions for building virtualized, private and public clouds will grow this year by about 25 per cent.

VMware's second quarter results and rest-of-year guidance were strong enough to earn a price target increase from the analysts at J.P. Morgan -- from $60 to $70.

And if these cloud developments don't excite, then how about this? Cloud computing is helping organizations climb out of the global economic mess!

How?

Well, according to a new study conducted by international research firm Vanson Bourne, a majority of IT business and decision makers say cloud computing is helping their companies do more with less.

A number of the 600 survey respondents believe that the benefits of cloud computing will result in a 15 percent decrease in their IT budget while others said IT savings could approach 40 percent.

Bryan Doerr, CTO at Savvis, Inc. -- which commissioned the study -- says that two key issues are driving organizations to cloud computing: flexibility and a pay-as-you-go model.

Cloud computing isn't the perfect computing model -- yet.

Security issues remain a concern, for example. But among fewer and fewer organizations as security issues are addressed and resolved.

Not matter how you slice it, Cloud Computing is enjoying the view from its coveted perch.

iPhone sold out before it goes on sale?

The iPhone 4 goes on sale in France next week and they are already predicting that it will be sold out. In fact, SFR, the number two moblile network operator in France, stopped taking advance orders for fear of not being able to fulfill all of the customer requests. Qu'est ce que c'est? Last week, I blogged about a study showing the widespread adoption of smartphones in France. Given the latest prediction of the iPhone 4 rush, it might be time for another survey. The question I have is if the iPhone 4 sells out will that be a blessing for Android phones? HTC, Motorola, Samsung, SonyEriccson all have multiple Android models on the market. Additionally, most of the iPhone 4 reviews that I've read mention Android as already having the functionality to have more that one application running at a time -- something new to the iPhone and a subtle plug for Android. The other question I have is is Microsoft too late to the smarthphone game? Steve Ballmer says to expect phones with Windows Phone 7 in time for Christmas but will there be in anybody left in France that doesn't already have a smartphone? Yes, there is the upgrade market but are users going to change OS unless they've had a bad experience with their current smartphone? Should be an interesting finish to the year.

Smartphones a big hit in France

I came across an interesting article in Les Echos this week. According to a survey by GroupM and SFR, four million French connect to the Internet daily from their smartphone -- that's about one of every thirteen citizens over the age of 15. Mon Dieu! However, only 18 percent of mobile phone users have a smartphone. The moral of this story seems to be if users get their hands on a smartphone they will use them and use them a lot. Orange, with its recent announcement of a range of Android-based phones from Sony Ericsson, LG, HTC and Samsung for less than 49 euros, is well positioned to make customers out of the the 82 percent of French mobile phone users who don't yet posses a smartphone. If the smartphone market booms in France, as it appears to be primed, it will be a welcome boost for the economy overall as carriers, equipment providers, handset manufacturers, mobile content developers and advertisers all stand to benefit.

Tablet Wars

Early in my career I had the good fortune to work with Dick Hackborn while he was still running the LaserJet printer business for Hewlett-Packard. Hackborn was a very smart guy, and one of the business and marketing strategies he most often employed was “never attack a fortified hill.”

What he meant was that it’s rarely a good idea to enter a market that has many competitors, with mature product lines and lots of loyal customers.

I thought of Hackborn’s fortified hill this week when I read that Apple had sold more than 1 million iPads in the first month they were on the market. That’s a lot of tablets. And Apple’s users are among the most loyal in any industry. So you think that competitors would think twice about entering the tablet market. Wrong.

Instead, competitors are entering the market as fast as they can.

Already in the market with Apple is the WeTab from German-based Neofonie, Fusion Garage’s JooJoo, and France-based Archos 9. Other expected entrants into the tablet market are Toshiba, Dell and other PC manufacturers. HP has already given sneak peaks at its Slate, which is Flash enabled (unlike the Apple iPad) and runs Microsoft’s Windows 7. Google also is rumored to be working on a tablet.

Google, Microsoft and the Palm OS (recently acquired by HP) will all vie for the operating system of choice on the new tablets.

But the question remains, what will it take to avoid getting slaughtered as these companies attack Apple’s fortified hill.

The key to success will most likely lie in their ability to create easy to use APIs designed to attract as many application developers possible. Apple has an unbelievable head start with more than 140,000 apps. Most industry analysts are betting that HP will have the best shot at battling Apple for tablet supremacy, while others are leaning toward Google.

Here at 3Point, we provide our clients with business and marketing strategy, so when we view the “tablet wars” through our marketing lens, it’s hard to bet against Apple. After all, they beat all odds when they attacked the fortified hill of MP3 players with their iPod, and won with an all-out marketing campaign. I’m betting they’ll be just as fierce protecting their iPad fortified hill.

Apple v. Google: Battle in the Cloud

I watched with amazement, and some amusement, as more than 300,000 people bought the new Apple iPad on the first day it was available -- and it isn’t even 3G enabled! I find it fascinating to watch people rush to buy the latest and greatest tech gadget the day it comes out knowing full well that it will have glitches and bugs, and will fall far short of versions 2.0 and 3.0 in terms of performance.

I talked with a geeky engineer friend of mine last night who had purchased his iPad last weekend and he gave it a less than glowing review of “it’s OK.” “Wait’ll the next rev,” he suggested.

But who am I to talk. I did the same thing last November when the Motorola Droid, running the Google Android OS on the Verizon network was introduced. I actually contacted Verizon in advance of the Droid launch to place my order. That ensured that my Droid arrived in the mail the first day the new smartphone was available. And guess what? It did have glitches and bugs, and it did fall short of my very high expectations.

Then on December 11 of last year the next rev of the Android OS automatically installed on my Droid and all of the problems I had experienced disappeared. Wait’ll the next rev, I thought to myself.

So I found it a bit ironic that on Tuesday of this week, just 4 days after the launch of the iPad, my Droid once again prompted me to download a new version of the “system software.” Was Google responding to the iPad launch with some vital fixes to the OS, or was it packing new features into it to maintain its lead over the iPhone? I wasn’t sure, but the timing of the operating system upgrade sure was interesting.

It is becoming clear that the future of mobile communications will be a battle in which both Google and Apple will be featured prominently. The iPhone came first, but the Google-driven Droid has proved to be a worthy opponent. And while the iPad hit the market first, there are several similar tablets in the works, including the WePad from Germany-based Neofonie, that will use the Android operating system and access the tens of thousands of apps available in Android Market.

A source no less than Gartner Group is predicting that the Android operating system will surge to 14% of the smartphone market by 2012, putting it ahead of the iPhone, Windows Mobile and the Blackberry; second only to the Symbian OS used in Nokia’s devices which are popular in Europe and many countries outside the US.

And why is Gartner so bullish on the Android OS? The Cloud. Gartner gives Android such an enormous surge in popularity because of a variety of factors, but chiefly because of Google's backing of Android and the range of cloud computing functions and related applications that Google will make available in coming years.

Smartphone applications live in the cloud. Therefore, the smartphone with an operating system designed for cloud computing is likely to perform better, and work more intuitively, than an OS that wasn’t built with the cloud in mind.

To quote Ken Dulaney from that Gartner Group report, “…because Android and Google operate in an integrative and open environment, [they] could easily top ... the singular Apple.”

Yes, Google and Apple will continue to slug it out in both the tablet and smartphone markets. Both companies will make great products and both will market the heck out of them. But the winner may be decided by which of them better understands how to work within a cloud-computing environment. So far, that appears to be Google.

The Dark Side of Cloud Computing

The old axiom in real estate is location, location, location. I just spent a full day at the CloudConnect Conference in Santa Clara, CA and the manta repeated by every one of the presenters on the future of cloud computing was security, security, security!

One presenter after another quoted data from Gartner Group, McKinsey & Company, or privately-funded research to show that 9 out of every 10 potential customers listed security issues as the number one barrier to implementing a cloud computing strategy at their company.

And the concern about cloud computing security is well founded.

One of the presenters asked conference participants if they knew what enterprise had the largest cloud computing presence in the world. Among the guesses were IBM, Microsoft, HP, Facebook, Amazon, and of course Google. The answer, however, was an outfit, if you can call it that, with which many in the audience were not even aware – Conficker .

A New York Times article from last year describes Conficker as program that “uses flaws in Windows software to co-opt machines and link them into a virtual computer that can be commanded remotely by its authors. With more than five million of these zombies now under its control – government, business and home computers in more than 200 countries – this shadowy computer has power that dwarfs that of the world’s largest data centers.”

Indeed, Conficker’s “cloud” is larger that the cloud computing efforts of Amazon, Google and IBM combined! And its sole purpose for existing is to disrupt normal business operations inside of companies, organizations and governments. With that monster looming in millions of “cloud computing resources” around the world it’s no wonder 9 out 10 customers considering implementing cloud computing strategies are nervous about security breeches.

But all is not doom and gloom. Despite the security issues that must be taken seriously, the benefits of moving resources to the cloud far outweigh the risk, and many organizations, including the US Government, are doing just that in a big way.

Much of the same research that showed security as the biggest impediment to cloud computing adoption also showed cloud computing revenue growing by more than 20 percent in the next three years. Of course with that much money in the balance, Conficker, and other ne’er-do-well’s won’t be far behind. That’s why security will remain front and center in any discussion about cloud computing.

In my follow up post next week, I’ll address Gartner Group’s “Seven Deadly Sins” of cloud computing security and what questions companies should ask of their cloud computing vendor before taking the plunge.

Energizing Brands

The number of brands in the world is increasing rapidly. With that, you would think there would be a renewed effort to think about brand strategy, brand positioning etc. as the key to differentiation and the driver of corporate strategy, since research shows as much 33% of the valuation of public companies is linked to their brand. Just look at the companies with high two of the highest valuations in technology -- Apple and Google -- and think about how good they are at creating, enhancing and expanding their brands. Heck, we are so impressed by these brands that we don't even focus much on their mistakes or failures. We buy into their vision and are left in awe of their inventiveness.

These are, what the authors of a great article entitled "The Trouble with Brands," define as "energized brands." The article was published in Booz Allen's magazine Strategy + Business.

The article is well worth reading as it presents both a strong point of view and rare analytical data regarding brands (the authors developed and use Y&R's Brand Asset Valuator tool). But to summarize it , energized brands are comprised of three major components:

1. Vision. Brands with vision embody a clear direction and point of view on the world. They convey what they’re on this planet to achieve.

2. Invention. Brands that score high in invention change how people feel and the way they behave.

3. Dynamism. Brands with dynamism create excitement in the marketplace through the way they present themselves to consumers. Dynamism is the most emotional and immediately visible of the three components. It reflects the brand’s ability to inspire consumer affinity.

Clearly consumer brands are more the sweet spot for this, but you only need to overlay these three aspects as a lens to see how Apple, Google and a handful of other brands elevate themselves above the thousands of others that compete for our attention, our engagement and our loyalty. It is not just about marketing or communications to manipulate a brand. It is about vision, planning, aligning products with unmet needs in the market and defining the right customer for the product. And it only works when there is passion for excellence balanced by a culture that understands failing at times is part of the process of innovation -- as IDEO, the terrific market leader in engineering and design, likes to say, "fail often to succeed sooner!"