Carpadium Blog

Blog Moved!

2008-09-11T09:33:00.001+10:00

The Carpadium Blog is now hosted at the Carpadium.com site. Please follow the link to find all of the old entries, as well as all of the new entries.

M@

Can anyone spell "mission critical"?

2008-09-09T10:34:00.002+10:00

If you can, then please give the London Stock Exchange a call. They need your help. Seven hours is a whole lot of downtime for the world's 3rd largest market. I suspect it's a long way back from there to meet this year's SLAs.

M@

It's all about the platform

2008-09-08T12:56:00.005+10:00

I've been following the blogosphere closely over the last couple of weeks and I'm kicking myself that I didn't get this post out a little earlier! When I read articles like this it just confirms everything I believe about the essential elements of a good product and good product strategy.

That's because a successful, long-term product strategy involves a platform, not just a product. A platform has three essential components: an endpoint, some content and a distribution mechanism. Content and distribution are pretty much self explanatory. By endpoint, I mean a place for consumption to occur. In different markets and different products, the endpoint can be quite different, but its essential property is that it facilitates consumption by the end user.

For example, with cola-flavoured beverages, the content is the drink itself, the distribution mechanism is the fleet of vans and supporting warehouse infrastructure that get the soft drinks into stores, and the endpoint is the can or bottle. In the traditional (ie non-digital) music business, content is obvious - its the music itself - and distribution is pretty straightforward as well, it's the record companies ability to manufacture CDs and get them into the hands of the music buying public. What's the endpoint in this case? Devices like CD players and other stereo equipment components that allow an end user to play music.

With PCs the endpoint is the machine itself. The content is the operating system and applications that rely on it. Distribution revolves around the ability of operating system and application vendors to get their software onto the device and into the hands of users. Microsoft managed to create an amazingly (economically) successful ecosystem around the DOS and Windows operating systems by making sure that PC vendors shipped it pre-installed. The mechanisms they used to make this happen have already been the subject of many column inches, so I won't go into them further here.

Domination in a market occurs if a single player (or group of players) manages to gain control over one or more of the three essential components, or if a player manages to commoditise one or more of the parts. This is best understood by example.

In the PC business, Microsoft's great innovation happened a long time ago - way back in the early days of DOS, and it was only partly technical. Whether or not it was Microsoft's intent at the time is another story altogether, but the the real innovation was that DOS commoditised the hardware platform. DOS created a nexus between hardware and applications that allowed the hardware vendors to ignore the application software, and software vendors to largely ignore the hardware. Consumers ended up with choice in hardware, and consequently, choice in application software. The creation of an intermediary "standard" was the thing that really allowed the PC market to explode. With this in place, there was proliferation of hardware vendors and a proliferation of software vendors too.

This is a classic case of commoditising the endpoint. They also managed to wrap up distribution by tying the sale of Windows to the sale of a new PC, rather than the sale of the operating system itself. Cleverly from Microsoft's point of view, it didn't matter whether the machine actually had the operating system installed because the deals that MS struck with Original Equipment Manufacturers (OEMs) were based on hardware sales. For each box they sold, they had to pay Microsoft a license, a trend that continued right through the transition to Windows.

It's worth considering the fact that while the price of PC hardware has dropped by more than an order of magnitude over the lifetime of Microsoft's operating system dominance, the cost of the operating system has increased by more than an order of magnitude. That makes it pretty clear which part of the network ended up being commoditised.

The music business is interesting because we can see the endpoint/content/distribution framework in action in the traditional physical music market as well as with digital music, but with some very different players. In the traditional music business, distribution is more or less completely controlled by the record companies. Up until the advent of the iTunes Music Store (and notwithstanding the small number of independent music stores) the vast majority of physical music sales occurred through large national or global chain stores, such as Sanity here in Australia, Virgin and, HMV globally, and Walmart in North America. The music played on radio stations is also heavily influenced by record companies, by legal means or otherwise. The subtlety of that part of the music business is beyond the scope of this post, but if you're interested, see Wikipedia for "payola".

The difference with digital music is not that the endpoint/content/distribution framework has changed, but rather that the players have changed. And if you have any remaining questions that Apple's iTunes Music Store has changed the game in the music business, then the fact the store sold its 5 billionth song in June this year should relieve you of any doubt.

What Apple managed to do to change the game is create a great endpoint in the iPod that consumers the world over just love, and a highly compelling distribution model in the iTunes Music Store that makes it so easy to buy digital music that it verges on the transparent. The end-to-end user experience enabled by the iPod and iTunes is so compelling that the iPod is now the most successful consumer product of all time. Tellingly, the company that Apple knocked off the perch for most successful product of all time (Sony, with the Walkman) is also one of the companies likely to experience some pain when their control over the distribution of music changes as consumer tastes switch from CDs to digital music.

In many ways, the change in the game that occurred in the music business has strong parallels in the PC business. The pattern is clear: a new player emerges on the back of a compelling endpoint, and then delivers a distribution mechanism that just blows away the competition. The iPod/iTMS combination is vastly superior in terms of the end-to-end experience (but arguably, not sound quality) than the CD/store combination. The Google user experience changed the game on search, which they then went on to overlay with an amazingly profitable advertising business model, as well as a variety of new user services which the competition just do not seem to be able to match.

In both cases, the incumbent didn't really see the change coming, and when they finally did, tried everything to ignore it or make it go away. By the time they reacted, it was just too late. Or at least, it looks like it was too late. Apple's success with the iPod and iTunes represents one of the most amazing turnarounds in corporate history, and although there is a lot of competition, both in terms of MP3 devices and distribution mechanisms for digital music, few apart from Apple seem to have any real traction.

In terms of the operating system market, we are probably a little further away from declaring such a convincing winner, but the signs are definitely there. They must be worrying for Microsoft as it continues to struggle for mind share with Vista. Perhaps more worrying is the fact that its online properties (with the exception of PhotoSynth - which is really brilliant) have little to recommend them. There is no question that the Microsoft business model generates staggering amounts of cash from operating systems and desktop applications, but the point here is simply that its not impenetrable.

What I find fascinating is that few seem to have noticed that Apple looks very likely to repeat the success of the iPod/iTMS combination with the iPhone and the iPhone App Store. All of the pieces are in place: a compelling endpoint in the iPhone and a distribution system that connects application developers with consumers like never before. Analysts have been quick to predict failure for Apple and the iPhone, not to mention the end of the run for the iPod. The reality is that Apple just keeps getting stronger, and if Mac sales continue this kind of growth, there may be some very different conversations about the power base of the PC industry in the future.

The amusing thing for an observer is that the role played by Big Music in the iPod/iTMS product mix is now being played by Big Telcos. They just do not seem to get what is going on. And if you need any clearer proof of this fact, check out the pricing plans for an iPhone on Telstra's NextG network here in Australia. Are they serious?

The risk for Apple is in maintaining this success without looking like its developing a monopoly that harms consumers. I don't think that they will have any problems maintaining this with the iPod/iTMS combination because there are many alternatives (just not very many good ones). Just because you have the most compelling product does not mean you are extracting monopoly rents. However, it might be different with the App Store. If its early success continues, then the 30% margin that Apple takes on all App Store sales might raise some questions. However, as with the iPod, no one is forcing you to buy an iPhone. Which is quite a different scenario to the PC world, where even if you do not want to run Windows on your machine, in most cases you still end up paying for it.

From a product perspective, the takeaway here is how powerful the combination of great endpoint, compelling distribution and engaging content can be. The advice to incumbents at risk of losing their endowments is to consider that all three parts of the platform need to be working effectively. When one leg weakens, the whole stool can fall down, but when all three are strong, then it forms the basis of a truly great product.

M@

Update: iPhone arrives

2008-08-18T21:41:00.002+10:00

Here's an update to my previous entry regarding the arrival of my new iPhone. The phone did eventually arrive, but not before about 4 visits to the Optus store to ask them where it was. I'm not sure who was telling stories in this process, Apple or Optus, but the bottom line was simply that the user experience of acquiring the phone was pretty crappy.

One good thing was that when the phone did arrive, the guys in the Optus store went out of their way to provision it for me, considering I walked into the store about 5 mins after it closed. It did require me to have a minor conniption first, but in the end they stayed around for an extra five minutes to make sure the phone worked.

As for the phone itself ... well, that's another story altogether. Apart from one freeze-up on the wife's phone (yet to be repeated so far), we've not had any of the problems that seem to have been reported elsewhere. Apparently, there will be a software update soon. We'll see.

One of the most impressive things about the phone is the AppStore. The ease with which I can get an app deployed to my phone as an end user, and the equal ease with which I can build a deploy an app to a ready marketplace as a developer are a truly remarkable bit of business building on the part of Apple.

M@

Moving to a new hosting provider

2008-08-18T21:39:00.003+10:00

Today I kicked off the process of changing the company's hosting provider. What I initially thought was going to be a nightmare process, actually turned out to be pretty easy. I'm amazed at the level of sophistication of hosting providers these days, and the prices are pretty low as well. As expected, I'm still waiting for all of the domain transfers to happen, so we'll see if I'm still thinking this was good idea in two days time.

M@

Two different ways to say the same thing

2008-08-07T15:27:00.013+10:00

[1] Ideas are just a multiplier of execution Derek Sivers, ONlamp.com

It’s so funny when I hear people being so protective of ideas.
(People who want me to sign an NDA to tell me the simplest idea.)
To me, ideas are worth nothing unless executed. They are just a
multiplier. Execution is worth millions.

Explanation:
AWFUL IDEA = -1
WEAK IDEA = 1
SO-SO IDEA = 5
GOOD IDEA = 10
GREAT IDEA = 15
BRILLIANT IDEA = 20
NO EXECUTION = $1
WEAK EXECUTION = $1000
SO-SO- EXECUTION = $10,000
GOOD EXECUTION = $100,000
GREAT EXECUTION = $1,000,000
BRILLIANT EXECUTION = $10,000,000

To make a business, you need to multiply the two. The most brilliant
idea, with no execution, is worth $20. The most brilliant idea takes
great execution to be worth $20,000,000. That’s why I don’t want to
hear people’s ideas. I’m not interested until I see their execution.

[2] The Hollow Men T S Eliot

...
Between the idea
And the reality
Between the motion
And the act
Falls the Shadow
For Thine is the Kingdom
Between the conception
And the creation
Between the emotion
And the response
Falls the Shadow
Life is very long
...

Tip o' the hat to Daring Fireball for spotting the first one. Which twigged me onto the second one - probably my favourite lines of poetry ever.

Search is a solved problem ... or is it?

2008-07-28T20:54:00.003+10:00

How's this for an out of the blue development. Just when you thought that search was a solved problem, with Google the only answer - along comes this: Cuil. Apparently "Cuil" is shorthand for "cool". Or a synonym, perhaps.

If nothing else, the look and feel of this search engine really sets it apart from Google. I know that the minimalist feel of Google has always been part of its charm, but am I the only one who things that it's starting to look a little tired these days?

Or maybe this is another Google job application. Perhaps not, the founders of Cuil appear to have a prior (employment) connection with Google.

M@

Is it smashed crab, bruised knee or dropped pie?

2008-07-28T20:52:00.002+10:00

Apparently, my photo is causing enormous offense to friends, family and colleagues. So I'll be taking it down over the weekend and replacing it with a new one. Unless someone can think of something better?

M@

Remind me, to what does my $50 iPhone holding deposit entitle me Mr Optus?

2008-07-11T21:55:00.005+10:00

When the iPhone 3G was announced at the WWDC last month, I had the misfortune (or good fortune, depending on how you look at it) of being awake at 5:00am in the morning thanks to a pair of restless children. Making the most of the opportunity, I had a look at Apple's web site and noticed that there were some links to where the iPhone would be available in Australia. Again, as luck would have it, the carrier that currently lugs around my BlackBerry, Optus, was mentioned as a source of iPhone 3G goodness, so I followed a few links [1] and found myself in what I thought was the privileged position of laying down a $50 holding deposit. Without really knowing what I was getting myself in for, I happily signed up for not one, but two new 3G iPhones. Of course, the fine print doesn't promise anything of the sort (as we will soon see).

I was quite happy with myself for doing this, and there was certainly more than one occasion between then and today when I had gloated (quietly, of course) to friends and family about how I was on a short list to get an iPhone. I only kicked up my gloating ever so slightly when news spread that both Optus and Vodafone had stopped taking reservations. I though that I was sitting pretty.

However, this is just about when it all started to go pear shaped. After receiving an e-mail from Optus reinforcing my sense of hipness, I was encourged to log onto a special iPhone site, designed only for Optus customers. Perhaps "designed" is overstating the case a little. First of all, I simply could not log on. This was not a load issue, it was (apparently) an "incorrect registration code" issue. I tried again, to no avail, then checked the FAQ, which politely informed me that the problems were "mostly to do with people incorrectly typing in their passwords and registration codes". Sure. The fact that you have to put an entry like that into the FAQ tells me something is wrong, and it's not with the users.

After several failed log in attempts I tried a password reset, and that failed as well. I was starting to get concerned. I shot them off a quick "can you help" e-mail. And guess what? I got not response. Not even an automated one. Hmmm. This is starting to look grim. I tried again the next day (Tuesday of this week), and there you go, I'm in. I wonder if there had been some late night development work behind the scenes ... or was it just that all of the users clued up at the same time? Who knows.

Anyway, what did I get for my efforts? A page that contained details of my deposit. Hot diggity. That was worth the wait.

Apart for the mind blowing 12 point Courier <pre> copy of my deposit, there were some instructions about what to do on iPhone day. The main nugget of advice was to bring a printed copy of the receipt, along with appropriate ID, to the Optus store where you had registered your interest. And it also informed me that I was very, very lucky indeed to be eligible to line up on iPhone Day in the priority queue. Tops.

To be perfectly honest, I wasn't all that interested in going out of my way just to get an iPhone on the first day. I would have much preferred to have put in an online order (which I would have been happy to pay for in advance) and then just waited in the comfort of my own home for the thing to arrive. But no, for whatever reason, all of the local Australian telcos have decided that the only way to get an iPhone is to line-up like an knob out the front of a store. Like I've said before, I'm a fan of Apple kit, but I really don't get all of this product worship crap. The beauty is in the use, not in the worship.

However, in this case, I was on a priority queue. So off I trundle this morning at about 7am for a nice morning walk up to my nearest Optus phone store. When I get there - perhaps not surprisingly - there was a lineup of about 250 people. Fair enough. But I'm in a priority queue. As it turns out, no I'm not. In fact, there is no such thing as a priority queue, it's every person for themselves. All 250-odd of them.

And it's right about now that it gets even better. I poked my nose into the front of the queue where there was a pair of Optus phone drones handing out raffle tickets to people in the line and asked them about the priority queue. Nope. No priority queue. You have to line up. Great. Next bit of news. There are only 5 16GB iPhones in the store. And they were already gone.

At this point, I shrugged my shoulders in disgust and walked off. There was no way - NONE - that I was going to wait in a line with 300 other people (yeah, it'd had grown by 50 people by now) to wait for the opportunity to be frustrated that I would not be able to get the phone I wanted. So, all I managed to get for my pair of $50 deposits was a nice walk through North Sydney on a crisp but clear winter morning. I'll just have to wait a little bit longer to my hands on an iPhone. The really bizzare thing, however, is that when I checked my credit card transactions after the walk, I noticed that Optus had already given me a refund on the deposits. Very strange. Perhaps they knew something that I didn't.

The puzzling thing about all this is that it would have to be the complete antithesis of my recent Mac purchase experience. Traditionally, Apple is an organisation that likes to exert significant control over the entire, end-to-end user experience. And for the most part, that experience is a very, very good one. In my case today, it wasn't. It sucked.

How'd you go with your iPhone quest?

M@

[1] For those of you playing at home, the Optus website is perhaps only exceeded in its maddening horribleness by the Telstra BigPond website. For example, the Optus site is so bad, that if your session times out, you have to close the browser before it will let you back in. Both of these organisations are Telcos. I think there's a pattern developing here ...

[2] And to top this all off, we heard this evening that the first nutter in the queue at the George St Sydney Optus store ... wait for it ... was an Optus employee. Not a plant, says Optus. No, of course not! On reflection, I'm probably prepared to believe them on this - they couldn't organise a simple priority queue, so why would I expect them to be able to pull of this stunt? Never ascribe to conspiracy what can be explained by incompetence.

Facebook worth less?

2008-07-08T12:24:00.006+10:00

In a followup to this post [1], it seems that some are now questioning the real value of Facebook [2].

And who is "some" in that sentance? Facebook itself. And the internal value is about US$3.75 billion, which is a whole lot less than the the US$15 billion that was placed on them after the injection of funds from Microsoft.

Update: I really, really, profoundly apologise to all the Hypercard fans for the slur! Sorry about that. I genuinely do think Hypercard was a brilliant innovation, it just missed the simple step of enabling remote decks. Had it done that, I think the Internet would look a whole lot different. The connection I was trying to draw was more along the lines of the fact that I suspect both of them will represent intersting cul-de-sacs in the history of technology, but will not ultimately end up as a ubiquitous platform. Kind of like PointCast [3], I suspect.

M@

[1] Facebook == Hypercard (perhaps I should rename this to ~=)
[2] Facebook worth a guessing game
[3] PointCast Network

An interesting spin on the net-neutrality debate

2008-07-08T12:08:00.004+10:00

Here's an interesting spin on the net neutrality debate:

The Internet vs The Internet Dynamic

What I like about this is the way Bob Frankston is really asking some very tough "Elephant in the Room" type questions. You can see precisely the type of thinking that underlies Telco's activities in some of the pricing decisions around data plans for the iPhone 3G, here, here, here and here.

What a mess!

M@

An alternative to "yesterday, today, blockages" reporting in an Agile stand-up

2008-06-27T00:16:00.003+10:00

The standard reporting technique for an Agile stand-up is to run around the team and get everyone to quickly report on three things:

What I did yesterday
What I am going to do today
Blockages

This works really, really well in teams of about 5-8 people, but I have noticed that it can become unwieldy if the team gets much larger. Leaving aside the obvious solution of breaking the team up into smaller units (which might not always be possible, as I found out today on a project that I am working on), I was wondering if there was anything that I could do to make the run-around work a little more smoothly.

One thing that we've tried that can improve the stand-up is to reduce the standard three questions down to just two:

Achievements
Blockages

Because not everyone will have daily achievements, nor will everyone have daily blockages, you can skip some of the team as necessary, which can speed things up. In a large group, it can give you some extra time to celebrate or congratulate those people that do have an achievement to report, even if it is only small. Or equally, to flag a blockage that needs some more attention. I've noticed that the group recognition is (generally) enough to spur others to participate when they have something worth telling the team.

I know this might sound a little like heresy, but it does actually work, as long as you are very diligent to watch out for two specific pitfalls. These are:

"My tasks are 95% complete"
"I have nothing to report"

If you find that someone on the team is falling into the "95% complete" rut, then you need to help them out by engaging them directly in the stand-up, and if necessary, go back to the standard three questions to help them out. Equally, if someone has nothing to report for more than 2 or 3 days, its a good sign that something is wrong, or at least, it's enough of a flag to the scrum master to pay a little more attention to that person.

I don't think that this is a substitute for the normal 3-point reporting style, but some stand-ups just get a little larger than you would like, and often this can be out of your control.

I'll see how this new technique goes over the next couple of weeks, and then follow-up with my findings.

M@

Facebook == Hypercard ... ?

2008-06-22T21:06:00.003+10:00

The New York Times is reporting [1] that LinkedIn is valued at $1b. This is deeply troubling.

Whilst I have a lot more time for LinkedIn than I do for FaceBook (because it actually has a purpose), I'm still deeply concerned about a $1b valuation for it.

If ever there was a "HAM radio for the Internet", it's social networking. And if you need proof, take a look at OpenSocial. This platform takes the data model that underlies any kind of social graph and makes it open and public. In the (very near) future, simply being a social networking site won't be enough, because every site of any form will be able to expose its social graph and interact with other nodes in the wider, semantic web.

FaceBook (and to a lesser extent LinkedIn) have done a great job kicking off the idea, but because they are both closed systems, they will inevitably be overtaken by things like OpenSocial and the rest of the long tail Internet making use of that library and API.

Here's an analogy:

FaceBook == Hypercard
OpenSocial == Internet

Where are they both today?

BTW: If any of the social network sites has a chance of breaking out of simply representing a social graph, it's probably LinkedIn (or maybe Plaxo). Both of these sites actually do something with the graph that is useful to people. LinkedIn is monetising its data through an alternative to traditional job ads, and Plaxo provides a way for poor, troubled Windows users to sync address/calendar across multiple devices (wait until MobileMe arrives!)

FaceBook, on the other hand, just fills your inbox with crap.

And don't just take my word for it. Google agrees: [1].

For the record, I actually think that Hypercard was a far, far more revolutionary idea (for its time) than FaceBook. Had they just made the leap to allow cards to link to cards on other machines, then the web may have been kick started a few years earlier.

M@

[1] A social site, only the businesslike need apply
[2] Google's view: 3 trends in social networking

Hardware Pr*n

2008-06-22T20:10:00.010+10:00

Up until last week, it was over three years since I spent any real money on computer hardware. I have done some minor upgrades here and there, but no completely new machines. Well, a fortnight ago that all changed when my ageing laptop finally gave up completely.

It had been slowing down for a while - the WiFi was going bleak, the network connector was quite dodgy and required a wiggle every now and again to stay connected, and the built-in monitor was shaky at best, and full of interference lines and static when it was feeling poorly. On top of this, my desktop - once a mighty beast of a machine - was also in its last throws of death. After a recent attempt to upgrade video cards to support a pair of new 22" monitors, it was suffering from a peculiar illness that caused it to suddenly die cold, with no warning other than the horrifying sound of the fan powering down as the power drained away and my unsaved document faded from view. And continuing the theme of technology decay, my DVD/PVR also gave up the ghost in the same week. By itself, that would not be too much of a problem (who gets time to watch TV anyway?) but it is a VERY BIG problem when two small children can't watch their daily fix of Pooh Bear and The Einsteins. So that needed replacing too. Excellent.

Part of the reason that I have waited for such a long time to upgrade was financial. Actually - that's most of the reason. But a small part was that I was waiting for Apple's June WWDC before I made any purchases just on the off chance that there could be some spunky new hardware announced. As expected, the WWDC focused on the iPhone, so I went to my local Apple reseller on Tuesday afternoon to put in an order. As an aside, I had contemplated waiting until the Apple store opened in Sydney last week to make the deal, but although I admit openly to liking Apple kit, its not (yet) to the point where I would prostrate myself at the altar that is the new Sydney Apple Store. Not quite ... Well, actually not at all. Certainly not like these kooks [1].

Also, if it's not obvious, my previous suite of IT kit was almost all beige-box PCs running Windows (there was 1 sneaky MacBook that my wife used), plus several even-older cast-off machines that I had managed to rebuild as Ubuntu boxes for a variety of random development tasks like s Subversion repository and a Wiki. This last bit is significant, because for about 15 years - most of my working life, really - I've been using DOS or Windows PCs.

Because it had been such a long time since I'd bought new equipment, when it came around to tooling up, I went a little nuts. I needed a new laptop AND a new desktop, and something to replace the DVD, not to mention a new laptop for my wife. So the order looked more or less like this: MacMini, check. MacBook, check. MacBook Pro, check. MacPro, double check. I went hard on the MacPro. Two 3.2 GHz quad-core Xeons, and 8Gb of RAM. In just under a week, it all turned up, which is where i got the title of this post. This stuff is hardware porn. I know that sounds completely ridiculous, but that's the best way I can think to describe it in only two words. Actually, its a terrible title, and its not at all what I mean, but it's catchy, and it probably got your attention. Sorry for the cheap trick.

But back to the MacPro - the thing that stands out for me at this early stage of ownership is Apple's attention to detail. Even the process of unboxing the thing was enjoyable. The box is about double the quality of any other PC box I've ever seen, and the internal packaging is even more robust and well put together. You could look at this cynically and say its all a waste of time and money - I'm sure it's not cheap to put together - but what it says to me is this: if Apple is prepared to put that kind of effort into packaging, then it gives me a lot of confidence that they will put the same effort into their hardware and software too.

And I hope that's the case. It's been just under a week now, and I'm loving the new machines on a gut level. I wonder how I'll feel in a couple of months? Already, I having some serious mental issues adjusting to some simple things like the differences in Control/Option/Command keys. I'm starting to get it, but slowly. Overall, the experience is one of speed, things flow and almost everything is more or less in the place that I expect it to be (something that I can't say about Windows even after 15 years of use). These feelings are all subjective at this stage as I bask in the post-purchase glow that seems to seduce most Apple customers. It will be interesting to come back in 6 months and see if I still feel the same way.

M@

[1] New Apple Store is a Glass Act

Is transparent synchronisation the next killer app for mobiles?

2008-06-10T06:21:00.005+10:00

So we are finally (officially) getting the iPhone in Australia! In what would have to be one of the most un-secret secrets in recent technology history, Steve Jobs today announced the second generation iPhone, along with a host of new countries where the uber sexy little gadget will be available.

Amid all of the fanfare about the iPhone, something struck me about the new Mobile Me service Apple will release in July. There has been past criticism from some quarters that Apple's .Mac service was poor value. I think you could probably make that argument pretty easily. However, this new service seems to be something else. For a start, it has some truly amazing web design (possibly, even as amazing as this, or this). [As an aside, the kinds of things that people are doing now in rich Internet applications and with the full toolbox of Web2.0 tricks is simply mind blowing. I don't think anyone considered 2 years ago that we would have applications of this quality.]

Mobile Me does two things. Firstly, it elevates all of a typical user's electronic stuff into the cloud. This is great, but certainly not unique - Google has been doing precisely this for some time. I think we can be sure that Apple will bring all of their usual user experience aplomb to the task, so the service will certainly be pleasurable to use. However, I think the real trick comes in the second part. Mobile Me also (at least on paper) appears to seamlessly synchronise this stuff across all of a user's devices.

As anyone with more than 1 device (desktop PC, laptop, phone) will know, synchronisation is a total nightmare. I currently use a BlackBerry [1], and even today I find myself fragging the BlackBerry calendar and overwriting it with the Outlook calendar on each sync because if I don't, then the BlackBerry will constantly double-up entries (particularly recurring appointments).

Perhaps more annoying is the fact that I have to start this bizzare and idiosyncratic little synchronisation application to make it all happen. As a consequence of the generally poor quality of synchronisation applications, most people have data that is out of sync or inconsistent, or they just don't bother with the process at all.

If Mobile Me delivers on the ability to push my stuff to the cloud, and then allows me to have a seamless, consistent, up-to-date view of that stuff from any device - from desktop, to laptop to mobile phone - then Apple will have pulled off a real coup. My guess is that they will deliver on this promise, underlying again their ability to "innovate through simplicity".

Which brings me to an observation about the relative approaches of Apple, Microsoft and Google - both in terms of technology and business model.

As we all know, Microsoft concentrates on the endpoint (at least traditionally), both on the PC and on the mobile device. It's all about Windows Vista and Windows Mobile. To play in the Microsoft ecosystem, you need to buy a license of some sort, and in the case of the vast majority of PCs, you don't even have a choice about it because the license comes as part of the purchase of each new machine.

Google is at the other end of the scale. Their entire service offering is in the cloud, and they give everything away for free, making (lots of) money on targeted advertising. Microsoft is certainly trying to respond to Google, but if you need any proof that they don't have a plan or a clue about how to compete online, then just check out their recent attempt to buy Yahoo.

So where does Apple fit in? Clearly, they have a strong story at the endpoint. The entire Mac hardware range, from laptops to desktops, is well regarded, and if recent sales figures are to be believed, are selling amazingly well. The Mac operating system is also a stand-out, and in stark contrast to Vista, seems to get almost nothing but high praise.

In my view, Apple's new Mobile Me offering places them equidistant from Microsoft and Google, with a service that makes the best use of their endpoint and operating system expertise, adds a cloud-based service layer that (on the surface) solves many of the traditional problems with synchronising multiple devices, mixed in with a subscription based charging model.

Such an economic proposition almost certainly means that Apple won't achieve the user scale of Google Apps (Mail, Calendar, Docs, etc) for Mobile Me, but it does allow them to target the premium end of the market - precisely the same market that they target with hardware sales, and one that is exceptionally profitable for the company.

In many ways, you could probably think of Mobile Me as a premium version of Google Apps in the same way that you can consider the Mac and Mac OS X as a premium version of a Windows PC. Of course, some would argue that these things are not even playing the same game, but allow me to stretch the metaphor for the sake of the discussion.

The real question is this: Where does it leave Microsoft? As an organisation, Microsoft lacks Google's capability in search or scale in advertising; Vista appears to be losing the operating system battle (at least in mind share, if not in volume) to OS X; and they do not appear to have anything nearly as compelling as Mobile Me as an online application. They will almost certainly attempt to turn the ship to deliver a suite of competitive services over the next 12 months or so, but where will Apple be in that time?

One final point that I think ties into this thread is the constant call for Apple to license OS X to third parties. Leaving aside all of the Hackintosh projects that are popping up, I do not think there is a snowball's chance that Apple will ever license their OS to anyone (again). And in any case, why would they bother? A compelling Mobile Me service that generates US$99/year per subscriber will generate a tidy revenue stream that will not in any way jeopardise Apple's healthy margins on the sales of Mac hardware. At the same time, Windows-based Mobile Me and iPhone users might be seduced to switch in the same way as the droves of iPod users who liked the seamless integration between the iPod and iTunes have done so up to now.

I expect that Apple has done its numbers properly to the point that any revenue lost through foregoing sharing argeements with carriers is more than compensated by a US$99/year subscription to Mobile Me. That is, of course, assuming that they can get enough subscribers. So I also expect that they will be trying to convert a big percentage of all new iPhone owners into Mobile Me subscribers as well.

The extent to which this is possible, I think, comes down to the success of Mobile Me. We have all been looking around for the next real killer application in the mobile space for some time [If you are wondering, the first two were obviously voice calls and SMS texting. UPDATE: Of course! Photos is number 3. Thanks Jen.]

Interestingly, the next killer mobile application may not be a mobile application at all, but rather, an application that makes it completely irrelevant and transparent that I am mobile. Regardless of whether I sit down at my desktop at home, my laptop in the airport lounge, or my phone on the go, I get the same, live, consistent view of all of my electronic stuff.

Apple really looks like they have cracked it with this one.

M@

[1] I was waiting for today's announcements from Apple before I replaced my entire technology kit. It's been over three years since I last splurged on decent technology infrastructure. So, come 9am this morning, I'm off to buy a new laptop and a new desktop. And I've already put my order in with Optus for a couple of 3G iPhones.

What I read last week 6.2

2008-06-07T13:33:00.003+10:00

[1] Gin, television and social surplus
I just love the idea that there is massive attention tsunami building and building ...

[2] Nick Bostrom's Home Page
If you want to cause a fracas at your next dinner party, read The Simulation Argument. Also, check out his TED Talk on "The 3 Biggest Problems for Humanity", linked off his home page: death, existential risk, and an inability to know how good things can really be.

[3] Where are they? Why I hope the search for extraterrestrial life finds nothing.
He's got a point.

[4] Content with style - A CSS framework.
This is brilliant - someone has applied the logic of software framework design to the creation of a set of stylesheets. Very well done. AppFuse uses this framework (or a variation on it).

How to apply for a job at Google

2008-06-03T12:59:00.003+10:00

Simple: just build this:

http://goosh.org/

However, I wonder what Google thinks about the fact that all of their AdWords get stripped out of the search results?

M@

What I read last week 6.1

2008-06-02T09:33:00.007+10:00

[1] Why Apple will sell 10 million iPhones
I wonder what they'll say when Apple end's up selling 12 million?

[2] Overview of Twine
Do I really need another social networking, information discovery tool?

[3] A tornado in space
I'm glad I don't live near this.

[4] First live images and videos of full screen ANDROID demos
There's something more to this whole story than is immediately obvious. Apple and Google are *very* close (Schmidt is on the board of Apple), so I don't think that either would do anything to screw the other over while they both share a common enemy. I wonder what they are up to?

[5] 'Give it Away and Pray' is Not a Business Model, but it doesn't mean that 'Free' Doesn't Work
There's a whole lot of 'buying a dollar and selling for 75c' in here. Maybe Jonah Peretti's "mullet strategy" is the way of the future?

Guys like us avoid monopolies

2008-05-28T23:01:00.006+10:00

I just watched Bill Gates say this (look about 2m:30s into the second video stream):

"Guys like us avoid monopolies ... avoid them because we compete."

This comment is bookended by Steve Ballmer, sitting next to Bill, who has just finished explaining the perils of a potential advertising monopoly from Google.

Wow. What can you say to that?

M@

SOA What?

2008-05-25T09:44:00.005+10:00

I was asked recently to talk to some executives about Service Oriented Architecture. In doing some research for the conversation, I found that there was a lot of information about the technical aspects of SOA, but not so much about the business/technology crossover. So I decided to write a white paper: SOA What?

Click here to see it, and let me know what you think. I've also included a brief precis below.

Precis: Describing technology from a business perspective can be a challenge. It is much easier to talk about or justify technology when it supports an existing business process because it is relatively straightforward to frame the benefits in terms of return on investment, time saved, or dollars spent. It is much more difficult when the technology provides support for other components, guides the way systems are built and integrated, or attempts to insulate pieces of infrastructure or application that face very different rates of change. In many ways, Service Oriented Architecture (SOA) falls into this second, intangible category. This paper attempts to demystify SOA by examining it from a business perspective. It presents some background and an executive definition, and then outlines some misconceptions before exploring the strategic business outcomes presented by SOA. It then looks at some of the headline business impacts, costs, and risks associated with SOA rollout, along with a real world example that highlights how SOA fits into and supports modern business architecture.

What I read last week 5.1

2008-05-22T22:53:00.004+10:00

[1] Better than Free
Free is the new black

[2] A computer scientist who doesn't include 'give up' in his lexicon
Wow

[3] Google App Engine for Developers
If only they had a Grails version

[4] The technology that will save humanity
I wish I had a lazy bar or two to build a solar thermal power station on the farm

[5] Coal saver
Is it coal that it's saving? Or something bigger?

Murals and Skyscrapers

2008-05-21T20:24:00.009+10:00

I think that everyone knows that the "like building a skyscraper" metaphor is thoroughly wrong for describing the process of building software. However, it doesn't seem to stop it being used again and again (and often clueless project managers are the worst offenders). I have a hunch that attachment to this metaphor might have something to do with why the same project managers have such a love affair with Microsoft Project. But that's another story altogether.

However, today I heard a thoroughly great metaphor for software, one that I haven't heard before, and it really resonated with my experiences building software. I really wish I could claim credit for coming up with this, but sadly, it was a colleague at my current consulting engagement. Tip o' the hat to Andrew. Nice work.

Anyway, the metaphor is a simple one and it goes like this: Software is like a bunch a people painting a mural. You all stand around for a while, maybe pencil out a rough outline, maybe mix some colours and sample how they look on the wall. Then you split up, and some of the team works on one part, and some on others, perhaps individually or in small teams. You come together regularly to assess progress and decide where to go next. There's generally someone in charge, in some form or other (or maybe not), and they might work on their own section, perhaps one of the most challenging bits. Every now and again, you take a step back, and there are some parts that you have to rub out, paint over and redo. It's collaborative and non-linear. Sure, you need an outline and some sort of plan to start, but the way it ends up is very much influenced by the process.

Not only is this a good metaphor for software in general, I think it's an espescially good metaphor for agile software development because it emphasises collaboration and iteration. I will be sure to use it next time I am trying to explain to someone why traditional project management tools are such crap for managing software development.

M@

Twitter?

2008-05-20T10:32:00.003+10:00

I just hooked up with Twitter. I've heard a lot about it recently, in particular how it is written using Ruby on Rails (I need to confirm if that's true - yep, it is: [1]). It's an interesting idea, in a weird kind of way. I'm not at all sure if I get the process yet (if there is anything really to get about it), but two things stand out for me after about 14 hours of Tweeting, one very interesting and one a little bit left field.

Firstly, I love the fact that from within Twitter I can click a button that miraculously adds my current Twitter state of mind directly into my Blogspot blog. It's not actually the low level technical details of that that impress me (not to devalue them in any way), but what that action represents. What's intriguing is that when I make that connection between my tweets and my blog, I'm actually creating a semantic connection between Twitter and Blogspot. Ok, I know that's kind of stating the bloody obvious, but the point is simply that this connection is basically the Vic 20 of the Semantic Web, and it makes me really wonder what the 8-core MacPro version will look like!

The second thing I've noticed (and this really does have nothing to do with technology) is that Twitter reminds me of a peculiar idiom that pops up every now and again in conversations. Wierdly, this seems to occur most often with Americans. I'm not sure what it is about American sensibilities that makes this the case, but that just seems to be my experience. The idiom I'm referring to is the way some people vocalise their internal monologue. For example, if I am going to sit down on a chair, I simply sit down. I don't generally find the internal decision making process about which chair to sit on and when particularly relevant to anyone else. However, some people really do find it necessary to tell you about it. "I'm just going to sit down over here, Ok?" And like that last sentence, often ask innocent bystanders for approval or confirmation. Unfortunately, I get a little bit of that sense from Twitter.

M@

[1] Apparently, Twitter does use Rails. "By various metrics, Twitter is the biggest Rails site on the net right now," Alex Payne, Twitter Developer.

Wow, I am very impressed with Grails!

2008-05-19T15:52:00.007+10:00

For those of you that have not come across the Grails platform, I would seriously encourage you to do so. Particularly if you are a web developer. If you're not a web developer, then hey, it's probably not that interesting for you.

Grails is built on top of the Groovy language, which itself is built on top of the Java platform. It shares some design principles and a philosophical orientation with Ruby on Rails, but it is its own discrete platform (and because it is so closely related to Java, it is nowhere near as intimidating for someone unfamiliar with Ruby).

I won't bore you with repeating the details of either technology, because the best thing to do is go to those links above and check them out for yourself. What I want to do in this post is highlight 2 things that I think really make these technologies compelling:

Model bootstrap time
Web development cycle time

Model Bootstrap Time
Let me begin by stating that before I embarked on my current project (a web-based work-flow and process improvement tool for a niche vertical) I had not programmed seriously (as in "on a development team, responsible for deliverables") for more than 3 years. In that time I had managed an engineering team and worked as a CTO, so I was across the technology landscape, just not in the kind of detailed, on the metal way that you are when you are actually writing code.

When I began to look for a platform to build my project, I checked out a variety of different options. First up was what I already knew, which was basically standard Java and J2EE. I though that through, and along with my business partners, made some estimates for development time. These numbers were pretty big, in fact they were probably too big for our resources and timeframe. This led me to have a look around for some alternatives.

My first port of call was AppFuse. Matt Raible has done a brilliant job integrating the daunting suite of Java tools, libraries and technologies into a coherent whole. With very little mucking around, I was able to have a simple application stub that allowed me to log on, manage users in a database, complete with Hibernate and Tapestry support, all running very sweetly out of Maven2. My issue with this, however, was not how quickly I could get up and running (which to be fair, cannot be much quicker!) but what to do next. Even though AppFuse wraps everything up, you still need to have a very good understanding of the architectures and idioms of the constituent parts to actually do anything of interest. And there is a very large software stack that underpins the prototypical AppFuse web application.

This is when I stumbled across the Grails project, just about the time it was released as Grails 1.0. I read the tutorial and quickly came to the conclusion that it would be simple enough to prototype the domain model for my new system using Grails. Which is what I did. After downloading all of the various Eclipse plug-ins, I was writing Groovy code and building my new system.

All up, I think I spent about 5 days on and off over the space of 1 month (note: this is a side project I'm working on, and not my full-time job) putting together the domain model. During this time, two pretty amazing things happened. Firstly, Grails has the concept of scaffolding. Until you have seen this, it sounds a bit like magic. Through the use of the configuration by convention idiom, Grails scaffolding allows you to get basic CRUD operations across your entire model (more or less) for free. This means that you can define a simple model class like this:


class User implements Serializable {
 String username = '';
 String password = '';
 String email    = '';
 String mobile   = '';
 Date   created  = new Date();

 // Relationships
 static hasMany = [roles:Role];

 // Constraints
 static constraints = {
   username(unique:true,blank:false);
   password(blank:false);
   email(blank:false);
   mobile(blank:false);
 }
}

And then run the application and work with the new domain object, creating, editing, updating and deleting them (assuming you also define the companion Role class referenced). Again, I won't go into the syntactic details, which can be easily discovered in the Grails reference manual. However the standout feature of that code is the complete lack of gumpf associated with the platform. It really does present a crystal clear example of what a POGO (plain old Groovy object) should look like.

What all of this means is that you can build a working domain model incredibly quickly when compared to the traditional Java approach. There is literally nothing else to do other than build the objects and attributes of the things that are in the domain model.

As an aside, I will mention that it took me a little bit of time to get my head around the configuration by convention idiom. When you start out, there is a lot of automagic stuff going on, and it can be a little difficult to let go and just trust the platform. However, once you do, the results are startling.

2. Web development cycle time
The second most extraordinary thing for someone who has not built a web application for the last couple of years was how different the development cycle time is with Grails. With a properly configured environment, the time it takes to make a change to a web page and see that registered in the application is roughly the time it takes you to make the change in the editor and click Refresh in the browser.

The spectacular thing for me was that this also works for (most) code changes. You can add an attribute to a Groovy object and then click refresh in the browser and the change will be apparent immediately. There are 2 exceptions to this. Some changes require the web container to go through a bounce process, but it is generally only marginally slower than a simple text change in .gsp page (GSP: Groovy Server Pages, like JSP pages but for Groovy code). And then there are some code changes that stretch this capability to the limit and will require a restart of the container, but these are rare.

This is an amazing difference when compared to earlier generation web development where you needed to rebuild the war and redeploy it to the container, then re-establish the session to the point you were up to in the test cycle. It could easily take many minutes to test a simple change. With Grails, more often than not, you just continue in the same session with the updated code running. No need to restart. Brilliant.

Conclusion
In combination, the speed with which I was able to prototype and work with a domain model, and the vastly reduced cycle time for the edit/compile/deploy/test cycle mean that I have been able to get started and then be productive more quickly than I could possible have imagined. When I use Grails and Groovy now day-to-day for development, I get the same kind of back-of-the-neck feeling that I got when I first saw Java back in its 0.9beta release in 1995. This is something special.

What's a CTO to do? (part 2)

2008-05-19T15:25:00.002+10:00

It has been a while since I posted about some of the disciplines that a CTO in a software start-up needs to consider. For the record, I broke these down into:

1. Strategy
2. Product
3. Architecture
4. Infrastructure
5. Process
6. People
7. Program

Some of these are self-explanatory, whilst others require a bit more depth. As a summary, here's what I think are some of the really important questions in each of these disciplines. When reading this, consider the role of a CTO in a software start-up, I am not so concerned about big enterprise CTO roles, but more of the kinds of innovative, product-oriented businesses that build and deliver software, either shrink wrapped, or as a service over the Internet.

1. Strategy
What is the business strategy? What is the technology strategy? Is the technology strategy succinct enough to capture the attention of partners and investors and satisfy the requirements of technical due diligence? Does the technology strategy align with the business strategy? Who owns the technology strategy?

2. Product
Is there a product mindset? Is there product management mindset? Does technology follow product, or vice versa? Is there an overarching product strategy for the complete suite of products? Is there a product roadmap? Does the roadmap have clean and achievable timeframes for delivery? Are there separate release cycles for core infrastructure and customer-specific projects?

3. Architecture
What is the software architecture? Does it align with the product architecture? Do all members of the technology team understand it? Is the architecture managed? Is there a plan for allowing the architecture to change over time?

4. Infrastructure
What is the state of the engineering infrastructure? Is day-to-day developer productivity appropriate? What is the nature of the configuration management, version control and build environment? Is there room for improvement? Does the engineering infrastructure support the product strategy?

5. Process
How does the team work? What formal and informal processes are in place to assist?

6. People
Are the right people in the right roles? Is there separation between the software infrastructure team and customer-specific project teams? Is there a plan for succession in key roles?

7. Program
Is there a comprehensive program of work designed to deliver the product strategy? Does the program have clear milestones? Is the level of agility appropriate for the nature of the task, the nature of customer-specific projects and the maturity of the organisation?

As I said in a previous post, I consider the customer to be important enough to have its own category over and above these 7 disciplines (perhaps I will add it in as Discipline Zero in a future iteration of this framework). I have found that just having a simple framework like this is a good start, particularly during the discovery phase of a consulting engagement where you are trying to find out how a start-up or software development house operates.

My personal favourite from this list -- and the one where I think Australian software companies really lag behind our North American and European counterparts -- is product. I have come across very few companies that really embrace the idea of product management. In fact, one company I worked for spent a long time disavowing the entire notion of product management, insisting instead that they "had a framework, not a product", leaving no wonder why it took them so long to make their first sale. Alternatively, some companies end up so customer and project focussed, that they never have time to even notice that doing enterprise project work is a completely different exercise to product development, requiring a profoundly different outlook, and different set of skills.

I genuinely believe that things do not have to be like this! So, in an upcoming post, I'll take a stab at a really, really, simple software product management process, and attempt to situate product management as one of the core disciplines that a software start-up CTO should be across.

M@

The Six Dumbest Ideas in Computer Security

2008-04-23T13:39:00.005+10:00

Well, it's been a while since I had an opportunity to post. The last couple of months have been very busy. Anyway, I stumbled across this link today (thanks to my brother):

The Six Dumbest Ideas in Computer Security, by Macrus Ranum

It's not new (Sept 2005), but it's really good on a number of dimensions. First up, it's spot on topic. The computer security industry seems to get bigger ever year (on both sides of the legal fence), but it still manages to congratulate itself over and over again about how things are going so well. But I also really like the way that Marcus gives very useful names to the "anti-good ideas" he discusses. Phenomenology is always (is it?) the first step in breaking down complex problems.

M@

What's a CTO to do?

2008-02-18T10:53:00.008+11:00

In my work as a consultant, I'm finding that there is an increasing niche for the role of a Consulting CTO. Rather than employ a full-time Chief Technology Officer, some smaller organisations and start-ups find it more cost effective to have a CTO on tap.

It's worth making the distinction here between a CTO and someone who's simply technically very strong. A lot of start-ups have brilliant engineers who often find themselves in the role of CTO, but without the business and strategy background that's so important to the role. This can lead to conflict between the engineering team and the management team, which can be exacerbated if the management team is not as tech savvy as they could be.

To highlight one particular point: the CTO should really not be the Chief Architect. However, quite often the person in the role of CTO is actually the best engineer in the start-up, or the founder with the technology background, or something of this nature. Sure, they are technically brilliant, but just as often, have no clue about business or strategy.

I see Architecture as just one of 7 disciplines that a strong CTO needs to be on top of. The Disciplines are:

Strategy

Architecture

Infrastructure

Product

People

Program

Process

I know that Customer is not in that list - and that's intentional because I think that they are so important they need a specific focus. There's elements of customer in all of the 7 disciplines listed above - the trick is working out which customer.

In a future post I will examine each one of these disciplines and try to pose some questions that asoftware start-up CTO should be able to answer, and that a CEO (or board) should be asking.

M@

Nothing at all to do with Technology

2008-02-13T11:27:00.000+11:00

Today, Australia's new Government, under the leadership of Kevin Rudd, formally apologised to the Stolen Generations [1]. What struck me about the apology was how natural it seemed, and how right it sounded. After such a long time watching the previous Government ducking the issue and playing a mean and tricky semantic game with the words, saying "Sorry" was the right thing to do.

However, as symbolic as the words are, they will not mean a thing unless they are backed up by real actions and bipartisan political support. I wonder if that's what we will see?

M@

References
[1] The Stolen Generation

Microsoft buys Danger

2008-02-12T10:17:00.000+11:00

In the news today [1] is the story that Microsoft has acquired Danger, Inc [2], maker of the Sidekick [3] portable connected device. Microsoft sure is spending some money at the moment [4].

What does that mean for Windows Mobile?

M@

References
[1] Microsoft to Acquire Danger, Maker of Sidekick Technology
[2] Danger, Inc
[3] T-Mobile Sidekick
[4] Microsoft, Yahoo!, Google ... and News Corp?

Hmmm ... not much demand to switch after all?

2008-02-12T09:58:00.000+11:00

Following on from yesterday's post [1] regarding the Australian Federal Government's push to make switching bank accounts easier for customers, comes this article in the TheSheet.com.au [2]. Quoting research from Roy Morgan, it suggests the desire to switch is actually not that high. In fact, less than 10% of people surveyed were dissatisfied with their primary financial institution, and over the last 12 months, only a touch over 3% of those surveyed had changed financial institution.

This says to me one of two things: Either, a) customers really are happy with their financial institutions and the politicians have got it wrong, or b) it's just so painful and expensive to switch that customers have convinced themselves that they do not want to have anything to do with the idea.

I wonder which one it is?

M@

References
[1] Original identification: impeding or enabling churn
[2] Not much demand for switching accounts

Original identification: impeding or enabling churn

2008-02-11T09:45:00.000+11:00

Because of my background with Westpac's Trust Centre, and a general interest in economics and the banking system, I have found the recent comments by the new Australian Government regarding account switching very interesting.

Treasurer Wayne Swan [1] and Finance Minister Lindsay Tanner [2] have both been in the press [6] over the last week berating the banks for raising interest rates above the recent increment by the Reserve Bank of Australia (RBA).

The twist here is that under the Australian banking system, there is, by design, very little the Government can do about the rates banks choose to charge borrowers. Some time back (under the previous Government), the Reserve Bank was given the power to independently set rates, and the banks now respond to this, setting rates as they deem appropriate for market conditions.

Of course, this is a Good Thing. Leave the Reserve Bank to handle the cash rate and leave the Government to look after fiscal policy. That's a sound economic principle and a pillar of the Australian banking system. And for the most part it works.

Unfortunately, the fact that falling interest rates often signal a worsening economy and rising rates often signal a warming (or even overheating) economy is lost on most people. Complicating issues further is the fact that almost all of the reasons rates move around lie beyond the control of a single Government, or jurisdiction. They rest pivotally with the machinations of the global financial system, and the large economies of the World such as the US, China, Europe and Japan. Regardless of this fact, politicians of all kinds love to take credit for rates falling, and shift the blame onto external factors when rates go up.

What is interesting about the new Government's response to the recent rises is that instead of simplistically trying to move the blame for the rise to external factors, or shaming the banks publicly, they've taken the unusual step (at least in this country) of resorting to competition policy.

One thing that characterises the Australian retail banking sector is that it is highly concentrated. We have 4 very large banks and 1 not-quite-so-large bank, plus a handful of smaller regional institutions and credit unions. Between them, the Big 4+1 have the vast majority of retail banking business in Australia.

This concentration has lead to a rather stable market where there are very few positive incentives for customers to change banks. From the banks' point of view, any kind of price competition simply ends up eroding value, so they do not typically engage in that kind of behaviour.

This has led to a situation where it is quite difficult (by design) to move around from bank to bank. Closing down direct debits and re-initiating them is a complete nightmare, and changing mortgages is even worse. Exit and entry fees generally make it so expensive that the average person finds just too hard to switch.

And so the Government, in the face of some banks raising home loan mortgage rates by an amount greater than the recent RBA increment, has turned to competition policy. It has taken the view that if banks are going to do that, then the Government will seek to make it easier for consumers to switch.

Like the independence of the Reserve Bank, this is a Good Thing. In fact, it's precisely the kind of thing a Government should do in a mature and sophisticated banking market - make sure that structural inefficiencies (such as barriers to changing banks) do not artificially distort the retail interest rate. If it is too hard for a customer to switch banks, then it is easier for the bank to load up rate increases without fear that it will lose customers. Conversely, if it is easy to move, then a rational customer presented with an artificially high rate rise will simply change banks and choose the provider with the lowest rate. Over time, this will place downward pressure on the retail rate.

What does this have to do with the Trust Centre? In order to switch banks, I have to identify myself to the institution. Up until recently, this process was known as the '100 point check', where I used a variety of physical identity credentials to demonstrate my identity to the bank. Now that the banks have switched over to a 'risk based approach' under the Anti-Money Laundering and Counter Terrorism Financing Act, the process is not so straightforward. Organisations are using different methods to identify customers, and some are stronger than others.

An obvious attack in a switching-enabled system would be to establish an account with an organisation that had low identification standards and switch it over to an account with an institution that higher identification standards. So, whatever measures the Government implements with respect to switching, it is going to have to take serious care with working through the process of original identification.

Of course, if the consumer is strongly identified in the first place, and issued with an equally strong uniformly recognised identity credential, then switching is pretty easy. But the questions here remain as ever: What process? What credential? Who pays for it?

These were precisely the questions asked during the Trust Centre project. I wonder if anyone has the answers?

M@

References
[1] The Hon Wayne Swan MP, Treasurer
[2] The Hon Lindsay Tanner MP, Minister for Finance and Deregulation
[3] Accelerated account switching planned
[4] Switching in vogue
[5] Identity checks an equal barrier to account switching
[6] Cost of bank switches to be cut

Microsoft, Yahoo!, Google ... and News Corp?

2008-02-06T11:28:00.002+11:00

Watching the Microsoft/Yahoo! merger dance presents some curious permutations. There has been a lot of press about the deal, and rightly so. It's a (possible) merger that represents a fundamental shift in the structure of online business. However, one thing struck me about the clear "No" [1] signal from News Corp this week.

At first, I thought that a News Corp tie-up would be an obvious play, but on second thoughts, I wonder if Murdoch actually wants Microsoft to try to swallow Y! because he knows deep down that it's a fundamentally bad idea, and the end result would be a disaster. For example, what will Microsoft do with all of Yahoo's PHP? Port it to .Net? For Murdoch, that's great news, because it effectively takes 2 big online players out of the game, leaving him up against Google by himself. Whether or not that's a fair fight is another question, but it certainly makes the landscape simpler.

M@

UPDATE-2008-Feb-08: Ok, here's a different point of view. I could see that working.

UPDATE-2008-Feb-13: Or maybe News Corp will play: Yahoo talks to Murdoch: report. Interesting.

References
[1] News Corp Says "No Yahoo Bid"

Some challenges for banking technology at the edge of innovation

2007-12-16T13:05:00.000+11:00

Here's three challenges for banking technology at the edge of innovation. As always, it's instructive to take and an end consumer focus in reflecting on this issue:

Identity anarchy, or: how do we credibly establish identity in the absence of face-to-face contact?
Mobility fragility, or: the rise and rise of mobile devices and their inherently heterogeneous environments.
Two-point-oh fatigue, or: let’s party like its 1999.

Firstly, as more and more transactions move to electronic channels, banks have an increasingly difficult problem in credibly establishing the identity of the person at the other end of the conversation. And this problem is not limited to banks because the end consumer too, needs reassurance about who they think they are dealing with.

Secondly, if the trend to motility manifests as I think it will, then there will be one characteristic of the technology landscape that will be very different from today’s PC operating system monoculture. The mobile handset market is vastly more diverse than the current PC domain, and this has two implications. Firstly, the diversity of platforms means that there will be more holes for attackers to chase and exploit (potentially a unique set for each handset and operating system combination). Secondly, because the lifecycle of a mobile handset is so short, vulnerabilities are often not patched because it is cheaper, easier and/or quicker to bring out a new model. The result of these factors is that if we think we have a problem with endpoint security today, then we are potentially in for a whole lot more trouble in the future.

Finally, there is some amazing promise in the notions of Web2.0; however there is also a very real risk of it all bursting in an explosion of social networking sites poaching each others members. This time around it seems driven by acquisitions not IPOs, but some of the same bells are ringing. How many times can we attach “2.0” to something before people start to lose interest?

I think that the solution to the first problem lays in a credible, universally accepted, portable, cheap, effective, secure, and privacy respecting digital identity. I know from personal experience that this is not at all an easy thing to achieve; however, there are some technologies in this space that look promising right now. A solution for the second problem becomes a whole lot easier if we stand back and forget for a moment that the mobile device is a phone, and consider that is just a PC with a small screen. In my view, it does not make sense to build a whole new banking platform and delivery capability designed specifically (and only) for mobile phones. It’s expensive, non-standard, time consuming, and prone to error and obsolescence. What makes more sense to me is to take the existing online channel and make sure that it can be viewed on a constrained form factor device, over IP on a 3G (or 4G) mobile network. Although these capabilities are beyond the average device today, I firmly believe that it will be the default capability of devices for the majority of consumers in the near future. As we have seen (hype aside) the iPhone has raised the bar by bringing a new brand of unconstrained web browsing to handheld devices so we can be sure that other manufacturers will follow suit.

Finally, I’m not sure there is a solution to the problem of “two-point-o fatigue”. As anyone who went through TechBubble1.0 can attest, it was a pretty fun time – right up until the very end. There’s a lot of activity in this space at the moment, both in terms of innovations such as Prosper.com, Zopa.com and Kiva.org, and in terms of acquisitions. For example, I recently read [1] that FaceBook turned down a US$1b acquisition, making it public that it is only entertaining offers in the US$10b price range (I just hope they don’t turn out to be another PointCast).

M@

References
[1] "FaceBook founder ‘stole our idea’", Sydney Morning Herald, 25-July-2007

Musing on the outlook for banking technology in 2008

2007-12-16T12:59:00.000+11:00

I think it’s always interesting to think about how technology is changing from the perspective of the end consumer. In that light, I can see two clear trends that will influence innovations in banking technology over the next year or so, particularly in the way consumers will interact with financial institutions. These are:

Motility, and
Sociability

Although there are certainly other trends, I pick these two specifically because they fit together well to exemplify what some have called “Banking 2.0” (even if the “two-point-o” moniker has become a little hackneyed).

Motility
I chose the word motility intentionally (from the Latin motus) because it implies spontaneity and revolt, as opposed to just simply moving. Mobile devices are not just coming of age; they are supplanting traditional desktop PCs as the access mechanism of choice. Depending on whose numbers you believe, there’s already nearly an order of magnitude more new phones purchased each year than new PCs, and the trend is increasing. People also tend to replace their mobile handset once every 12 months or so, as opposed to 24 months for a PC, so the likelihood is that if a consumer does not currently have a state of the art phone, they probably will have one with those capabilities next year. The bottom line here is that in 5 years time, I think most people will be using a mobile device, and not their desktop PC, as the preferred platform to interact with their bank.

However, there is an embedded contradiction in the above trend, characterised by an article I read in the SMH [1] the other day. This study showed that the use of e-mail and text messaging by Gen-Y’s and Gen-Nexters is actually decreasing in favour of the use of social networking sites such as Facebook and MySpace. Apparently texting is “sooooo 2006”. You can already interact in a rudimentary way with Facebook and MySpace from a phone – imagine what will happen when the next generation of those applications emerges.

Sociability
Which brings me to sociability. In the financial services space, the best examples of sociability that I have seen so far are the “social lending” sites like Zopa.com and Prosper.com. I’m not sure which one came first, but in each case their basic premise is that they put lenders and borrowers directly in contact with each other, bypassing traditional financial institutions. Borrowers list a request, indicating how they intend the use the money, along with some personal information to establish credibility. Lenders don’t invest in a single borrower but rather distribute their capital across a number of requests, effectively spreading the risk. Its portfolio theory meets social networking. Over time, borrowers establish a credit rating by successfully paying back their loans, and they can also form groups that bestow credibility on members by virtue of their associations.

Taking this idea one step further, organisations like Kiva.org and Opportunity.org are delivering micro-finance to the third world, allowing desktop philanthropists from the developed world to invest in developing world entrepreneurs.

Banking 2.0
And it’s at the confluence of motility and sociability that I can see some amazing opportunities for innovation. Is social lending a new way to drive originations for traditional lenders? Will this have an impact on unsecured lending and credit cards? Maybe it’s a new asset class for investors looking for an interesting combination of financial and philanthropic returns? Or perhaps it’s a combination of all of the above? Who knows, but it is fertile ground.

M@

References
[1] "For SMS, the days are numbered", Sydney Morning Herald 27-Sep-2007

Products versus Customers

2007-12-16T12:47:00.001+11:00

It strikes me that there is a really deep flaw in the way traditional core banking systems model the relationship between an institution and the end consumer. Often these systems are product-based, with the customer’s relationship with the bank modelled as an artefact of the origination process. I have heard this described as “inverting the customer/product model”. To me the standard product-based approach is basically backwards. I should be able to have a relationship with the bank that is independent of any particular product. Of course this is changing with modern CRM systems, but the fact remains that there is a huge underlying legacy of core banking systems that seem to have the basic abstraction wrong.

M@