Tuesday, September 29, 2009

Mammals Shouldn't Take Advice from Dinosaurs

On ZDNet, Larry Dignan asks, Is Barry Diller Delusional? Barry Diller is the exec formerly behind Fox Broadcasting and USA Broadcasting, and is currently in charge of the lukewarm IAC/InterActiveCorp. Larry's post contains video of Barry (once again) declaring that people should pay for Internet content.

There are gobs of media moguls out there who feel that they should be paid for access to their content and that people will pay whatever said mogul thinks is fair. These people have heard of the Internet, but they've never actually used it. They might "have people" who surf, but they don't. In the context of the Internet they don't even know what's fair, and their entire argument is based on their abject ignorance. AIC's stock price pinpoints the moment when investors realized that fact.

I won't argue that they shouldn't get paid, but the mechanics of it are vastly different from what their wishful thinking would prefer to see. And it is the consumer, not the mogul, who sets the price. The principle of supply and demand is not negated simply because the content is on the web. On the contrary, it's magnified due to increased competition.

Web surfing is a lot like shopping. Not "guy shopping" like I do (I need something, I buy it, I leave), but the way my wife does it... taking a day, going to the mall (the modern incarnation of a bazaar), browsing, being pulled along by one interesting thing after another in imitation of Brownian motion. Along the way she might just buy something and take it home, but the bulk of the experience is the browsing. And, shopping this way, she's likely to bring home only those things that are bargains. Stores don't generally charge admission or require a subscription for that. Internet browsing isn't called "browsing" for nothing.

Now imagine if the stores required you to pay to see what they had. They wouldn't stay in business.

Now, what Hollywood execs are trying to do is treat a bazaar as if it were a theater. And certainly, they can do that. They can lock the doors of their establishment and only allow in those customers that have purchased a ticket or pass. But they've forgotten a few things:

First, people are pulled along by their interest, and locked doors aren't very interesting. That's why carnivals have barkers, and why movies have trailers. Experience shows that both barkers and trailers exaggerate the desirability of their product.

Second, people have finite funds. They can't pay for everything. They just can't. They have to choose. Given a choice between paying for access to a site and visiting a competing site for free, most of them will choose the competing free site. Don't think so? WIKIPEDIA. Ask a pundit and you'll be told that Britannica is more respectable, more reliable, yada, yada, yada. But for traffic and general use, they're getting their butts kicked every single day by Wikipedia.

The New York Times used to be a subscription site. Then they woke up and noticed that people were ignoring them. When it comes to news, the old rule applies: subscriptions pay the paperboy... ADVERTISERS pay the reporters, editors, printers. So what happens when your delivery costs drop to near zero? The answer is NOT to continue the subscription model and hope that your customers don't notice. They do. People will happily get the same news stories from web publishers who do understand that the subscription model is dying.

From a personal perspective:

I'm dropping the premium channels (particularly the movie channels) on cable, because over the last year I've found that I don't use them at all. I have used on-demand (PPV) and Hulu, which is supported by ads. Would I pay for Hulu? Maybe, if the cost were small and they pulled the ads. But even though Hulu is free to me, I still find I watch more YouTube and fanfilms (which are only getting better). If I had to purchase Hulu content per view I'd certainly watch far less of it. If I had to subscribe I'd almost certainly bypass it for other fare. Being supported by ads, Hulu certainly reaches a larger audience than it would otherwise do.

It's not a matter of being willing to pay. I donate to PBS, and nobody's twisting my arm. I buy the occasional PayPerView movie or event. But... in order to sink money into something regularly, it must not only be interesting, it must be interesting enough to justify the cost over something that's maybe not quite AS interesting, but free.

In Diller's case... sure, he can argue that people should pay for HIS content. He doesn't even have to argue it... he can just wall off his sites and do it, and needs no one's permission. But if he thinks he's arguing on anybody else's behalf, then he's just laying down a smoke screen for his own anti-competitive behavior. If he's hesitating, it's because he's got free competition. That he's complaining shows he doesn't like it. Tough. Other people have found ways of monetizing the web without fees. They don't need to be told how to run their businesses by the guy who hasn't figured it out yet.

Monday, September 07, 2009

Cloud Computing: Still Bad.

In response to my previous post, Cloud Computing is Baaaad, Mmmkayyy?, I was happy to receive a most thoughtful comment from Greg Charland. Greg writes in part:
Really, though, it comes down to the math.

I'm not even going to go in the direction of google as I'm not convinced that their email solution is business-worthy.

But I can offer hosted Exchange & SharePoint through a well-known provider for $15 per mailbox per month...and make good margin doing it. Not cheap crap but a real provider who answers phones, monitors their servers, and knows their stuff.

For an "average" 10-user business:
10 x $15 = $150/mo
That's $1,800 per year
That's $7,200 over the 4-year life of a "typical" server.
I invite you to read the entire comment, please. I've been writing this blog for a long while, now and I'm thrilled to say that this is the most thoughtful, insightful comment I've ever received, well worth the read.

Nevertheless, it does not change my mind. My core advice to anyone is summed up in the statement "Do not put your mission-critical data in someone else's hands," (and I mean this generally, but more specifically I mean "in their hands alone"). With all due respect to Greg, that means don't entrust it entirely to Greg... or to ME for that matter. The rest of this post is addressed to Greg in response, but the rest of you feel free to read "over our shoulders."

Greg, cost savings isn't the whole of the equation, and I suspect you realize that... otherwise you'd have no alternative but to go in the direction of Google mail and docs, which can provide pretty much what you do, but for free. I realize that you're not convince that they are "business-worthy", but you yourself face precisely the same hurdle. I've been burned by "well-known" cloud vendors who talk a great game, only to shut down, taking my data with them. Your challenge is not only to convince someone that you're more "business-worthy" than Google, but that you're in it for the long haul.

As to costs, per user you are charging $15/mo x 12 months = $180 per seat. For about $140/seat I could set a business up with Domino Collaboration Express and Notes clients, and Lotus' small business pricing would effectively throw in the Domino server for free. The savings is applied toward the purchase of server hardware, which for 10 users doesn't need to be that hefty. Not only are email and file sharing services lightweight, but groupware tasks can be distributed to the workstations as appropriate. Most small businesses overspend on server hardware, and that's simply because they're told to do so by consultants who sell the hardware. The "typical" server cost of $10K is completely overpriced (for SMBs, more on that later), and that higher-than-necessary rate is commonly quoted not only because it's what small businesses are suckered into buying, but because it serves the interest of SaaS vendors to quote the higher price. For a small business server, the actual cost is about half of what you're quoting, assuming that their needs are reasonably constant over the life of the box.

My challenge would be to convince a client that this localized solution is worth the nominal additional expense. And it's not much of a challenge, really.

First of all, compared to Exchange, Notes/Domino is a an overall better solution, as detailed in this comparison on ChannelWeb.

Then there is the security aspect, which is a major factor. They would own the hardware, they would have 24/7 physical access to their data, and no one else would. Their internal network is not dependent on any external party, nor any periodic renewal, nor any terms of service. Their ability to do business is not hampered by the failure rate of their internet provider + that of their hosting service provider.

Next, there is the flexibility of the solution. You would offer Exchange and Sharepoint. A local Domino solution could also host additional services, as mail and groupware would not begin to tax its capabilities. At zero additional cost the business has available to it any of the features provided by the many Domino database templates that ship with the product, supplemented by those which are available at OpenNTF.org, and available from third parties.

The same hardware could host accounting or other shared services beyond those which the hosted service provides. Keep in mind that we're only discussing 10 users here... this is extremely lightweight. And here's where your math falls apart.

You must realize that if the user needs to provide these services which are not provided by your host, he's going to have to buy the hardware anyway. Then the equation changes drastically. Mail and groupware for 10 people are easily provided in the spare CPU cycles of the hardware he will have on hand, and the purchase price of this hardware with regard to mail and groupware is properly removed from the equation entirely, leaving the user with a $400 acquisition savings in the first year, plus savings on subsequent renewal fees, compared to hosting. The yearly savings defrays the cost of on-site maintenance and support (which, again, would be paid anyway), leaving the small business with all of the security benefits discussed PLUS "free" email and groupware after the first year as compared to your solution. So, after the first year, and for the limited set of services we're discussing, the local solution is pure savings. This doesn't even factor in the benefits of additional template customizations or custom groupware solutions not provided by the host.

As you say, it comes down to the math, but cloud computing doesn't look one bit better when you REALLY look at the numbers.

Now, Greg, you and I both know that you'll disagree with my numbers, just as I disagree with yours. In point of fact, both sets are pulled out of the air, and each client has to do the math for himself to see what makes sense for him. All I can say is that I have clients who are hosting their own email and groupware and are paying bupkis for it, having long since amortized the cost.

All that said, for some companies in some situations, some of your numbers make sense. For instance, the $10k cost of a server is typically used at the multinational where I frequently contract... but that's not an actual cost; it's an accounting ballpark used for budgeting and chargebacks. Then again, the meeting simply to determine the need for that hardware easily costs $500. However, these numbers are not appropriate to SMBs.

Likewise, there are really small businesses that do all of their accounting on a single desktop with Quicken or PeachTree, with no need for separate stations for order entry, shipping, or accounts payable. They may never have the need for a local server, and thus would really benefit from hosted email and groupware. Unfortunately, these are the businesses that are also prime candidates for Gmail and Google Docs. Unlike larger companies, their downtime is not measured in thousands or millions of dollars per minute.

Nevertheless, while recommending a hosted solution for them (whether Google's or something like yours where it makes sense), continued access to their data is still a risk, I'd still recommend to them that they set up the mail account with POP or IMAP so as to maintain a constant backup of the information on those servers. Ditto with the docs; so once again...
Don't leave your critical data in someone else's hands.

Friday, September 04, 2009

Cloud Computing is Baaaad, mmmKayyy?

Cory Doctorow has a story in the Guardian (link) describing the "real" purpose of cloud computing.

The tech press is full of people who want to tell you how completely awesome life is going to be when everything moves to "the cloud" – that is, when all your important storage, processing and other needs are handled by vast, professionally managed data-centres.

Here's something you won't see mentioned, though: the main attraction of the cloud to investors and entrepreneurs is the idea of making money from you, on a recurring, perpetual basis, for something you currently get for a flat rate or for free without having to give up the money or privacy that cloud companies hope to leverage into fortunes.

Now, Cory Doctorow is making the spot-on observation that cloud computing is a scheme to get money from your pocket into someone else's. I dislike it for this reason, but that's not the only one. I have long maintained that choosing SaaS is a major mistake for most companies. This is especially true for small companies that don't have the negotiating clout to legally safeguard their data. Nor is it a good choice for large companies. For medium-sized companies it questionable at best.

People, do not put your mission-critical data in someone else's hands. There are some things that "the cloud" is good for, but not when you realize that you can, in fact, do it yourself... more securely and cheaper. Most people don't even know that they have these capabilities available to them. And many don't, because they don't have the right tools. But they could.

Now, if I were in a Microsoft shop I might be worried that I can't provide these "cloudlike" services in-house economically. But I work in a Notes/Domino environment. You can use it for email, sure... but it also gives you a full messaging solution. It can provide your website, your forums, etc. Yet I repeatedly see companies deploy other "solutions" to handle the functions that they could do perfectly well with what they have, if they only knew it.
Need a wiki? Notes. Need a Teamroom? Notes. Need a document repository? Notes. Need instant messaging tightly integrated with email? Notes. SFA? Notes. Other Lotus products can extend your infrastructure beyond the basic capabilities, but for many small businesses, Notes and Domino are all you need. A Notes+Domino environment is ridiculously cheap for small businesses, and it will quickly repay the investment rather than constantly drain your finances, as will cloud computing.

Domino isn't the only way to do this... you can use a number of Open Source software packages if you can deal with complexity. Or you can cobble together Microsoft's offerings if you don't mind complexity AND expense. But Notes+Domino is really the simplest way to go for those who aren't technically inclined.

Folks, processing power is cheap: people have so much of it that they can afford to donate it to projects like SETI and ASTRA. Data storage is cheap: you can buy a terabyte for one Benjamin Franklin. Network connectivity is cheap: I get gobs of it with several hundred channels of cable television. The capabilities you need are cheap as we've discussed above. As a result of all this, the cloud vendors are selling you "solutions" to problems that don't really exist. Avoid, avoid, avoid.

Tuesday, September 01, 2009

Software Patents, Word, and OpenOffice.org

If you've read this space at all over time, you'll know it's no secret that I'm a serious fan of OpenOffice.org, the free alternative to expensive desktop software like Microsoft Office. Recently we've been provided with additional reasons for making the change.

Reason one:
A District Court has issued an injunction banning Microsoft from selling Word in consequence of losing a patent-infringement lawsuit brought by i4i. Read about it at PCWorld.

Now I'm not a fan of software patents at all, and side with Microsoft on this one. Software is already covered by copyright, and it is the expression of an idea, and not the idea itself, that should be protected. Speaking as a programmer, software is not invention, and should not be subject to patents. True, writing and inventing are both creative acts, but they are governed by different rules, regardless of what some greedy opportunists would have you believe.

Imagine, if you will, an author wanting to patent the "mechanism" of a story, in exactly the same way that a software publisher is allowed to patent a "mechanism" described by a program. Here the plot device is "the butler did it," and some schmuck at the patent office screws up royally and says, "OK, here's your patent." Great for the author, since now he can sue everybody who uses "his" plot device, crying about how they are "thieves", even as he shakes them down for money for their work, their creativity, their stories, of which he wrote not one blessed word. To add insult to injury, the patent office then compounds their error by issuing patents for every subsequent "plot device" that's tossed in their direction, by reason of precedent.

This is no analogy. This is a one-for-one exact comparison. It is exactly the way in which our patent office screwed up royally. Programming is an act of authorship, adequately governed and protected by copyright. Software patents are unconscionable; they are illogical; they are, I believe, precluded by a sober reading of statute, and they should be struck down. Of course, the district court in Texas disagrees, but this is tempered in my mind by the knowledge that the court that disagrees with me has made precious few decisions of which they can be proud. As it is, the rest of the world is struggling to avoid the same mistakes we in the US have made.

I feel for Microsoft here. This isn't a case of copyright infringement, they didn't steal anything. Nevertheless, they're getting shaken down, and that's a shame. In the meantime, it is what it is, and Microsoft faces a deadline for stopping the sale of Word, even as they file an appeal and prepare non-infringing versions of Word.

Meanwhile, i4i have looked at the code in the open-source OpenOffice.org and have declared that it does not infringe on their patent. So now is not a bad time to look at this alternative.

Reason Two:
Microsoft Expands Office Office Anti-Piracy Program. While the previous reason is none of Microsoft's doing, this one is, in half-measure. The other half-measure belongs to the users. So, in two parts:

Microsoft's anti-piracy measures such as "Genuine Advantage" haven't been stellar. While I can't fault Microsoft for feeling the need for piracy-reduction measures (the reasons for which I'm about to touch on), I can't say I'm thrilled that they don't address them by economic means, or through better mechanisms than they've chosen to use. So far, Microsoft's measures have been inconvenient, they've been restrictive, and they've had their share of false positives, meaning that even if you've bought your product from a retail store and installed it out of the box yourself, you've run a risk of being flagged as a pirate. They've also been almost completely ineffective... the real pirates have gotten around every measure thus far.

On the other hand, Microsoft Office is frequently pirated, which is a reason why Microsoft feels that these measures are necessary. It's pirated because it's mostly decent software; it's ubiquitous; and because it's bloody expensive. Software piracy is the result of that perfect storm of user need + overpriced solution. But you shouldn't be pirating software, even if you can't afford it, even if you need it really, really badly.

OpenOffice.org meets the needs of those users who are pirating office, and there's no need to steal what you can have -- legally -- for free. And it's more than a little stupid to pay for what you can have for free, as well. So combat software piracy by using OpenOffice.org and other Open Source software. Remember, with OpenOffice.org, here's what you get:
  • Word Processor
  • Spreadsheet
  • Presentation Graphics
  • Drawing
  • Database
  • Math
Throw in other Open Source software like Thunderbird email with Sunbird calendaring and you've got a full replacement suitable for most offices. All of these are cross-platform as well, so you are free to use any operating system (like Apple's Mac or the amazingly easy-to-use Ubuntu Linux) to improve your bottom line and cut your computer acquisition and support costs.

Reason Three:
I recently found these nifty new Avery templates for OpenOffice.org on the web at Worldlabel.com. Avery, of course, is a leading manufacture of business products, so these templates are a great enhancement for your OpenOffice.org-driven office. So a big thanks to the people at WorldLabel.com for providing these. Show your appreciation by buying some of their paper products. And then take a look at some of the other great templates available to you.