Microsoft Acquires Skype: Winner or Loser?

Read my opinion on the Microsoft acquisition of Skype on the ACG website here.

Staying in front of the Wave – How I Spot Trends Before the Crowd

This post starts in the early 1998.  I had just started as a new analyst at Aberdeen Group and was still learning networking technology.  I was not that busy so I took every briefing request that came my way – so did not hesitate to take briefing with an MIT professor to talk about Internet protocols.  The person was Tom Leighton, and he outlined a method for delivering Internet content more efficiently.  I could not follow the technological nuances his concepts, but I was impressed by the elegance of the solution and thinking that it made a lot of sense, but that commercializing it would be a bear. The most memorable part of that day was afterward, a colleague pulled me aside to ask me who I met with.  After telling him about the meeting, he chastised me for wasting time with someone who did not have a product.  About a year later, Tom’s company, Akamai had one of the most successful IPOs in history.

The point of this post is not about my brush with fame (Tom probably does not even remember me or the meeting), but how I distinguish “break through” trends from fads before the rest of the crowd.

So here is a stab at identifying some of the things what I do intuitively.

• Monitor the news flow in your market segment and in other segments because many disruptions come from adjacent markets or segments.  For example, the iPad, which is arguably the single most disruptive innovation in the TV industry, did not exist a year ago and was not designed specifically for consuming video content.

• What is in it for the end user?  Does it require a major shift in habits, if so, does it offers something in return like dramatically lower costs.  In its early days, VoIP was plagued with quality problems, required microphones and speakers, and required keeping the PC turned on.  However, saving $3/minute for international calls made it worth it.

• What can I learn from similar disruptive technologies that we have seen in the past.  It is amazing how often history repeats itself especially if the disruption comes from a similar sector.  The pattern of social media adoption by enterprises was eerily similar to what occurred when the browser and web sites were first introduced.  A few years ago, senior executives were asking the same questions about blogs, wikis, Facebook and twitter as they did about the web:  what is this, is it real and what does it matter to my company?

• Who are the winners and losers and what steps might the losers take to block the adoption.  Sometimes the better idea does not always win.  We are already starting to see this was content owners are reevaluating their licensing to OTT vendors.  For example, Showtime, announced that it is not going to renew its licensing of its newer shows to Netflix.

For example, I was one of the first analysts telling enterprises to pay attention to social networking, and over a year ago, I pointed to OTT as the major disruptor for pay TV operators and equipment vendors.  Here is the back story.

I had read about Facebook for a while, but did not really understand it until I got my Facebook account (right after it was open to non-students – and much to the chagrin of my children).  I saw the power of it was in its simplicity, abilty to consolidate content, provide news/updates to a group, and generate and publish content without breaking a sweat.  If applied correctly to an enterprise, these basic social networking functions could greatly enhance their communications with customers and streamline enterprise communications and collaboration.

I was covering STBs when we bought our first Internet enabled Blu-Ray player and that let me watch YouTube and my Netflix instant queue on my home screen.  Before that, to be able to watch our Netflix instant queue on the big TV, we had to put a laptop on a tray table and run an extra cable to the back of the TV set.  The Blu-Ray set up was simple and did not require an extra box like AppleTV, Roku or Boxee.  The quality was not as good as the pay TV but was acceptable.  The price was a no-brainer, a flat $15 a month for two DVDs at a time and streaming more of movies than I care to watch.  Sure, I would like more recent movies, but at that price, it was OK.  I knew it was only a matter of time before Netflix and YouTube would quickly get more content and competitors.  It became clear also that over time, I would not be totally reliant on my pay TV provider for all of my video content, which meant that I could cut back my premium options or drop my service all together.

That being said, I am not perfect: I thought buying Google stock was risky (because there was nothing preventing another competitor from developing a better search algorithm and taking the market much like what Google did to Yahoo).  I missed Twitter’s success and its value as a marketing and customer service tool and underestimated how fast OTT video viewing would grow (Netflix alone can be 20% of an ISPs prime time traffic).

What is your opinion, is my record average, above or below?  Am I missing something in my analysis?  I look forward to your feedback.

Don’t Count Cisco Out Yet

In the wake of Cisco’s latest earnings release, much has been written in the press about how Cisco has lost its touch and may be in danger of losing its market lead. I understand that uncertainty causes anxiety, however I believe that this latest whirlwind of opinion is a case of “Short-Term Think”, and like “Group Think” it can blind us to bigger and often more significant drivers.   When one looks at Cisco as a whole and historical experience, one can reach a different conclusion.

We can all agree that Cisco’s results were disappointing and that they need to make significant changes.  However, I believe this is a short-term situation more akin to a speedbump than a concrete barrier and that the company will get back on track in a few quarters.

• Even though some competitors gained share, Cisco is still the undisputed leader in most of the markets they participate in
• John Chambers is a savvy business leader who is willing to admit his mistakes and to make the difficult changes (they have already announced some first steps like dropping Flip)
• They are extremely well positioned in key growth markets like video, mobile and content delivery
• They have plenty of cash in their war chest to battle back

This is a 40,000-foot view, Cisco is huge company in many markets – so a detailed analysis would take 40 pages.  However, given a long-term view and macro trends, betting against Cisco is likely to be a losing bet.

What Makes a “Thought Leader?”

“Thought leader(ship)” is a term that is used frequently in the market research/industry analyst world, especially in technology – the area I know best. Unfortunately, its frequent use, in combination with a vague definition, has created the current state of affairs:  it is essentially a meaningless term that is used to impress non-experts.

I have to admit that 1) Wikipedia has a good definition: “business jargon for an entity that is recognized for having innovative ideas” and 2) I am guilty of using this term for self-promotion reasons.  However, I still do not like it, and I will promise to stop.

I think my problem is that these are two words that do seem to belong together.  It feels forced, like a gunshot wedding.  What is a thought?  What is a leader?  How can a thought be a leader?  Can a leader be a thought, perhaps?

OK, I admit, my rant will not stop the use of “thought leader”, and I will probably slip up and use it to describe myself once in a while.  However, let’s try to set up ground rules for its use:

• If you use the term “thought leadership”, define what you mean.  Are you talking about being the first to publish an idea?  Are you seeing trends that no one else sees?  Are you providing non-obvious insights?  Are you drawing conclusions that set you apart from the crowd?  Do you defy conventional wisdom beyond just being a contrarian?  Do you have unique processes or algorithms?

• Can you back up your claim of leadership?  Can you show a track record of being first or among the first to call a trend?  Can you provide examples of unique analysis or non-obvious insights?  Claims of leadership always seem suspect to me.  As an analyst, you read press releases from tons of companies and it seems that everybody in the tech world claims to be a “leading provider” of their product or service.  The absurdity is apparent:  it is not possible for everyone to be a leader.  Also, I have noticed that the true market leaders generally do not use the word to describe themselves.

Also, if you consider yourself a “thought leader”, are you open to other points of view?  Do you admit that you may have missed something or may be wrong even if your reasoning is sound?  Is your certainty also a set of blinders?  I ask these questions because thought leaders are supposed to be the “advance scouts” of their industry and disruptive innovation often comes from outside the narrow confines of the traditional market.  For example, Twitter’s sudden popularity is more than a consumer messaging service, it has changed the way companies should be running their customer service function, and is in many ways more important than their CRM vendor.  Also, ten years ago, the people running the landline telephony business did not consider mobile phones to be a serious replacement threat.  In today’s world, very few people under the age of 30 has a land line.

Please let me know what you think.  I would like to hear back from my colleagues in the market research / industry analyst world and the people who consume the research and data.  It should be a good conversation.

 

 

Is the iPhone Verizon’s Silver Bullet?

Finally the rumors and hype are over:  the iPhone will be available next month on Verizon Wireless.  This is a big deal for Verizon, who should gain some subscribers and AT&T will undoubtedly lose some.  But I do not see this a big game changer, at least not yet.

The reason I am not so sure this is a silver bullet for Verizon is that despite the marketing hype, their 3G network is, based on my personal and unscientific research,  much slower than AT&T’s.  Sure they have coverage in more spots than AT&T, but it is often so slow that it is the same as having no coverage.   On more than one occasion, I have sat next to an iPhone user trying to do the same task (like find a restaurant on google maps) and while I am waiting for the first page to download the iPhone user is done and moved on. Given the slow response and that you can’t talk and surf at the same time, the ultimate customer experience on VZW will seem a lot like AT&T’s experience.  My prediction is that VZW will earn a similar reputation as AT&T in just a short time.

Add the fact that and VZW’s track record of  customer service is not that stellar and disabling competitive features (the GPS on the Palm Pre only talks to VZnavigator and you need an unofficial work around to navigate on google maps) will not earn it lots of raving fans.

I am not running out to get an iPhone on VZW even though I am a customer and I really dislike my current smart phone (it is a Palm Pre Plus and that is a subject for another post).  I want to hear from early users to see if the network is as slow as I have experienced and what features they disabled.  Plus with 4G supposedly around the corner, it might make sense to wait.  Also, with some of the users leaving AT&T, their network might provide more consistent service and thus I might switch to them.

Way to go Verizon! Leading the Way in Customer Gaff

In case you do not know my sense of humor and irony, this blog is not praising Verizon’s customer service but pointing out its total ineptitude.

We are moving and decided to keep Verizon services in our new house, (having to choose between Comcast and Verizon is hard, but we have had real issues with Comcast reliability and their customer service is awful as well).  My wife set up a  disconnect next week and the customer service agent was not very good and put in this week as the effective date (despite clear instructions).  Imagine our surprise when we discovered that we had no internet or TV, and our email was shut down.  To make the problem even worse, they wiped out our email access, all stored emails and incoming messages were being rejected.

My first call this morning was not too bad, about 10 minutes on hold initially and a transfer to another agent that took another 10.  The second person said they would work on getting it restored, with no promises that it would be done today.

I got home at around 5 pm and found the Internet and TV were restored, but still no email.  Fortunately, I got a very skilled tech on the line and he was able to restore the email.  Elapsed time was about 30 minutes.  My wife was not so fortunate, she was on the phone for an hour or more, spoke to five people, none were able to fix the problem.

I am complaining about:

• The initial mistake.  They should have verified the shutoff date on the phone and with follow-up email.
• The incredible waste of our time to fix their mistake.
• Why did it take multiple calls to try to get the mistake fixed.
• The horrible voice recognition/voice response front end.  It asks superfluous questions designed to waste time hoping that you will go away.  For example, it asked if I was calling about the number that I happen to be calling from.  I pressed 1 for yes, then it asked about if it was about account information or technical support.  I pressed 2 for technical support. Then it asked if I was calling about FIOS TV, Internet or Phone – those are the only services attached to this phone number!  Then it goes on to tell me that support options are available on the website!  Then it asks if I want to repeat that information and pauses for 5-10 seconds.  I am calling because I do not have web access and because your web site can do only a few rudimentary things, and not very well.
• Making us feel like we were customers they were glad to get rid of.  There was no transition time or assistance for the transitioning the email account (even AOL provided that).  They shut us off immediately without giving us time or instructions on how to forward to another account.  It was not like we were leaving for a competitor, we were going to keep verizon internet access and our verizon.net email at the new house.  This felt like we were being thrown under the bus.

If any of the Verizon brass is reading this:  get a clue.  You may want to blame your line employees for this type of snafu, but it is really a failure of leadership and policy setting at the executive level.  If you really valued customer service you would put in the systems, training and policies that would make it easy for your employees to deliver first class service.  So “man up”:  if you want to take credit for successes, you have to take the rap when things go wrong as well, otherwise you are not credible as a a leader.  Now is the time to own up to your shortcomings and do something about it, because your ticked-off customers are ready to go to your competitors.

Home Depot’s Customer Service Problems are Driven by Outdated Systems

I occasionally will take time to rant about customer service from some of the major brands.  I feel compelled to write again because of an experience I had at Home Depot.  Surprise!  My experience was actually quite good:  Sal at the Marlborough, MA Home Depot was awesome, he got me an estimate on carpet while juggling 5 customers at the same time with a great attitude.  So what is my problem?

The problem was the time it took to help me.  Even though Sal was very skilled and worked efficiently as possible, it took 15 minutes to finish the quote and print it!  By any reasonable standard, this should have taken 5 minutes tops.  The reason it took so long is that the ordering system is based on the old text terminals (what we used to call green screens) that mainframes and minicomputers used back in the 1970s and 80s.  (For those of you not old enough to remember, here is some background: http://en.wikipedia.org/wiki/Minicomputer).  I have first hand experience using this system and it takes 5 or more screens with arcane codes to perform any task.  There are many opportunities to make mistakes and it is very awkward and time consuming to make changes.  My “favorite” part of the system was that whenever I made a typo and used the backspace key on my PC (in terminal emulation mode), the system recorded the backspace as another character – making even more typos.

It is frustrating to me as a customer that senior management is either unaware that the system is broken or knows and is not doing anything about it.  Either way they should be called to the carpet by the board and shareholders and possibly fired.  This archaic system causes customers to leave in frustration, hurts employee productivity, increases training time for new employees and affects employee morale.

What really pisses me off is that the company paid Robert Nardelli $210 million severance after firing him for screwing up the company (I have another rant about Nardelli that I may write at another time).  I have not gotten a quote for a new order entry system, but a quarter of a billion would certainly make a dent in the down payment.

My message to Home Depot brass:  get a clue and fix this software ASAP, even if it takes cancelling bonuses for your top guys to pay for it.

My Entry into Smart Grid Coverage

I am fortunate enough to have been accepted as a guest columnist with TMCNET.com on Smart Grid issues.  My first post is on the cultural differences between the IT and power generation camps.  The main point was that we should be aware of how are backgrounds affect how we filter and view the issues at hand and that we get more educated on each other’s issues and concerns.

I am planning on doing articles on different parts of Smart Grid technology and interviews with different people in the industry.

Suggestions and comments are always welcome.

Cablevision’s Lack of Vision on Internet TV

I just saw this post on Light Reading regarding Cablevision’s response to Internet TV.

I have to admit that I was underwhelmed by their response to getting TV and videos from the Internet.  By time they figure out to make it happen and try to keep everyone going through the set top box, consumers will have bought Blu-Ray players (now in the $100 range) or new HDTVs with streaming built-in.

If I had the choice of using my MSO as an intermediary or going direct to Hulu or Netflix, I would go direct.  I think most consumers would agree with me, especially since MSOs do not have great reputations for great customer service or for reasonable pricing.

Time will tell, but I do not give this much of a chance of success.

What was Wal-mart Thinking When it Bought Vudu?

Wal-Mart purchasing Vudu for $100M is a watershed event for the video entertainment market.  It is foreshadowing the imminent shift in video entertainment delivery from traditional video entertainment from traditional carriers (MSOs and Telcos via IPTV) to over the top video (OTT) via the Web (see more comments in my Google Gigabit Fiber post).

It is understandable that Vudu wanted deep pockets to compete with more established players like Netflix and Blockbuster, but the wrong company bought the startup.

Wal-Mart is a low cost retailer not a service provider, they are different businesses that required different skill sets and mindsets to operate.  Here is my list of issues that I do not believe that Wal-Mart has a good answer to:

• They do not have a 24/7 customer service department capable of handling customers’ issues.  I do not believe that they will have the stomach to make the necessary investment and commitment in this area.
• They do not understand software development or product management.
• They do not understand what it takes to run huge data centers and CDNs.  Even if they use outsource / cloud computing, they will need someone on their end to manage vendors effectively.
• The corporate culture will lead them to use inappropriate metrics for managing the business, be impatient for results and keep them from making key new investments to enhance the user experience.
• The big -company culture will stifle experimentation with new business models.
• Their family oriented brand will drive them to censor certain content.  This will turn away a significant percent of consumers.
• The synergy between selling low cost Internet enabled TVs and Blu-Ray players and the service will not materialize unless heavily subsidized and promoted by Wal-Mart.  Given the already thin margins it works with, I am not sure there is much room here.
• If Wal-Mart cuts deals with the consumer electronics makers to carry its service, the other retailers might push back.

This reminds a little of the AOL Time Warner debacle.  The deal was overpriced, both companies hyped a story about synergies and market power, but in the end, the businesses were too dissimilar, the synergies never materialized and consumers did not really care.  I would say the same thing here, Wal-Mart, in its eagerness to get into a hot area overpaid for something they do not understand and will likely not invest the additional money, time and effort needed to make it successful.  There will be low barriers to switching, so if Wal-Mart tries censoring content, they could see big losses in subscribers.

I hate to say it, but this deal looks like a turkey to me.