BATSHIT CRAZY PARANOID

There's a definite sense of late that all's not well inside a number of big technology companies.

• Microsoft has been muddled about its direction for ten years, the nastier side effects of which have been mostly mitigated, or at least deferred, by the fact its Windows / Office cash cow is so large.
• Nokia used to be the worlds largest mobile phone manufacturer, now it's betting its future on the Windows Phone OS hoping that Microsoft can save it from oblivion.
• Six years ago RIM was redefining what we expected from smartphones with BlackBerry. Now it's redefining the meaning of the word implosion.
• HP had the corporate equivalent of a nervous breakdown last summer and has just decided (again) to start manufacturing Tablet PCs. This time running Windows 8 RT. If HP had a face, you'd slap it.
• Sony looks increasingly fragile.
• Dell is in need of a second act; the mail order PC business isn't exactly ground breaking.
• And today Yahoo staggered through yet another leadership crisis and is about to get it's fourth CEO in four years.

And only Apple and Google seem capable of recognising that no matter how earth shatteringly awesome your one great product idea was, it most likely isn't enough. You need to be BATSHIT CRAZY PARANOID - as Steve Jobs evidently was - that your treasured Golden Goose is either going to die or get stolen from under your feet.

Yahoo is a great example of a business that got big quickly with one simple idea back in 1994, but which has been spraying the cash proceeds from that same idea against the wall ever since Google showed and spooked them almost fifteen years ago. They're demonstrating brilliantly that you can't build a sustainable long term business if you fail to engineer the right conditions to make lightning strike twice. And, actually, maybe you can't make it strike twice.

And so I think what we're seeing now is a kind of Newtonian reckoning where the inescapable laws of physics ultimately draw back down to earth anything that lacks the propulsion required to stay aloft.

This stuff really is business school 101. You'd have thunk.

Shameless Promotion

Cookies are annoyingly broken.

Particularly when you're going about your business and up pop supposedly targeted Google ads from competitors. And all because genius marketeers inside competitors make Google ad assumptions which conclude that people who visit websites of their competitors are likely to be thinking about buying new accounting software for example, so let's be ultra targeted and serve them ads for our alternative.

And so, because I visit xero.com as a user and an employee, the cookie tracking cruft that builds up in my browser cache tells ad servers that I ought to see adverts for competitors of Xero.

Even if I'm watching something entirely contextually inappropriate.

Redefining Big

We've been conditioned over twenty years to think that Microsoft was as big as you could ever get in technology.

Some data insights from Apple's last quarter financial results courtesy of The Critical Path podcast.

• As a standalone business, the iPhone now makes more profit than the whole of Microsoft. The iPhone business didn't exist five years ago.
• For bonus points, Apple's total quarterly profit was $1Bn more than Google's total revenue for the quarter. That's Google's revenue, not profit. 
• In the minutes immediately following the publication of Apple's results last Wednesday, Apple's stock price lifted by $50+ a share, adding more than $40Bn to Apple's market capitalization.
• Using just that instant lift in market cap, Apple could have bought the entire mobile phone industry, (Nokia $14Bn, RIM $7Bn, HTC $12Bn, Motorola $12Bn) and would still have had chump change left over.

We've never seen numbers like these.

(Update - someone just pointed out these don't add up to $40Bn - I just transcribed the numbers off the podcast as they were spoken. And I guess the point Horace Dedui is making is that in general terms, for a brief period Apple's market cap lift (the point being it's just the lift) was as large or larger than the estimated the market caps of all the other mobile phone businesses put together. What's $5Bn between friends.)

Lifestyle Vendors

I had a long chat yesteday with Dennis Howlett about the likely direction of the next five years of cloud, web apps, mobile. Dennis wrote his thoughts down this morning.

These are my rambling reflections.

For a while there's existed a loose expectation that some kind of market consolidation or shakeout would descend upon the nascent web apps space, mostly because that's what usually happens. Start-ups cease to be start-ups, lose the wide-eyed impetus that got them going in the first place and some then struggle to respond to competitive, growth or strategic challenges. And progressively some begin to give up, cash in their chips or, worse, banks begin to withdraw lines of credit. A few succeed in guessing the right moves and they prosper.

While some standard degree consolidation will occur, I think it will be different.

My general shake-out theory is this.

The same economics of internet distribution that made it very easy for a larger number of vendors to come to market over the last ten years, compared with the prior, pre-web generation when software shipped in cardboard boxes, will blunt the sharper edges of a regular market shakeout.

Some cloud vendors will give up/go under/get acquired (delete as appropriate) but this will be as much to do with internal mismanagement (fiduciary as well as strategic) as it will natural competitive forces.

However, good enough cloud vendors now have a third, relatively comfortable option that sits right between the previously binary commercial outcomes of market obliviion and market domination.

Become a Lifestyle Vendor.

Although the term sounds new, it's really a 2012 update on the old Lifestyle VAR (Value Added Reseller) tag.

Lifestlye VARs were generally competent, well run intermediaries that were responsible for physically purchasing business apps from old world software vendors and then reselling them, deploying them and offering services to the end customer businesses who ultimately used them.

The Lifestyle modifier came from the fact that the owners of Lifestyle VAR businesses were generally content to be masters of their own destinies rather than smaller cogs in a corporate entitiy, had nice cars, nice homes, modest offices and two expensive overseas vacations a year. Perfectly serviceable if plodding businesses with balance sheet cloth cut according to the rate of attrition of their annual software and hardware maintenance contracts.

However, Lifestyle VARs were generally regarded by software vendors with disdain because the inherent lack of ambition found in a classic Lifestyle VAR ultimately held back the vendor. After all, the VAR was often the sole route to market and if, as a vendor, your once vibrant VAR channel matured over time into a plump, greying and generally content bunch then the metabolic rate of your software business slowed with them.     

Fast forward back to today when we now know that the web disintermediates, spawning the current generation of online business software, no longer reliant on the classic VAR model.

However, because it doesn't cost very much to run a online software business today and because online software businesses - certainly online accounting software businesses are harder to sell* than classic software businesses, while I think we'll see some online vendors go on to build huge, successful businesses, we'll also see a good few smaller vendors revert to being Lifestyle Vendors instead of disappearing.

Lifestyle Vendors will have enough operational ability to do a excellent job of supporting hundreds or even a few thousand customers, will drive nice cars, work out of modest offices with great coffee, own nice houses and take a couple of overseas vacations every year.

While I'm evidently clever enough to predict the arrival of the Lifestyle Vendor, I not clever enough to calculate whether or at which point being a Lifestyle Vendor might ultimately become untenable. It's relatively easy today to throw together a good enough service, but that might change radically in the next ten years.

* Online software businesses are more difficult to sell than classic software companies because of the lack of security in recurring revenues. Classic software licensing and annual maintenance contracts tend to be much more stable assets to sell on because it's hard for all the customers to just stop paying upon change ownership at the software company. And because there's the theoretical risk that every customer in an online business could just cancel their monthly subscriptions should they not take kindly to the new regime, it's much more difficult to reach agreement on price when online software businesses are up for sale - the seller seeks a classic valuation, the buyer discounts because of the increased risk. This also supports an outcome where we'll see more Lifestyle Vendors.  

RELATED : Benevolent Dictatorships, The Disintermediation Of Ability

For whom the bell no longer tolls

The ringtone has passed over the threshold of usefulness and is now beginning its journey towards Anachronism Avenue, Historyville. For people under the age of 21, telephones used to ring to in order to alert the recipient of a call to the fact that someone was calling them and that they ought to hurriedly relocate themselves from wherever they happened to be, to wherever the phone happened to be in order to receive the call. So, a ringer made perfect sense when we had a single, immobile phone.

For a long time telephone calls were also the only method of distance communication in realtime (I'm ignoring the telegraph) and compared with writing and mailing a letter, phonecalls were by far the most efficient method of communication. Today however, talking with someone by phone is actually much less efficient than email, text messaging or any one of a multitude of electronic communications methods. So much so that the phone part of smartphone already feels anachronistic in much the same way as referring to, as one did around the turn of 1900, the first automobiles as a horse-less carriages.

I'm not sure, but I think my iPhone's ringtone has been set to silent for about three years. I couldn't even tell you what sound its configured to make when it does ring out loud. This started as a courtesy to others when in meetings it would chirp annoyingly upon receipt of every email. And over time this practical courtesy has combined with the fact that alternative electronic communication methods now negate the need for most phonecalls.

The foreshortening shelf-life of the phonecall is not helped by my perception that many of the calls I do get are from people trying to sell me something. So, the phonecall feels increasingly like an intrusion that sits outside my shell of personal intimacy where, accordingly, the people who are really important to me get my polychronous, silent attention every waking hour.