Well, the end of 2007 is certainly interesting. Microsoft is rushing into a race to the bottom with Google. Pundits are holding forth in the computer press on how Google will conquer other galaxies, and no one seems to wonder if they're merely the last spams of the dotcom bubble. A bubble they are for the marginal returns on on-line advertising are dropping precipitously, while in board rooms around the world it is thought that anything on-line must be "ad-supported" as Google is held to have proven the concept. No one again stops to think that setting yourself up to compete with Google means that you are dedicated to being a second stringer. Tell Steve Ballmer that.
The contrarian view is that the ad-supported model is ultimately a dead end. Serious readers read books. Serious movie viewers get cable or rent movies, or go to the Cinema. They don't put up with the advertising of network tv. Tivos, slingboxes and other time/space shifting technologies will see to that.
So are we bereft of common sense? I vote yes. I just got another comment on this site to my 1985 interview of Edsger Dijkstra, which confirmed that the central theme of his teaching work, the gaping discrepancies between theory and practice is as relevant today as it was in 1985 when I interviewed him. And the ad- supported model will make that worse, not better. The reason is simple. Ad support will pull the support behind fads, fallacies, and whims at the expense of what people truly need, which would take some profound research to understand. So for the moment it's the chrome and tail-fins that win, just like they did in Detroit in the 1960's. Even serious corporations entertain outsourcing their vital resources (email) to Google. Email is not like electricity. It is strategic. Tell that to a CIO who is under the gun from a board that still only understands dollars and cents, but not strategic IT.
Having said all that, the Google juggernaut will obviously continue for the forseeable future, but undeniably their position is more like the oil companies today, i.e. very large and profitable, but the marginal cost of exploration and exploitation is going up, and a strategic alternative to their model is not obvious from within their universe. This is not to say they are not sustainable. Evidently they are doing their damnedest to be just that, but the bubble psychology will have to make way for a more professional focus.
The truth is that truly profound solutions, the ones that people need in good times and bad, are never going to be generated in this kind of an environment, and the old adage that if nobody paid for it, you haven't sold it, applies in this situation. So the challenge is to understand people's needs in lieu of peoples wants, whims, and fads. There is lots of work to do in IT if you want to be be relevant...
I'm writing this against the backdrop of watching someone close to me taking their new laptop which they got for Christmas, back to the store to down grade it from Windows Vista to XP, which is apparently a brisk service business these days. And by the same token they are dropping MS Office 2007 in favor of 2003. And in the CompUSA liquidation sale, XP is sold out, but Vista and Office 2007 is not selling, in spite of growing discounts. I see the decreasing response of people to the on-line advertising. As Business Week and other magazines report response rates are down, (BW Nov 12, 2007), clearly people are backing away from the tailfins, and returning to basics. The Apple stores are inundated by recovering Microsofties, just go walk around and listen to the questions. The way forward will critically rest on the ability to be able to determing the true needs of users, and de-emphasizing the fads and focusing on the truly relevant potential of IT, and satisfying the wants of bored teenagers is not a business model.
Copyright © 2007 Rogier F. van Vlissingen. All rights reserved.
Monday, December 31, 2007
Monday, October 30, 2006
Kanosis Postmortem
I have not posted here for a while. Simply put, after Kanosis launched on May 1st, 2006 and obviously was not delivering what they promised, I decided to hold off and see if the ship would right itself. It did not, things steadily spun out of control with a management which seemed occupied mainly with blaming each other for the failures of the company, and could not re-group after that disastrous launch. Granted, some mistakes were made which were not easy to overcome, most notably with the third-party payment system, to be provided by Uniclear, which should never have been used in the first place if anyone had bothered to do due diligence on that company, for even by casual observation it was clear they did not have the wherewithal to perform at the levels Kanosis would have required.
And so it goes. Axiasoft appears to be working on other releases of the technology, which I still think holds promise, though I would assume that Kanosis as a business entity is irreparably compromised. Timing is everything, and I still think that if the technology and the marketing could have synched up a bit better, this company could have succeeded spectacularly and made history. Right now it would probably take a lot of money and an extremely competent management to make it happen, but in the meantime the field might have become too crowded.
Some cowardly anonymous recently posted the September 22 announcement of insolvency by Kanosis management as a response to one of my posts here. The text of that document reflects some of the facts, but also the underlying management problem. The "majority ownership" of the company even in a public document takes no responsibility for the fact that they were not apparently in control of the Kanosis finances during the launch period, and they adduce that claim in their defense, instead of taking responsibility for it. All of this leaves little hope that in anything close to its current form the company could ever succeed, never mind how good the software is.
Besides the bitter disappointment, the Kanosis experience however has inspired me to look further into this area, which I think is the absolute key to the future. Not only is it thin clients etc., but it's secure personal computing, and never again personal computers. A cell phone maybe, but not a computer. Use those boxes for doorstops, unless you absolutely must have one. Windows Vista in my modest view is an exercise in pointlessness. Nobody needs it. The world has moved on, and it ain't a Microsoft Windows world any longer, Windows mobile on phones will die out sooner rather than later.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
And so it goes. Axiasoft appears to be working on other releases of the technology, which I still think holds promise, though I would assume that Kanosis as a business entity is irreparably compromised. Timing is everything, and I still think that if the technology and the marketing could have synched up a bit better, this company could have succeeded spectacularly and made history. Right now it would probably take a lot of money and an extremely competent management to make it happen, but in the meantime the field might have become too crowded.
Some cowardly anonymous recently posted the September 22 announcement of insolvency by Kanosis management as a response to one of my posts here. The text of that document reflects some of the facts, but also the underlying management problem. The "majority ownership" of the company even in a public document takes no responsibility for the fact that they were not apparently in control of the Kanosis finances during the launch period, and they adduce that claim in their defense, instead of taking responsibility for it. All of this leaves little hope that in anything close to its current form the company could ever succeed, never mind how good the software is.
Besides the bitter disappointment, the Kanosis experience however has inspired me to look further into this area, which I think is the absolute key to the future. Not only is it thin clients etc., but it's secure personal computing, and never again personal computers. A cell phone maybe, but not a computer. Use those boxes for doorstops, unless you absolutely must have one. Windows Vista in my modest view is an exercise in pointlessness. Nobody needs it. The world has moved on, and it ain't a Microsoft Windows world any longer, Windows mobile on phones will die out sooner rather than later.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Tuesday, June 13, 2006
BW on Web 2.0
BusinessWeek has provided some intersting comments on Web 2.0 phenomena. A little bit on the light side perhaps, but after all they are the People Magazine of Corporate America. Their role is to spot trends, and report on them, not to analyze them, or reach any final conclusions.
There are a zillion phenomena that would be part of Web 2.0, and predictions of success and failure are hard. When even the business model of Amazon.com is still in question, and nobody really knows why Skype was worth billions. However there can be no question that something is afoot.
That the corporate world doesn't get it is equally sure. Just like they didn't get the PC revolution, or the Web 1.0, certainly not in the beginning, but even now it remains shaky - "The Cluetrain Manifesto" covered a lot of that. However, people are too cavalier in thinking that the PC revolution was a success of sorts, when it really has brought about a set of new problems which are barely beginning to be dealt with, witness the explosive rise of on-line fraud, and data theft from corporations as well as individuals. So if the success of the PC revolution was ease of use, then we are living the failures of it in the form of explosive new risks. We're just starting to realize the overwhelming problems which have been created by the PC revolution, and its presumed "ease of use," which is a powerful tool in the hands of the wrong people as well as ourselves. And we don't even know for sure who the good people are...
The Internet, and what we may now regard as Web 1.0, extended functionality and ease of use, but exploded vulnerabilities and insecurity in a way that is increasingly overwhelming everything else. So we are now living at the time when some of the world is still discovering the potential of email, while at the other end of the spectrum people are already giving up on email because of spam and viruses on one hand, and because it is not in real time on the other. Web 2.0 is about doing things in real time.
The biggest single problem then is that the potential speed up also will exponentially magnify the potential for abuse. With email you have time to think about a 419 scam, and perhaps have second thoughts but on chat, you are far more vulnerable. Urgency, urgency.
So security and privacy are overriding issues on the Web, and if those are not adequately addressed, the backlash will be considerable until it does, for people will boycott the medium if they're beset by problems every minute. I unsubscribed from some lists recently, because of virus problems. It's not a reasonable thing any longer.
When we are within corporate walls we have a modicum of assurance that other employees are who they seem to be, but on the Internet we have no such assurance. False identities are perhaps a bit harder on LinkedIn, but not impossible even then. On the wide open net, all we have a lot of the time is an email address.
The underlying problem in networked computing is that "My Computer" is a meaningless term, if I have no way to assert that ownership, and the rights that it entails. To all intents and purposes, "my house" and "my appartment" are relatively clear concepts, and I can have reasonable security to restrict access or at least to know when someone trespasses. Not so with a computer, yet given our information dependence, a computer becomes the central repository of information in our lives, but we routinely have far less ability to restrict access to it, and in the age of networked computing ownership of the physical device is meaningless from the moment we connect it to the Internet.
Mathematically speaking, logically speaking "personal computer," and "personal computing," are meaningless terms if the user, the "person" is an ambiguous concept and today it is. I have more security on my Windows PC than many if not most, but it's still a sieve. I have individual log-ons for other members of the family who occasionally use the machine, and restrict all of their rights on my PC. Yet when I have a problem, and bring it into the store, the technician just casually reset my administrator password in order to do his job. To call that security is a joke. And on all current generation consumer devices this is the prevalent situation. Web 2.0, with a technical foundation in IPv6 offers the opportunity for much stronger virtual networking than has been the case heretofore, and this will make the lack of meaningful access security from edge devices even more of a joke.
Therefore the central value of Web 2.0 is indeed shaping up around the idea of instant collaboration, in real-time, compared to which email is a silly store and forward medium, not much better than snail mail, and equally overwhelmed by an avalanche of spam anyway, just like your physical mailbox is by junk mail. So we move on to chat, filesharing, and other forms of collaboration, between known users, defined either by corporate perimeters, or by memberhsip in a service. But today's common form of access, by username and password, offers little or no protection, no definition of who that user is, even if the service otherwise provides technically competent "security." It is time people should go to jail for marketing anything as "secure" when any fool knows that a username/password can be cracked in 25 seconds or less. It's a joke far worse than "organic produce," and for that at least there is some modicum of consumer protection now. There used to be such a thing as truth in advertising.
THE KILLER applications of web 2.0 will be the ones that satisfactorily solves the twin problems of security, including authentication, and privacy. And also of meaningful ownership of data, which means the ability to exert all rights of an owner, such as back-ups and copies, which I can store wherever I deam them safe, otherwise people have the single provider problem, which is a security threat in and of itself.
The biggest enemies of such solutions are the users themselves, and the legal systems and government policies in many countries. Governments have a habit of doing either too much or too little. Proper authentication, and security automatically provide the ability to do secure transactions over the Web, money transfers, digital signatures: business without borders. But the risks have to be statistically insignificant, so they become properly insurable, otherwise the system will fail. Instant communication, collaboration, filesharing, and social networking and other such features will all fail if they continue to be a constant source of abuse.
The prize will go to those providers who can succeed by proving that people will pay for security. And they will, regardless of what the naysayers think, for if it enables the functionalities described in the previous paragraph, without undue risk, only a fool would not use such services.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
There are a zillion phenomena that would be part of Web 2.0, and predictions of success and failure are hard. When even the business model of Amazon.com is still in question, and nobody really knows why Skype was worth billions. However there can be no question that something is afoot.
That the corporate world doesn't get it is equally sure. Just like they didn't get the PC revolution, or the Web 1.0, certainly not in the beginning, but even now it remains shaky - "The Cluetrain Manifesto" covered a lot of that. However, people are too cavalier in thinking that the PC revolution was a success of sorts, when it really has brought about a set of new problems which are barely beginning to be dealt with, witness the explosive rise of on-line fraud, and data theft from corporations as well as individuals. So if the success of the PC revolution was ease of use, then we are living the failures of it in the form of explosive new risks. We're just starting to realize the overwhelming problems which have been created by the PC revolution, and its presumed "ease of use," which is a powerful tool in the hands of the wrong people as well as ourselves. And we don't even know for sure who the good people are...
The Internet, and what we may now regard as Web 1.0, extended functionality and ease of use, but exploded vulnerabilities and insecurity in a way that is increasingly overwhelming everything else. So we are now living at the time when some of the world is still discovering the potential of email, while at the other end of the spectrum people are already giving up on email because of spam and viruses on one hand, and because it is not in real time on the other. Web 2.0 is about doing things in real time.
The biggest single problem then is that the potential speed up also will exponentially magnify the potential for abuse. With email you have time to think about a 419 scam, and perhaps have second thoughts but on chat, you are far more vulnerable. Urgency, urgency.
So security and privacy are overriding issues on the Web, and if those are not adequately addressed, the backlash will be considerable until it does, for people will boycott the medium if they're beset by problems every minute. I unsubscribed from some lists recently, because of virus problems. It's not a reasonable thing any longer.
When we are within corporate walls we have a modicum of assurance that other employees are who they seem to be, but on the Internet we have no such assurance. False identities are perhaps a bit harder on LinkedIn, but not impossible even then. On the wide open net, all we have a lot of the time is an email address.
The underlying problem in networked computing is that "My Computer" is a meaningless term, if I have no way to assert that ownership, and the rights that it entails. To all intents and purposes, "my house" and "my appartment" are relatively clear concepts, and I can have reasonable security to restrict access or at least to know when someone trespasses. Not so with a computer, yet given our information dependence, a computer becomes the central repository of information in our lives, but we routinely have far less ability to restrict access to it, and in the age of networked computing ownership of the physical device is meaningless from the moment we connect it to the Internet.
Mathematically speaking, logically speaking "personal computer," and "personal computing," are meaningless terms if the user, the "person" is an ambiguous concept and today it is. I have more security on my Windows PC than many if not most, but it's still a sieve. I have individual log-ons for other members of the family who occasionally use the machine, and restrict all of their rights on my PC. Yet when I have a problem, and bring it into the store, the technician just casually reset my administrator password in order to do his job. To call that security is a joke. And on all current generation consumer devices this is the prevalent situation. Web 2.0, with a technical foundation in IPv6 offers the opportunity for much stronger virtual networking than has been the case heretofore, and this will make the lack of meaningful access security from edge devices even more of a joke.
Therefore the central value of Web 2.0 is indeed shaping up around the idea of instant collaboration, in real-time, compared to which email is a silly store and forward medium, not much better than snail mail, and equally overwhelmed by an avalanche of spam anyway, just like your physical mailbox is by junk mail. So we move on to chat, filesharing, and other forms of collaboration, between known users, defined either by corporate perimeters, or by memberhsip in a service. But today's common form of access, by username and password, offers little or no protection, no definition of who that user is, even if the service otherwise provides technically competent "security." It is time people should go to jail for marketing anything as "secure" when any fool knows that a username/password can be cracked in 25 seconds or less. It's a joke far worse than "organic produce," and for that at least there is some modicum of consumer protection now. There used to be such a thing as truth in advertising.
THE KILLER applications of web 2.0 will be the ones that satisfactorily solves the twin problems of security, including authentication, and privacy. And also of meaningful ownership of data, which means the ability to exert all rights of an owner, such as back-ups and copies, which I can store wherever I deam them safe, otherwise people have the single provider problem, which is a security threat in and of itself.
The biggest enemies of such solutions are the users themselves, and the legal systems and government policies in many countries. Governments have a habit of doing either too much or too little. Proper authentication, and security automatically provide the ability to do secure transactions over the Web, money transfers, digital signatures: business without borders. But the risks have to be statistically insignificant, so they become properly insurable, otherwise the system will fail. Instant communication, collaboration, filesharing, and social networking and other such features will all fail if they continue to be a constant source of abuse.
The prize will go to those providers who can succeed by proving that people will pay for security. And they will, regardless of what the naysayers think, for if it enables the functionalities described in the previous paragraph, without undue risk, only a fool would not use such services.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Saturday, April 29, 2006
MSWin Integration: Scotch Tape and Bailing Wire
Good programming must rest on a rigorous foundation, or, as my mentor Edsger Dijkstra used to point out, it is a branch of applied mathematics, and anyone who forgets that, risks irrelevance. However good programming is also a craft. And sometimes in the evolution of design we become the victims of a paradigm, which needs to be broken before progress can happen.
Under the link of the title is an article from one of my favorite columnists, John C. Dvorak, on the death of Internet Explorer, titled "The Great Microsoft Blunder." I always enjoy his columns, not because I always agree, but because he has a strong opinion and is provocative. This time I also agree with him. Internet explorer is a dead duck, and the only place I used it is if I absolutely must download something from Microsoft.com, which tends to misbehave with alternative browsers, on purpose. Other websites that are not browser-friendly I simply ignore any longer, for the independent browsers are winning, and within six months those sites will be forgotten if they don't conform.
One of the mysteries around Internet Explorer is the question of why Microsoft would have made such a fuss over it, and have put themselves in a massive state of corporate fear over the appearance of Netscape, and successfully killed it off in the market place, only to forget about the whole opportunity after they killed their prey? This is a classic mistake in business, if you focus on beating your competitor, you forget about delivering service to your customer, and thereby you hasten your own demise, all the while thinking that you are perhaps succeeding in killing the competition. Opera, Firefox and many others have demonstrated superior browsing for years now, and are making steady inroads as people grow tired of IE and its problems. Meanwhile Microsoft is grudgingly fixing security problems but failing to deliver functionality. And Dvorak is right, the defense of coupling IE to Windows, with the idea of protecting Windows, is what helped kill it as a platform. That may not be evident to consumers yet, but it is evident on the margin of the technology world, in those places where fast growth does happen, and where economists know you need to look to see what is really going on. Microsoft's biggest problem right now is that it's making money hand over fist, and therefore is in a delusion of being successful. The stock market is starting to have second thoughts, though. Corporately it is squandering its resources on numerous rear guard actions to defend what it has, rather than to build value for its customers. And that's deadly.
Of course this little reflection only serves as an intro to my favorite topic of late, Kanosis and the COIL(r) operating system. By way of an introduction let me share an experience. I talked to an old friend about Kanosis, and he told me that he and his partners had just had a meeting and were bemoaning the fact that they all hated ACT! but had been unable to find an alternative. I started to laugh, for the first victim on my desktop after I decided to move to Kanosis, will be ACT! That is already a given, though I'm taking my time getting there. My friend is presently evaluating Kanosis, but I don't know today if the consumer version will be viable in his business, though if it is, his partners will soon start using it also.
ACT! is a program I have used since its inception, and it has struggled to provide meaningful integration in the Windows environment, and has consistently failed to deliver. This is not per sé their fault, within the given paradigm they pursued a strategy that seemed reasonable, but the reality is that in the Windows environment integration is done with Scotch Tape and bailing wire, and is a very delicate affair, prone to constant breakdowns, something which my experience with ACT! constantly demonstrates, and in recent years, the more features they add, the more I don't use. In fairness I will not totally abandon ACT!, because for some telemarketing work it can be useful, because it allows me to keep a database separate from my own data, but for my own work ACT! will not be seen any longer, and all its wonderful "integration" features are therefore useless to me.
What I'm finding sofar in Kanosis -- and I'll write more on it after the launch on May 1st -- is an integration of a number of functionalities in a way that promises huge leaps in productivity both for myself by integrating my own desktop, and for any collaboration, as I'm presently experiencing in my collaboration with one of my associates in Kanosis, as we are starting to use the Kanosis interface in our marketing work for Kanosis. The convenience of drag and drop functionality in collaboration with others, for file-sharing and soon for payments etc. is not to be missed.
Another way of looking tat this issue is that Microsoft's ace in the hole is always unnecessary associations which compromise elegant architecture, but which benefit their marketing. An example is the needless "personal" in computer, and the compromise of one's data and information by that association. Presently in the Internet age, a service like Kanosis offers to separate the personal from the computer, and provide professional management of at least some critical set of your data, with mirroring and backup, and thus much reducing the risk of data loss or compromise. If you switch to using Kanosis, you will see yourself increasingly becoming indifferent to the hardware you're running on, and you're then free to pick the hardware that's best suited to other tasks you wish to perform, be it Apple, Wintel, Lintel, a Sun workstation, a Wyse workstation, or Linux on PPC, any of them will do, as long as you have an internet connection a browser, and Java.
Stephen van Zutphen has expressed publicly that his vision was that of a "personal operating system" as opposed to a computer operating system, and based on the previews sofar of the "beta version" of COIL/Kanosis, he is well on his way to delivering on that promise, and the release of the final version on May 1st should fill in most of the remaining blanks. The result seems very important to me, also in the context of the discussion John C. Dvorak raised. At the launch Kanosis will offer an integration of upto twelve applications into one interface, and thereby offers the opportunity of drastically simplifying anyone's desktop. And, in the case of a user like myself, who works at times with Windows, or with Mac or with Linux, this Kanosis interface is the great equalizer, to make me platform independent because it provides a core of applications, so that without any further worries about integration problems, I can use Mac for what it does best, and Linux for what it does best, and Windows... well really only because other people do, and my business requires it for that reason. In other words, the corporate world moves slower than I do, but they'll catch up eventually. And that is where I've been headed for the last ten years, ever since I set up my first dual-boot Linux machine, when the first kernel was going around.
It is very funny that the Kanosis phenomenon should hit the market now, just when Apple has made itself furthermore technologically irrelevant by switching to Intel. I have a publishing business, for which I was planning to switch to Apple, and Kanosis provides me with the last missing link to make such a mixed environment feasible for a small business without huge integration costs and diseconomies of scale. I may end up still acquiring one of the last PowerMacs G5 with the last dual-core Power processors, but meanwhile DTP on Linux is far enough along, that in two years I'll probably be running my publishing work on a PPC- or AMD64-based Linux box, or on a Sun workstation, and most likely not on a Mac. In other words, whatever else Kanosis may be, to me just now it has removed the last remaining inefficiencies and worries of integration of Mac, Linux, and MSWin in a small business setting. And therein lies the rub.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Under the link of the title is an article from one of my favorite columnists, John C. Dvorak, on the death of Internet Explorer, titled "The Great Microsoft Blunder." I always enjoy his columns, not because I always agree, but because he has a strong opinion and is provocative. This time I also agree with him. Internet explorer is a dead duck, and the only place I used it is if I absolutely must download something from Microsoft.com, which tends to misbehave with alternative browsers, on purpose. Other websites that are not browser-friendly I simply ignore any longer, for the independent browsers are winning, and within six months those sites will be forgotten if they don't conform.
One of the mysteries around Internet Explorer is the question of why Microsoft would have made such a fuss over it, and have put themselves in a massive state of corporate fear over the appearance of Netscape, and successfully killed it off in the market place, only to forget about the whole opportunity after they killed their prey? This is a classic mistake in business, if you focus on beating your competitor, you forget about delivering service to your customer, and thereby you hasten your own demise, all the while thinking that you are perhaps succeeding in killing the competition. Opera, Firefox and many others have demonstrated superior browsing for years now, and are making steady inroads as people grow tired of IE and its problems. Meanwhile Microsoft is grudgingly fixing security problems but failing to deliver functionality. And Dvorak is right, the defense of coupling IE to Windows, with the idea of protecting Windows, is what helped kill it as a platform. That may not be evident to consumers yet, but it is evident on the margin of the technology world, in those places where fast growth does happen, and where economists know you need to look to see what is really going on. Microsoft's biggest problem right now is that it's making money hand over fist, and therefore is in a delusion of being successful. The stock market is starting to have second thoughts, though. Corporately it is squandering its resources on numerous rear guard actions to defend what it has, rather than to build value for its customers. And that's deadly.
Of course this little reflection only serves as an intro to my favorite topic of late, Kanosis and the COIL(r) operating system. By way of an introduction let me share an experience. I talked to an old friend about Kanosis, and he told me that he and his partners had just had a meeting and were bemoaning the fact that they all hated ACT! but had been unable to find an alternative. I started to laugh, for the first victim on my desktop after I decided to move to Kanosis, will be ACT! That is already a given, though I'm taking my time getting there. My friend is presently evaluating Kanosis, but I don't know today if the consumer version will be viable in his business, though if it is, his partners will soon start using it also.
ACT! is a program I have used since its inception, and it has struggled to provide meaningful integration in the Windows environment, and has consistently failed to deliver. This is not per sé their fault, within the given paradigm they pursued a strategy that seemed reasonable, but the reality is that in the Windows environment integration is done with Scotch Tape and bailing wire, and is a very delicate affair, prone to constant breakdowns, something which my experience with ACT! constantly demonstrates, and in recent years, the more features they add, the more I don't use. In fairness I will not totally abandon ACT!, because for some telemarketing work it can be useful, because it allows me to keep a database separate from my own data, but for my own work ACT! will not be seen any longer, and all its wonderful "integration" features are therefore useless to me.
What I'm finding sofar in Kanosis -- and I'll write more on it after the launch on May 1st -- is an integration of a number of functionalities in a way that promises huge leaps in productivity both for myself by integrating my own desktop, and for any collaboration, as I'm presently experiencing in my collaboration with one of my associates in Kanosis, as we are starting to use the Kanosis interface in our marketing work for Kanosis. The convenience of drag and drop functionality in collaboration with others, for file-sharing and soon for payments etc. is not to be missed.
Another way of looking tat this issue is that Microsoft's ace in the hole is always unnecessary associations which compromise elegant architecture, but which benefit their marketing. An example is the needless "personal" in computer, and the compromise of one's data and information by that association. Presently in the Internet age, a service like Kanosis offers to separate the personal from the computer, and provide professional management of at least some critical set of your data, with mirroring and backup, and thus much reducing the risk of data loss or compromise. If you switch to using Kanosis, you will see yourself increasingly becoming indifferent to the hardware you're running on, and you're then free to pick the hardware that's best suited to other tasks you wish to perform, be it Apple, Wintel, Lintel, a Sun workstation, a Wyse workstation, or Linux on PPC, any of them will do, as long as you have an internet connection a browser, and Java.
Stephen van Zutphen has expressed publicly that his vision was that of a "personal operating system" as opposed to a computer operating system, and based on the previews sofar of the "beta version" of COIL/Kanosis, he is well on his way to delivering on that promise, and the release of the final version on May 1st should fill in most of the remaining blanks. The result seems very important to me, also in the context of the discussion John C. Dvorak raised. At the launch Kanosis will offer an integration of upto twelve applications into one interface, and thereby offers the opportunity of drastically simplifying anyone's desktop. And, in the case of a user like myself, who works at times with Windows, or with Mac or with Linux, this Kanosis interface is the great equalizer, to make me platform independent because it provides a core of applications, so that without any further worries about integration problems, I can use Mac for what it does best, and Linux for what it does best, and Windows... well really only because other people do, and my business requires it for that reason. In other words, the corporate world moves slower than I do, but they'll catch up eventually. And that is where I've been headed for the last ten years, ever since I set up my first dual-boot Linux machine, when the first kernel was going around.
It is very funny that the Kanosis phenomenon should hit the market now, just when Apple has made itself furthermore technologically irrelevant by switching to Intel. I have a publishing business, for which I was planning to switch to Apple, and Kanosis provides me with the last missing link to make such a mixed environment feasible for a small business without huge integration costs and diseconomies of scale. I may end up still acquiring one of the last PowerMacs G5 with the last dual-core Power processors, but meanwhile DTP on Linux is far enough along, that in two years I'll probably be running my publishing work on a PPC- or AMD64-based Linux box, or on a Sun workstation, and most likely not on a Mac. In other words, whatever else Kanosis may be, to me just now it has removed the last remaining inefficiencies and worries of integration of Mac, Linux, and MSWin in a small business setting. And therein lies the rub.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Monday, April 24, 2006
Labels, Stereotypes and Prejudice Cover for Bad Decisions
This post is yet another in a series of analyses of some issues around the new SAAS (Software as a Service) venture Kanosis (we used to call these ASPs...), which I've committed myself to. I feel it is a brilliant, minimialistic, elegant and functional solution to some of the "digital divide" issues which this blog is meant to address.
However, I'm realizing that some of the issues here connect to other matters in relation to IT, namely the fact that business decisions in general are hard, and the responsibility for them is preferably to be shirked by corporate politicos, and IT decisions are even harder and even more likely to be the subject of games playing. In another post I have already addressed the issue of the popularity of SAP with Wall Street Analysts. Other examples are the popularity of Windows, or the time when CIOs (then mostly called IS Managers), "could not be fired" for choosing IBM. Thus labels often got in the way of sound decision making and outsiders labeled as progress many dysfunctional IT decisions.
It gets worse when, as my friend Michael Hugos related recently, a CIO is appointed for his presumed ability to "implement SAP" similar to choosing a secretary (excuse me: Personal Assistant) because he or she "knows" Microsoft Word. And then if SAP fails to deliver the CIO is fired, because obviously Wall Street aproves of SAP. Such companies don't seem to get that they should choose CIO for his ability to analyze and decide if SAP is an effective solution for their company, and possibly should fire him if he chose SAP for the wrong reasons. They should not saddle a CIO with responsibility for dysfunctional IT decisions over which they have no control, or otherwise limit them to being implementers of someone else's strategy. And so on.
The same goes on with people's lack of analysis of marketing plans in the Network Marketing/Direct Selling industry, and as a result we're encountering this in spades around the launch of Kanosis. Some examples:
The "P" Word.
------------- "Pyramid scam" is a bad word, and it denotes a business concept that fallaciously assumes an ever expanding base, and therefore is unsustainable in the long run. This is quite contrary to the positive meaning of the word, denoting certain architectural phenomena in Egypt, which is where the term comes from, and which are based on a solid foundation, and have now lasted in excess of 6,000 years. Similarly some quite functional business hierarchies look like pyramids, as do some very dysfunctional ones. In other words the negative connotation of the word refers purely to the false assumption of an ever expanding base. According to some credible analysis by Bill Parish & Company, which has been published among other place in Barron's, Microsoft is just such a phenomenon, and the findings are hard to refute:
http://www.billparish.com/msftfraudfacts.html
Thus when I Googled "financial fraud" today, the above URL comes up at the top of the page. That speaks volumes. Conversely when people see a multi-level pay structure like Kanosis has, they say: "Oh a pyramid scheme," as if they knew what that meant, when clearly their very statement shows that they don't, since in this specific case the model evidently means that this company in particular enjoys a predictable distribution margin of 70% paid from REVENUE, and which therefore does not require an additional up-front capital infusion, and also ensures that there is a high degree of commitment for the early birds who help build the company. Evidently only people who really believe in the product or service would commit their time and resources to the vision. The level of commitment of your $200K VP of Sales and Marketing might not be as certain.
Therefore the humorous way in which Kanosis deals with the "P-word" on their site, is in fact the only way that you can counter this non-serious label (for it isn't even an argument), see:
http://www.kanosis.com/index.cfm/id/support/lang/english
There it says: "Is Kanosis Pyramid selling? No we do not sell pyramids. They are too heavy and expensive to ship!" And that is all you could say to this kind of non-serious "objection." And still some people will say: "Oh, it's a pyramid," and that will be the end of their "business decision." I guess it's just one more example of how labels are used to mask an inability to make proper decisions.
The "M-word."
------------- "Matrix" compensation plans have featured in so many Internet scams that there is a site devoted to steer the gullible out of trouble:
www.matrixwatch.org
The intentions are evidently good, however the discussion around Kanosis on this site suffers from a knee-jerk response that if it looks like a matrix at all, the specifics are ignored, and it is assumed that the venture in question is automatically a scam. Jim Southworth, the Chief Technology Evangelist (he's the CTO with an emphasis on explaining the technology to the outside world) for Kanosis has had quite a time of it on that site to try and keep the dialog meaningful while wading through piles of invective and prejudice.
Again the same applies here as did on the discussion of the "P-word," and that is that if you analyze the specifics, you are likely to find a gem of efficient and effective marketing in the form of the Kanosis marketing plan. Based on my analysis, I continue to bet that Kanosis has struck just the right balance. As of this week the jury's still out on the feature set they are about to deliver May 1st, but provided that lives up to its billing, there can be no question where this company is headed.
There are other "M-" and "P-" words, such as MLM, for Multi-Level Marketing, and Ponzi-scheme for a venture where the early investors are given phoney returns based on paying them from the investments of subsequent investors. All of them are evidently nefarious schemes, and any student of financial fraud will recognize them. Many a time the studies of the actual schemes people came up with are quite hilarious and instructive as to how people defer decisions and hurt themselves by reliance on irrelevant externals. The best resources to sort right from wrong are (among others)
www.quatloos.com (provided by a non-profit corporation)
www.mlmwatchdog.com (provided by the best network marketing consultant in the country)
www.ic3.gov (collaboration of FBI and National White Collar Crime Center).
So resources abound, and anyone should do their own due diligence on any venture they decide to get involved with by standards that makes sense to them.
It is very clear to me already that one reason network marketing scares off people is because they have to make their own decisions, because in this business model you hire the company instead of the company hiring you. Unfortunately it is the same mentality which causes people to later be herded into many of the same business opportunities, since by then they consider them credible because the neighbors are doing it. This behavior is no different from a company throwing out a perfectly good Unix architecture in favor of Microsoft Windows, which breaks down far more often and requires 5-10 times the number of administrators to users of Unix, not to mention every seat has 10 times higher power consumption than e.g. a SunRay terminal 250 Watt for a PC, vs 25 Watt for a SunRay). They are making the choise because the neighbors are doing it, or because the boss's kids have a Microsoft PC at home, or whatever. It has nothing to do with analysis.
One of the best scam artists I ever met, David Eastes, who was a big succes in Best Line (that was the "other" soap company besides Amway) at one time, and was barred from the direct selling industry because of some dubious practices, had a saying that demonstrates the issues clearly: "Logic and reason are the horse the emotions ride in on." I met him in my early days in the phone card industry, when he was trying to do it again in Amerivox, one of the first phone card companies, and one which definitely helped create that industry, even though they collapsed because of a defective strategy as well as sloppy execution.
To come back to the underlying issue here of deciding by appearances rather than by facts, another important example is the whole business of website design and the availability of reasonable and adequate disclosure on the website of any company. I have seen many criticisms of Kanosis in this regard, meanwhile they have improved the site on an ongoing basis, and I guess the critical point will come now that the company is launching their service as of May 1st, if the site will provide enough hard information. I am currently dealing with the same issues for another start-up company I'm tangentially involved with, where an interim website has garnered negative responses because of lack of information, and so it becomes a hindrance not a help in discussing the venture with others. So here is an area where companies can help themselves a lot by creating the right impression and providing sufficient answers to any potential issues. However in the spirit of caveat emptor, it does remain incumbent upon any buyer to do their own assessment, and by facts, not appearances.
The bottom line is first and foremost we should guard against being intellectually lazy, and doing our own due diligence by analysis, and not by proxy, either negatively by applying the label of "scam," based on appearance not facts, or positively, because the neighbors are doing it, so it must be alright. Any attempt to decide by proxy is ultimately only a way of avoiding responsibility for your own decisions, and making sure that you have somebody to blame if things go wrong.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
However, I'm realizing that some of the issues here connect to other matters in relation to IT, namely the fact that business decisions in general are hard, and the responsibility for them is preferably to be shirked by corporate politicos, and IT decisions are even harder and even more likely to be the subject of games playing. In another post I have already addressed the issue of the popularity of SAP with Wall Street Analysts. Other examples are the popularity of Windows, or the time when CIOs (then mostly called IS Managers), "could not be fired" for choosing IBM. Thus labels often got in the way of sound decision making and outsiders labeled as progress many dysfunctional IT decisions.
It gets worse when, as my friend Michael Hugos related recently, a CIO is appointed for his presumed ability to "implement SAP" similar to choosing a secretary (excuse me: Personal Assistant) because he or she "knows" Microsoft Word. And then if SAP fails to deliver the CIO is fired, because obviously Wall Street aproves of SAP. Such companies don't seem to get that they should choose CIO for his ability to analyze and decide if SAP is an effective solution for their company, and possibly should fire him if he chose SAP for the wrong reasons. They should not saddle a CIO with responsibility for dysfunctional IT decisions over which they have no control, or otherwise limit them to being implementers of someone else's strategy. And so on.
The same goes on with people's lack of analysis of marketing plans in the Network Marketing/Direct Selling industry, and as a result we're encountering this in spades around the launch of Kanosis. Some examples:
The "P" Word.
------------- "Pyramid scam" is a bad word, and it denotes a business concept that fallaciously assumes an ever expanding base, and therefore is unsustainable in the long run. This is quite contrary to the positive meaning of the word, denoting certain architectural phenomena in Egypt, which is where the term comes from, and which are based on a solid foundation, and have now lasted in excess of 6,000 years. Similarly some quite functional business hierarchies look like pyramids, as do some very dysfunctional ones. In other words the negative connotation of the word refers purely to the false assumption of an ever expanding base. According to some credible analysis by Bill Parish & Company, which has been published among other place in Barron's, Microsoft is just such a phenomenon, and the findings are hard to refute:
http://www.billparish.com/msftfraudfacts.html
Thus when I Googled "financial fraud" today, the above URL comes up at the top of the page. That speaks volumes. Conversely when people see a multi-level pay structure like Kanosis has, they say: "Oh a pyramid scheme," as if they knew what that meant, when clearly their very statement shows that they don't, since in this specific case the model evidently means that this company in particular enjoys a predictable distribution margin of 70% paid from REVENUE, and which therefore does not require an additional up-front capital infusion, and also ensures that there is a high degree of commitment for the early birds who help build the company. Evidently only people who really believe in the product or service would commit their time and resources to the vision. The level of commitment of your $200K VP of Sales and Marketing might not be as certain.
Therefore the humorous way in which Kanosis deals with the "P-word" on their site, is in fact the only way that you can counter this non-serious label (for it isn't even an argument), see:
http://www.kanosis.com/index.cfm/id/support/lang/english
There it says: "Is Kanosis Pyramid selling? No we do not sell pyramids. They are too heavy and expensive to ship!" And that is all you could say to this kind of non-serious "objection." And still some people will say: "Oh, it's a pyramid," and that will be the end of their "business decision." I guess it's just one more example of how labels are used to mask an inability to make proper decisions.
The "M-word."
------------- "Matrix" compensation plans have featured in so many Internet scams that there is a site devoted to steer the gullible out of trouble:
www.matrixwatch.org
The intentions are evidently good, however the discussion around Kanosis on this site suffers from a knee-jerk response that if it looks like a matrix at all, the specifics are ignored, and it is assumed that the venture in question is automatically a scam. Jim Southworth, the Chief Technology Evangelist (he's the CTO with an emphasis on explaining the technology to the outside world) for Kanosis has had quite a time of it on that site to try and keep the dialog meaningful while wading through piles of invective and prejudice.
Again the same applies here as did on the discussion of the "P-word," and that is that if you analyze the specifics, you are likely to find a gem of efficient and effective marketing in the form of the Kanosis marketing plan. Based on my analysis, I continue to bet that Kanosis has struck just the right balance. As of this week the jury's still out on the feature set they are about to deliver May 1st, but provided that lives up to its billing, there can be no question where this company is headed.
There are other "M-" and "P-" words, such as MLM, for Multi-Level Marketing, and Ponzi-scheme for a venture where the early investors are given phoney returns based on paying them from the investments of subsequent investors. All of them are evidently nefarious schemes, and any student of financial fraud will recognize them. Many a time the studies of the actual schemes people came up with are quite hilarious and instructive as to how people defer decisions and hurt themselves by reliance on irrelevant externals. The best resources to sort right from wrong are (among others)
www.quatloos.com (provided by a non-profit corporation)
www.mlmwatchdog.com (provided by the best network marketing consultant in the country)
www.ic3.gov (collaboration of FBI and National White Collar Crime Center).
So resources abound, and anyone should do their own due diligence on any venture they decide to get involved with by standards that makes sense to them.
It is very clear to me already that one reason network marketing scares off people is because they have to make their own decisions, because in this business model you hire the company instead of the company hiring you. Unfortunately it is the same mentality which causes people to later be herded into many of the same business opportunities, since by then they consider them credible because the neighbors are doing it. This behavior is no different from a company throwing out a perfectly good Unix architecture in favor of Microsoft Windows, which breaks down far more often and requires 5-10 times the number of administrators to users of Unix, not to mention every seat has 10 times higher power consumption than e.g. a SunRay terminal 250 Watt for a PC, vs 25 Watt for a SunRay). They are making the choise because the neighbors are doing it, or because the boss's kids have a Microsoft PC at home, or whatever. It has nothing to do with analysis.
One of the best scam artists I ever met, David Eastes, who was a big succes in Best Line (that was the "other" soap company besides Amway) at one time, and was barred from the direct selling industry because of some dubious practices, had a saying that demonstrates the issues clearly: "Logic and reason are the horse the emotions ride in on." I met him in my early days in the phone card industry, when he was trying to do it again in Amerivox, one of the first phone card companies, and one which definitely helped create that industry, even though they collapsed because of a defective strategy as well as sloppy execution.
To come back to the underlying issue here of deciding by appearances rather than by facts, another important example is the whole business of website design and the availability of reasonable and adequate disclosure on the website of any company. I have seen many criticisms of Kanosis in this regard, meanwhile they have improved the site on an ongoing basis, and I guess the critical point will come now that the company is launching their service as of May 1st, if the site will provide enough hard information. I am currently dealing with the same issues for another start-up company I'm tangentially involved with, where an interim website has garnered negative responses because of lack of information, and so it becomes a hindrance not a help in discussing the venture with others. So here is an area where companies can help themselves a lot by creating the right impression and providing sufficient answers to any potential issues. However in the spirit of caveat emptor, it does remain incumbent upon any buyer to do their own assessment, and by facts, not appearances.
The bottom line is first and foremost we should guard against being intellectually lazy, and doing our own due diligence by analysis, and not by proxy, either negatively by applying the label of "scam," based on appearance not facts, or positively, because the neighbors are doing it, so it must be alright. Any attempt to decide by proxy is ultimately only a way of avoiding responsibility for your own decisions, and making sure that you have somebody to blame if things go wrong.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Saturday, April 22, 2006
Internet Marketing dos and don'ts: Network Marketing, really?
The link under the title of this article you will find a link to Eric Scheibeler's Merchants of Deception site. He provides very interesting material about the business methods of Amway and Quixtar, and the fact that those businesses are not at all what they seem. Whatever they are - and I've always thought that any money made in Amway was made on motivational and promotional seminars and tapes, not products - they are, I think, one example of a business who simply exported their existing business methods to the net, realizing some advantages, and in this case, among other things, brilliantly avoiding the estate tax by having the heirs to the Amway fortune launch Quixtar and cannibalize the Amway business. However they are not examples of Internet marketing in pure form, in which business concepts are not exported from the brick and mortar world, but conceived from the outset with the Internet reality in mind. The tenets of Eric Scheibeler's book coincide with my exposure to the phenomena of Amway and Quixtar, which have always seemed very cult-like to me, and not even good examples of what MLM could be or should be. There are plenty of good examples however, which may include Avon, Mary Kay, Tupperware, Creative Memories, Prepaid Legal, Primerica, and many other companies with legitimate products, services and marketing plans. In saying that, I am not concerned with legalities. Amway has always managed to stay clear of the law, and validate its business methods against legal challenge. That is different from saying they represent a sensible business opportunity. But I'm not going to attempt a history of MLM here.
On the Internet, things are different. Many companies have moved their presence to the Internet, including most MLM companies of old, and they naturally have realized some benefits and efficiencies in doing so. But few true Internet plays have proven viable. Personally, I would consider even Amazon a questionable case nowadays. To say the least, the jury is still out on them. It is proving more and more dubious if their wild expansion into everything including kitchen sinks, is going to provide the payoff for their technology investments, with which they have justified their infrastructure spending.
However if we look at successful marketing launches, we notice that the "network effect," is alive and well on the Internet, and has been the driving force that made many companies what they are today. Paypal offered referral fees for opening accounts with them, and they became an overnight success. INGDirect did the same, though less successfully so. AllAdvantage, Google, Skype, MySpace, and most portals somehow or other leveraged the network effect, and a few reinforced the network effect through incentives, referral fees, and sometimes multi-level compensation. The results are visible in inflated stockmarket evaluations of some companies which are temporarily deemed successful, but the question remains how well they serve all stakeholders, not just shareholders. MySpace and Google are examples where the "value creation" accrues entirely to the founders and shareholders, and not to the users except through the functionality of their services, which are paid for with advertising, and to some degree the sacrifice of privacy, not hard cash. I liken this part to the early days of television, and network TV, which became all paid for by advertising.
In TV, the development is perhaps further along than on the Internet in that some clear winners of pay TV seem to have emerged, while commercial TV is losing the battle on all fronts both against pay channels on cable, and against the Tivo on the hardware front. Consumers are sending a clear message: they want the content, but preferably without the ads. To assume that the Internet will be any different is naive. Users want the functionality, not the ads. Therefore superior functionality in some form or other will warrant payment. Salesforce.com seems to be an example, and there are others. In spite of the apparent successes of Google, the ad-supported model therefore may peak at some point if people switch to ad-free pay-services in massive numbers. Right now Johnny-come-latelies like Microsoft are getting more and more into the ad-supported model, which again is going to do nothing but depress advertising rates, and undermine the value of on-line advertising, which, as it becomes ubiquitous, becomes as boring and annoying as TV commercials. So right now the ad-supported model is most likely in a "bubble" mode, and overdue for a correction.
On the software front meanwhile, the revolution that is going on is that of "Open Source" vs. the proprietary software model. Here one of the most central themes is control, but there is another stakeholder issue, which is sometimes overlooked. If I submit an improvement to Microsoft, they own my improvement, and I get charged for the privilege with their next upgrade. The only benefit these stakeholders get is the functionality of the software which they pay for. User frustration therefore sets in if "upgrades" do not match their perceptions of what they need, and merely force them to acquire more powerful computers, to little actual benefit in the long run.
To get back to the MLM discussion, MLM is annoying when the economic incentive gets people to push products or services I don't want, just as much as advertising is annoying when it pushes products or services I don't want. But if I found a superior product due to a good ad, then I accept the ad, since it did me a service. Successful advertising therefore needs to be entertaining, engaging, and helpful.
What sets aside the Internet as a medium is among other things the ease with which the network effect can manifest, AND the ease with which economic drivers can be tracked and rewarded, which can in turn reinforce that network effect. Therefore the Internet and a network model of payments is potentially an optimal combination, since it offers the potential of engaging more of the stakeholders more fully, in particular extending the benefits of growth from the network effects to the users who create it. Doing so will not prevent a bad product or service from tanking eventually however. And that, among other things is the reason why scams ultimately flame out, quite aside from legal and regulatory challenge, which merely serve to hasten the crash of the deserving. Therefore in general it will also be helpful to speak of network marketing as a category, in lieu of the particular pay structures, such as mlm-, matrix-, or pyramid- which have become labels that confuse more than they explain, and in the realization that the economic effect of the network is the natural ally of would-be "network marketing" programs, and that conversely if the economic potential of a product, application or service are not well aligned, they are always doomed.
Further, once we properly understand the tremendous power of the network effect, in conjunction with efficient and effective economic incentives, it becomes very easy to see why a private company like Kanosis could easily outcompete a traditional business that is publicly financed. More start-ups bit the dust who were done in both by a combinaition of the high cost of capital, and the tremendous cost of sales and marketing, which might constitute as much as 80% of the runrate in the early years. To pay for (word-of-mouth) marketing from revenues, at a predictable 70% as is the case in this particular example, is positively a bargain by comparison, and a model of economic efficiency.
As a cautionary note meanwhile, it should also be noted that while this type of a company launch is by and large easier because of lower startup costs, it is also harder because the execution is much more demanding. Namely if the reputation of your product or service is directly linked with your user constituency as it is in this case, if relations between the company and its user base break down, that breakdown will happen that much more quickly, and it takes truly extraordinary management talent to maintain the social compact between the company and all of its stakeholders, because feedback is very fast. Better have a LeMans driver at the helm then...
A lot of confusion stems from the fact that many people have lost money in non-viable MLM companies, or in various Internet scams, or they have loved ones who have done so, and then they come to the erroneous conclusion that all MLM is bad, in an obvious confusion of ends and means. I'm seeing this phenomenon in respect of my involvement with Kanosis. Many people have a priori notions which prevent them from examining the actual business model, due to a prejudice against MLM, pyramid schemes, or matrix pay-outs, when they don't even understand the actual definitions of those concepts, or much less are able to distinguish right from wrong in any meaningful way from either a business or a legal standpoint.
On the level of functionality I tend to think that Kanosis represents a value which can be easily justified, and compares favorably with some other pay services, since it offers a level of integration and convenience that is not otherwise available. I have obviously arrived at the conclusion that Kanosis is a winner, and decided to market it. Only time will tell if my analysis was correct. However, if it is, many otherwise intelligent people who opted against it only because of an irrational prejudice against MLM, will regret their short-sightedness, and at some point it should become evident that prejudice is not a good substitute for business analysis.
Leaving aside therefore for a moment the consideration if Kanosis itself will succeed, there can be no question that in consumer marketing in particular, and of products and services with a strong network effect (like the collaboration features in Kanosis), network-type compensation plans will be increasingly popular in order to engage the users as the best qualified sales people. That logic is impeccable. After all what does any buyer do? Ask for references! I routinely ask drivers of a car I want to buy how they like it, etc.
It should be noted also that Kanosis is developing an interesting hybrid model, and will set a precedent by developing a professional, certified salesforce for their corporate services, which will be released starting three months after the consumer service, and they will have a profit sharing mechanism for their regular consumer users, on the strength of the theory that it is the popular use of the service which will help promote corporate adoption. This will be the vindication of word-of-mouth advertising and the network effect. This innovation alone is likely to be a brilliant marketing vision.
While all of this analysis remains to be proven for the historians, I'm not waiting for the history to be written, and in the interim I've put my money where my mouth is. Further, by publishing this analysis here, I'm on the record, and I will be duly curious myself what the outcome will be, even while I'm obviously banking on being right about it.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
On the Internet, things are different. Many companies have moved their presence to the Internet, including most MLM companies of old, and they naturally have realized some benefits and efficiencies in doing so. But few true Internet plays have proven viable. Personally, I would consider even Amazon a questionable case nowadays. To say the least, the jury is still out on them. It is proving more and more dubious if their wild expansion into everything including kitchen sinks, is going to provide the payoff for their technology investments, with which they have justified their infrastructure spending.
However if we look at successful marketing launches, we notice that the "network effect," is alive and well on the Internet, and has been the driving force that made many companies what they are today. Paypal offered referral fees for opening accounts with them, and they became an overnight success. INGDirect did the same, though less successfully so. AllAdvantage, Google, Skype, MySpace, and most portals somehow or other leveraged the network effect, and a few reinforced the network effect through incentives, referral fees, and sometimes multi-level compensation. The results are visible in inflated stockmarket evaluations of some companies which are temporarily deemed successful, but the question remains how well they serve all stakeholders, not just shareholders. MySpace and Google are examples where the "value creation" accrues entirely to the founders and shareholders, and not to the users except through the functionality of their services, which are paid for with advertising, and to some degree the sacrifice of privacy, not hard cash. I liken this part to the early days of television, and network TV, which became all paid for by advertising.
In TV, the development is perhaps further along than on the Internet in that some clear winners of pay TV seem to have emerged, while commercial TV is losing the battle on all fronts both against pay channels on cable, and against the Tivo on the hardware front. Consumers are sending a clear message: they want the content, but preferably without the ads. To assume that the Internet will be any different is naive. Users want the functionality, not the ads. Therefore superior functionality in some form or other will warrant payment. Salesforce.com seems to be an example, and there are others. In spite of the apparent successes of Google, the ad-supported model therefore may peak at some point if people switch to ad-free pay-services in massive numbers. Right now Johnny-come-latelies like Microsoft are getting more and more into the ad-supported model, which again is going to do nothing but depress advertising rates, and undermine the value of on-line advertising, which, as it becomes ubiquitous, becomes as boring and annoying as TV commercials. So right now the ad-supported model is most likely in a "bubble" mode, and overdue for a correction.
On the software front meanwhile, the revolution that is going on is that of "Open Source" vs. the proprietary software model. Here one of the most central themes is control, but there is another stakeholder issue, which is sometimes overlooked. If I submit an improvement to Microsoft, they own my improvement, and I get charged for the privilege with their next upgrade. The only benefit these stakeholders get is the functionality of the software which they pay for. User frustration therefore sets in if "upgrades" do not match their perceptions of what they need, and merely force them to acquire more powerful computers, to little actual benefit in the long run.
To get back to the MLM discussion, MLM is annoying when the economic incentive gets people to push products or services I don't want, just as much as advertising is annoying when it pushes products or services I don't want. But if I found a superior product due to a good ad, then I accept the ad, since it did me a service. Successful advertising therefore needs to be entertaining, engaging, and helpful.
What sets aside the Internet as a medium is among other things the ease with which the network effect can manifest, AND the ease with which economic drivers can be tracked and rewarded, which can in turn reinforce that network effect. Therefore the Internet and a network model of payments is potentially an optimal combination, since it offers the potential of engaging more of the stakeholders more fully, in particular extending the benefits of growth from the network effects to the users who create it. Doing so will not prevent a bad product or service from tanking eventually however. And that, among other things is the reason why scams ultimately flame out, quite aside from legal and regulatory challenge, which merely serve to hasten the crash of the deserving. Therefore in general it will also be helpful to speak of network marketing as a category, in lieu of the particular pay structures, such as mlm-, matrix-, or pyramid- which have become labels that confuse more than they explain, and in the realization that the economic effect of the network is the natural ally of would-be "network marketing" programs, and that conversely if the economic potential of a product, application or service are not well aligned, they are always doomed.
Further, once we properly understand the tremendous power of the network effect, in conjunction with efficient and effective economic incentives, it becomes very easy to see why a private company like Kanosis could easily outcompete a traditional business that is publicly financed. More start-ups bit the dust who were done in both by a combinaition of the high cost of capital, and the tremendous cost of sales and marketing, which might constitute as much as 80% of the runrate in the early years. To pay for (word-of-mouth) marketing from revenues, at a predictable 70% as is the case in this particular example, is positively a bargain by comparison, and a model of economic efficiency.
As a cautionary note meanwhile, it should also be noted that while this type of a company launch is by and large easier because of lower startup costs, it is also harder because the execution is much more demanding. Namely if the reputation of your product or service is directly linked with your user constituency as it is in this case, if relations between the company and its user base break down, that breakdown will happen that much more quickly, and it takes truly extraordinary management talent to maintain the social compact between the company and all of its stakeholders, because feedback is very fast. Better have a LeMans driver at the helm then...
A lot of confusion stems from the fact that many people have lost money in non-viable MLM companies, or in various Internet scams, or they have loved ones who have done so, and then they come to the erroneous conclusion that all MLM is bad, in an obvious confusion of ends and means. I'm seeing this phenomenon in respect of my involvement with Kanosis. Many people have a priori notions which prevent them from examining the actual business model, due to a prejudice against MLM, pyramid schemes, or matrix pay-outs, when they don't even understand the actual definitions of those concepts, or much less are able to distinguish right from wrong in any meaningful way from either a business or a legal standpoint.
On the level of functionality I tend to think that Kanosis represents a value which can be easily justified, and compares favorably with some other pay services, since it offers a level of integration and convenience that is not otherwise available. I have obviously arrived at the conclusion that Kanosis is a winner, and decided to market it. Only time will tell if my analysis was correct. However, if it is, many otherwise intelligent people who opted against it only because of an irrational prejudice against MLM, will regret their short-sightedness, and at some point it should become evident that prejudice is not a good substitute for business analysis.
Leaving aside therefore for a moment the consideration if Kanosis itself will succeed, there can be no question that in consumer marketing in particular, and of products and services with a strong network effect (like the collaboration features in Kanosis), network-type compensation plans will be increasingly popular in order to engage the users as the best qualified sales people. That logic is impeccable. After all what does any buyer do? Ask for references! I routinely ask drivers of a car I want to buy how they like it, etc.
It should be noted also that Kanosis is developing an interesting hybrid model, and will set a precedent by developing a professional, certified salesforce for their corporate services, which will be released starting three months after the consumer service, and they will have a profit sharing mechanism for their regular consumer users, on the strength of the theory that it is the popular use of the service which will help promote corporate adoption. This will be the vindication of word-of-mouth advertising and the network effect. This innovation alone is likely to be a brilliant marketing vision.
While all of this analysis remains to be proven for the historians, I'm not waiting for the history to be written, and in the interim I've put my money where my mouth is. Further, by publishing this analysis here, I'm on the record, and I will be duly curious myself what the outcome will be, even while I'm obviously banking on being right about it.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Tuesday, April 11, 2006
A Dream Come True?
In 2002, after leaving NTT/Verio, amid the ashes of 9/11 and the dot com bust, I continued in the business selling security solutions, and at some time, as part of the effort we developed a business concept with a working title of My Virtual Computer, aiming to provide a hosted personal working environment with superior security features. One of the driving concepts was that managing PC hardware and software is a constant challenge for more than 99% of the population, and too often data is lost, due to hard disk crashes, system changes, and God knows what all. Also, the reality is that people often times share hardware, and existing technologies are hopelessly inadequate to do that effectively. People also want PRIVATE access to their personal data from the office, or anywhere for that matter. Therefore a professionally managed service, accessed over the web would be the answer.
We conceptualized this in two flavors, for broadband and for dial-up, and we worked for a while with a development company which provided secure email, which was also developing a sort of personal desktop which embodied the key ideas we had for the service. When I explained the initial concept to my partner Roger, he exclaimed: "Rogier, I KNEW you had it in you!" Still, for various reasons, both technological and business, the plan did not come to fruition, but my conclusion was that the idea was too logical, so that inevitably someone, some day would figure it out and make it a reality. This blog was actually started once I gave up on ever realizing this idea myself, and decided instead to just share some of my thinking on appropriate IT with the world. The central notion was about Personal Computing, as opposed to Personal Computers.
Unbeknownst to me in Cyprus a developer by the name of Stephen van Zutphen was working on the very idea we had been talking about here in New York, and actually he was able to implement it. Apparently he first thought of lawyers, appointment calendars, and time billing, and he should be forgiven for that, since he is a lawyer himself, so he can't help it. Fortunately however events took a different turn and the product is now being launched as a consumer service under the name of Kanosis, and later will be re-released for the corporate market.
As of this writing we are still working with a pre-release version of the Kanosis service, but I will sum up some of the basic functionality here, however I will also preface this by saying that I think the solution is BRILLIANT because of its simplicity. Stephen van Zutphen's vision was that of a "Personal Operating System," as opposed to a computer operating system. I see that as another way of expressing the ideas of Personal Computing vs. Personal Computers. Most PC software suffers from featuritis, and complexity, which tends to grow out of control until a competitive software arrives and takes the old champ down.
Kanosis is a paradigm shift centered around the idea of Personal Information Manager, (PIM), but delivered over the net as an ASP, or Software As A Service (SAAS). The brilliance of the design is in the integration of features, combined with the effectiveness of facilitating collaboration among users of the service. In effect it provides on a membership basis a collaboration platform to beat many of the best corporate platforms, which are available only to employees or business partners of said corporations. From a marketing standpoint he adoption will strongly benefit from the network effect, and supporting that with an appropriate multi-level compensation plan was another brilliant move.
An example of this was during my visit to the Cingular store this morning to upgrade my phone. The salesman pushed me towards a PDA, and I rebuffed him, describing how I used this new on-line service which I use for managing my contacts, and scheduling, etc. and that I found it kind of pathetic how people around me are constantly synching their Blackberry. To me it seemed like more hassle than it is worth. He listened up, and he already wants to join Kanosis. And that's just one aspect of the service.
What Kanosis is in full is:
- a live, on-line, and cross platform (java-based) Personal Information Manager (PIM): contacts, schedules, task management, including organizing files by contacts.
- a communications center: email, chat, internet telephony, video conferencing/video mail
- a secure on-line storage facility with 5Gb of personal space
- low-cost international financial transactions, including an on-line account in up to twelve currencies, along with a company debit card.
- a store for video and audio downloads, which will reportedly have the largest on line movie inventory yet starting from the launch date of May 1st.
- a business opportunity which allows consumers sales ONLY by members, and on a personal level those are the best sales people, because as users of the service they are eminently qualified to sell it to others.
In short, if simplicity sells, this service will be hugely successful, and it will cut a wide swath through the territory of Salesforce.com, the Outlook/Exchange franchise, Google, and others. I think the KISS principle is likely to win out, and win big. One of the fascinating aspects of the service is also that it provides better security, in creating a VPN like environment between the IPV6 compatible clients and the central server, so that users enjoy above average security and privacy by collaborating through this platform. For the moment access security remains limited to username and password, but hopefully better alternatives for that will be provided in due course as well.
Last but not least I can only say that on the whole that if Kanosis is an implementation of the idea for My Virtual Computer, they did a far better job than I was envisaging, and I salute Stephen van Zutphen for his vision, and all the other people involved for ultimately realizing this idea and bringing it to market in the form of Kanosis.
Besides the competitive issues discussed here, I also think that this service will make it easier for people to switch to a Linux desktop. In fact, I would suggest a small business could get by with a Linux PC, Open Office, GnuCash, and Kanosis. In short, this service is going to change the landscape, and help close the digital divide just a little bit, by providing appropriate technology, device independence, and ease of use.
By clicking on the title to this article you will find a link to the Kanosis website, which will show that you were referred by me. Have at it, have fun, join the revolution... I'm sure I will write about this again, for I enjoy seeing an old dream realized in this fashion, and I enjoy technological revolutions and paradigm shifts, and this surely is one of those!
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
We conceptualized this in two flavors, for broadband and for dial-up, and we worked for a while with a development company which provided secure email, which was also developing a sort of personal desktop which embodied the key ideas we had for the service. When I explained the initial concept to my partner Roger, he exclaimed: "Rogier, I KNEW you had it in you!" Still, for various reasons, both technological and business, the plan did not come to fruition, but my conclusion was that the idea was too logical, so that inevitably someone, some day would figure it out and make it a reality. This blog was actually started once I gave up on ever realizing this idea myself, and decided instead to just share some of my thinking on appropriate IT with the world. The central notion was about Personal Computing, as opposed to Personal Computers.
Unbeknownst to me in Cyprus a developer by the name of Stephen van Zutphen was working on the very idea we had been talking about here in New York, and actually he was able to implement it. Apparently he first thought of lawyers, appointment calendars, and time billing, and he should be forgiven for that, since he is a lawyer himself, so he can't help it. Fortunately however events took a different turn and the product is now being launched as a consumer service under the name of Kanosis, and later will be re-released for the corporate market.
As of this writing we are still working with a pre-release version of the Kanosis service, but I will sum up some of the basic functionality here, however I will also preface this by saying that I think the solution is BRILLIANT because of its simplicity. Stephen van Zutphen's vision was that of a "Personal Operating System," as opposed to a computer operating system. I see that as another way of expressing the ideas of Personal Computing vs. Personal Computers. Most PC software suffers from featuritis, and complexity, which tends to grow out of control until a competitive software arrives and takes the old champ down.
Kanosis is a paradigm shift centered around the idea of Personal Information Manager, (PIM), but delivered over the net as an ASP, or Software As A Service (SAAS). The brilliance of the design is in the integration of features, combined with the effectiveness of facilitating collaboration among users of the service. In effect it provides on a membership basis a collaboration platform to beat many of the best corporate platforms, which are available only to employees or business partners of said corporations. From a marketing standpoint he adoption will strongly benefit from the network effect, and supporting that with an appropriate multi-level compensation plan was another brilliant move.
An example of this was during my visit to the Cingular store this morning to upgrade my phone. The salesman pushed me towards a PDA, and I rebuffed him, describing how I used this new on-line service which I use for managing my contacts, and scheduling, etc. and that I found it kind of pathetic how people around me are constantly synching their Blackberry. To me it seemed like more hassle than it is worth. He listened up, and he already wants to join Kanosis. And that's just one aspect of the service.
What Kanosis is in full is:
- a live, on-line, and cross platform (java-based) Personal Information Manager (PIM): contacts, schedules, task management, including organizing files by contacts.
- a communications center: email, chat, internet telephony, video conferencing/video mail
- a secure on-line storage facility with 5Gb of personal space
- low-cost international financial transactions, including an on-line account in up to twelve currencies, along with a company debit card.
- a store for video and audio downloads, which will reportedly have the largest on line movie inventory yet starting from the launch date of May 1st.
- a business opportunity which allows consumers sales ONLY by members, and on a personal level those are the best sales people, because as users of the service they are eminently qualified to sell it to others.
In short, if simplicity sells, this service will be hugely successful, and it will cut a wide swath through the territory of Salesforce.com, the Outlook/Exchange franchise, Google, and others. I think the KISS principle is likely to win out, and win big. One of the fascinating aspects of the service is also that it provides better security, in creating a VPN like environment between the IPV6 compatible clients and the central server, so that users enjoy above average security and privacy by collaborating through this platform. For the moment access security remains limited to username and password, but hopefully better alternatives for that will be provided in due course as well.
Last but not least I can only say that on the whole that if Kanosis is an implementation of the idea for My Virtual Computer, they did a far better job than I was envisaging, and I salute Stephen van Zutphen for his vision, and all the other people involved for ultimately realizing this idea and bringing it to market in the form of Kanosis.
Besides the competitive issues discussed here, I also think that this service will make it easier for people to switch to a Linux desktop. In fact, I would suggest a small business could get by with a Linux PC, Open Office, GnuCash, and Kanosis. In short, this service is going to change the landscape, and help close the digital divide just a little bit, by providing appropriate technology, device independence, and ease of use.
By clicking on the title to this article you will find a link to the Kanosis website, which will show that you were referred by me. Have at it, have fun, join the revolution... I'm sure I will write about this again, for I enjoy seeing an old dream realized in this fashion, and I enjoy technological revolutions and paradigm shifts, and this surely is one of those!
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Saturday, March 25, 2006
Overdoing IT - Language, Layout, and Typography
Recently I had the opportunity to do a small translation job for an agency. I guess I've been living an isolated life, doing only some specialized translation jobs here or there, mostly of the literary variety, though a few were in the legal and commercial space. But this professional translation world is something else yet again. I had my suspicions, for some time ago I translated the 2nd volume of a series of books, the first one of which unfortunately also had been translated by such a "licensed" professional, whose last job apparently was to translate the text on a box of Corn Flakes...
Well, my recent experience was rather bizarre. A rush job. What else? The project was a translation of a quote for a residential electrical installation in Holland for an American principal. The Dutch original had been revised, and now it was upon me to translate and integrate the revisions. Unfortunately the document had been printed as a text file and on a large chain fed computer printer with 12*14" paper, so in printing it out, the format was all screwed up, with headers and footers and page breaks falling in the middle of the page.
The agency insisted that I come in to their office, since I did not possess the latest version of that wonder of technology, Microsoft Word. Side by side comparison was where it's at, I was told. I might have preferred to work from home because of a larger screen, among other benefits. After I reformatted the document to format the pages conform the original, at least the text became clear. However the agency person disagreed, and fought me on my efforts to reformat the page to match the original output. It only took an hour or two to convince the person of using common sense about this part.
Then came the matter of taking out the headers and footers, so one could separate the body of the text from the printed output. Another fight. I was told this was how the client wanted it (i.e. formatted for A4 and printed on large sheets, so all the pages were off), and I was not to change the document. The concept that headers and footers are not part of the document in the first place was apparently foreign to this person, so I gave up on that issue. I became the object of several other attempts to show me how to do the job faster, by someone who clearly had barely ever worked with Word or any other word processor. Altogether that wasted 6-8 hours of the job, including a helpful interim reformatting job, designed to save even more time, undoing the unintended side-effects of which took at least an hour.
In between all the struggles about how to use a word processor, I also received an explanation on how to become a translator, and learn to use appropriate translation software, etc. My predecessor on the job apparently knew all these things, and it was soon to be revealed how effective they were, as I was ready to proceed to the content once the formatting was more or less under control. The instructions were to reuse as much as possible the translations of the earlier translator, and to try not to duplicate the effort.
After my first day of work on the project I came to the conclusion that the prior translator was probably of Turkish origin, and had perhaps completed correspondence courses in Dutch and English. In my view this party could not possibly be a native speaker of either language, and had probably looked up words in a dictionary. Here were some of the pitiful problems I ran into:
- nouns were translated as verbs and vice-versa;
- technical terms were uniformly wrong;
- idiomatic expressions were mangled beyond recognition.
Some examples were the Dutch word "aarde," literally "earth," however in the context of an electrical installation should clearly be translated as "ground," even more so because there was no evidence of installing any garden lighting, or even roof gardens on the house. A "ground fault interrupt circuit breaker" thus had been translated as an "earth leakage interrupt circuit breaker." And a temporary electrical panel (for use during construction), "zwerfkast" in Dutch idiom, became a "drift box," just as much as a "patch panel" had been rendered as a "patch box." On and on and on, one hilarious mistake after another. Electrical conduit had been rendered as "tubing," as though it were for gas or water, and even there pipes may be more common usage than tubes. A very formal expression for an electrical receptacle (Dutch: "wal contact doos," which is truly formal contractorese, just as english "receptacle") was rendered as "outlet," and in some cases these were "rim-grounded" (why not "rim-earthed" - be consistent at least?), which no American would understand, for it's simply a grounded outlet, though in the European code the ground is not a 3rd prong, but is in a spring contact in the rim of the receptacle.
In short, between the reformatting problems and the word processor fights, the entire previous translation needed to be overhauled for it could have caused enough problems for the architects or builders to have serious difficulty with the material, and misunderstandings with the electrical contractors. And the entire job, which should have been eight hours work, ended up taking nearly twenty. After I finished it, I simply commented to the agency person that since I had thirty years of experience with word processors, and had learned to use probably that many different ones, that perhaps it was not necessary to explain Word to me, since she quite apparently was not sure how to use it herself. That brought some let up in the instructions.
The second document thankfully was two-thirds the same as the first, and with the formatting job already done, was easy to work on, and took five hours including corrections, even though the second document was one fifth longer than the first one. But then there were no more helpful hints about how to use wordprocessors, or time saving reformatting jobs. I have no idea though how much the client appreciated having headers and footers in the middle of the page...
The icing on the cake, after all of this, was the discovery that the prior translator was reportedly a college professor, and originally a Dutch speaker, teaching an arcane topic called "translation," and apparently an expert at all the software tools that can assist translators in their trade, a skill yours truly sorely lacked, making me not a professional translator, but a mere weekend-warrior.
Once again these experiences are routine daily examples of the misuse of technology, where the absence of skill is compensated with technology, and so the problems are compounded even while the appearance of competent work is created. Doing a layout job with a sophisticated word processor or desk top publishing program will result in disaster if one does not understand the elements of page layout to begin with. In this case the idiotic treatment of headers and footers as part of the text serves as an example. I should say that I speak from experience in particular in the area of typography, where in previous book projects I have been only just barely saved by professional typographers restraining my efforts at ridiculous extravagances in this area.
The latter brings me to my frequent discussions with Franklin Cooper, who with his twin brother Francis will surely be doing the typograhpy for my books in the future. Both were trained as typographers, and learned in "the old days" how to typeset. Frankling found himself displaced by technology and the presumption that software could REPLACE expertise. Francis stayed in the trade, learning to control the technology and create good results in spite of the best software technology on offer. Their stories could fill a book, and perhaps some day they will. For now the world seems full of opportunities to design books the old fashioned way, but using modern software as an extension of profound design skills, not in lieu of design skills. More about that another day.
To top it off, when coming home I found my twelve year old stepdaughter working on her Spanish homework, using an online translation service. Yet another example of the sad failures of providing basic training in the educational system, and replacing it with misused technology to raise a generation of cripples who can't understand their own language, let alone anybody else's. Computer "literate" illiteracy. For idiomatic English go to India, perhaps.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Well, my recent experience was rather bizarre. A rush job. What else? The project was a translation of a quote for a residential electrical installation in Holland for an American principal. The Dutch original had been revised, and now it was upon me to translate and integrate the revisions. Unfortunately the document had been printed as a text file and on a large chain fed computer printer with 12*14" paper, so in printing it out, the format was all screwed up, with headers and footers and page breaks falling in the middle of the page.
The agency insisted that I come in to their office, since I did not possess the latest version of that wonder of technology, Microsoft Word. Side by side comparison was where it's at, I was told. I might have preferred to work from home because of a larger screen, among other benefits. After I reformatted the document to format the pages conform the original, at least the text became clear. However the agency person disagreed, and fought me on my efforts to reformat the page to match the original output. It only took an hour or two to convince the person of using common sense about this part.
Then came the matter of taking out the headers and footers, so one could separate the body of the text from the printed output. Another fight. I was told this was how the client wanted it (i.e. formatted for A4 and printed on large sheets, so all the pages were off), and I was not to change the document. The concept that headers and footers are not part of the document in the first place was apparently foreign to this person, so I gave up on that issue. I became the object of several other attempts to show me how to do the job faster, by someone who clearly had barely ever worked with Word or any other word processor. Altogether that wasted 6-8 hours of the job, including a helpful interim reformatting job, designed to save even more time, undoing the unintended side-effects of which took at least an hour.
In between all the struggles about how to use a word processor, I also received an explanation on how to become a translator, and learn to use appropriate translation software, etc. My predecessor on the job apparently knew all these things, and it was soon to be revealed how effective they were, as I was ready to proceed to the content once the formatting was more or less under control. The instructions were to reuse as much as possible the translations of the earlier translator, and to try not to duplicate the effort.
After my first day of work on the project I came to the conclusion that the prior translator was probably of Turkish origin, and had perhaps completed correspondence courses in Dutch and English. In my view this party could not possibly be a native speaker of either language, and had probably looked up words in a dictionary. Here were some of the pitiful problems I ran into:
- nouns were translated as verbs and vice-versa;
- technical terms were uniformly wrong;
- idiomatic expressions were mangled beyond recognition.
Some examples were the Dutch word "aarde," literally "earth," however in the context of an electrical installation should clearly be translated as "ground," even more so because there was no evidence of installing any garden lighting, or even roof gardens on the house. A "ground fault interrupt circuit breaker" thus had been translated as an "earth leakage interrupt circuit breaker." And a temporary electrical panel (for use during construction), "zwerfkast" in Dutch idiom, became a "drift box," just as much as a "patch panel" had been rendered as a "patch box." On and on and on, one hilarious mistake after another. Electrical conduit had been rendered as "tubing," as though it were for gas or water, and even there pipes may be more common usage than tubes. A very formal expression for an electrical receptacle (Dutch: "wal contact doos," which is truly formal contractorese, just as english "receptacle") was rendered as "outlet," and in some cases these were "rim-grounded" (why not "rim-earthed" - be consistent at least?), which no American would understand, for it's simply a grounded outlet, though in the European code the ground is not a 3rd prong, but is in a spring contact in the rim of the receptacle.
In short, between the reformatting problems and the word processor fights, the entire previous translation needed to be overhauled for it could have caused enough problems for the architects or builders to have serious difficulty with the material, and misunderstandings with the electrical contractors. And the entire job, which should have been eight hours work, ended up taking nearly twenty. After I finished it, I simply commented to the agency person that since I had thirty years of experience with word processors, and had learned to use probably that many different ones, that perhaps it was not necessary to explain Word to me, since she quite apparently was not sure how to use it herself. That brought some let up in the instructions.
The second document thankfully was two-thirds the same as the first, and with the formatting job already done, was easy to work on, and took five hours including corrections, even though the second document was one fifth longer than the first one. But then there were no more helpful hints about how to use wordprocessors, or time saving reformatting jobs. I have no idea though how much the client appreciated having headers and footers in the middle of the page...
The icing on the cake, after all of this, was the discovery that the prior translator was reportedly a college professor, and originally a Dutch speaker, teaching an arcane topic called "translation," and apparently an expert at all the software tools that can assist translators in their trade, a skill yours truly sorely lacked, making me not a professional translator, but a mere weekend-warrior.
Once again these experiences are routine daily examples of the misuse of technology, where the absence of skill is compensated with technology, and so the problems are compounded even while the appearance of competent work is created. Doing a layout job with a sophisticated word processor or desk top publishing program will result in disaster if one does not understand the elements of page layout to begin with. In this case the idiotic treatment of headers and footers as part of the text serves as an example. I should say that I speak from experience in particular in the area of typography, where in previous book projects I have been only just barely saved by professional typographers restraining my efforts at ridiculous extravagances in this area.
The latter brings me to my frequent discussions with Franklin Cooper, who with his twin brother Francis will surely be doing the typograhpy for my books in the future. Both were trained as typographers, and learned in "the old days" how to typeset. Frankling found himself displaced by technology and the presumption that software could REPLACE expertise. Francis stayed in the trade, learning to control the technology and create good results in spite of the best software technology on offer. Their stories could fill a book, and perhaps some day they will. For now the world seems full of opportunities to design books the old fashioned way, but using modern software as an extension of profound design skills, not in lieu of design skills. More about that another day.
To top it off, when coming home I found my twelve year old stepdaughter working on her Spanish homework, using an online translation service. Yet another example of the sad failures of providing basic training in the educational system, and replacing it with misused technology to raise a generation of cripples who can't understand their own language, let alone anybody else's. Computer "literate" illiteracy. For idiomatic English go to India, perhaps.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Tuesday, March 21, 2006
Overdoing IT - again
There are too many ways that people go overboard on IT, and it becomes dysfuncitional. Some of the more pedestrian examples are people who don't know a language (even if it's their native language) and are overreliant on spelling checkers. They will proudly deliver documents that are full of "there" when it should be "their" and vice versa. We all know the symptoms. Recently I was confronted by a translation job where I saw the same at a higher level, and on the corporate level, executives who are suffering from Math and IT phobia pay through the nose to shod their companies with "respectable" software like SAP at a price that would sink most businesses. It makes good conversation on the golfcourse, for everyone thinks they know what they're talking about, and the approving slaps on the shoulder follow, but many businesses suffer from a strategic misalignment of IT.
By the same token the current spate of outsourcing of IT all too often serves to hide incompetence, and dress it up in a halo of cost savings, and "contributions to the bottom line," when the real story is a strategic misalignment. For if companies truly understood the strategic value of IT, they would not put it too far out of their reach - which is not to say that certain parts of development cannot be productively outsourced, but the opportunity is far more limited and surgical in nature than current trends indicate.
Last year I had the opportunity to meet with Michael Hugos, formerly CIO at a distribution coop, who clearly has done a remarkable job there, and has at the same time become a best-selling author at John Wiley with his book on Supply Chain Management, modestly titled "Essentials of Supply Chain Management" (now in a second edition John Wiley & Sons, 2006).
In a recent conversation he expressed to me his eagerness at competing against any company that implements SAP. However, they are becoming harder to find, for the drive to conformity, in particular in public companies makes the pressure to conform to the norm almost too much to bear, and being a public company in the US in that sense is almost a recipe for disaster. Announce a deal with SAP and your stock will go up. What CEO could resist that, particularly if he is compensated with lots of options?
The whole experience brought to mind the fiasco at Pitney Bowes when they implemented SAP, at a time when there were still the big five accounting/IT consulting firms, and they went through four of the five, firing all of them but the last one, realizing they were running out of options to implement it successfully. I became instrumental in bringing in another consulting firm to try and save the day by actually managing the communication between PB management and the implementers, and keeping an eye on strategic alignment as far as possible.
As soon as we got involved - even at the proposal stage - interesting issues of strategic alignment began to surface, and it became apparent that one of the problems of the implementation was in the fact that Pitney Bowes' business model is based on leasing, and the SAP model did not accomodate that, so everything had to be customized. Hence the last proposal from #5 of the big five was for a $300 million implementation budget. A few years later the job was apparently completed successfully "below budget," as I heard. So they likely got away by reflecting only $299 million of the cost explicitly on the books, but the disastrous inefficiencies that no doubt resulted will be paid for over and over and over again for years.
The next brilliant management move then is to outsource the maintenance of the disaster, so that no-one actually ever has to have the intellectual honesty and courage to look at the disaster for what it is, and to do something that actually benefits the business. When in between you meet a business which really understands IT, and leverages it to the max, that is like a breath of fresh air. On the whole however, it seems as though the consumer trends of buying "boxed" software, has all but overwhelmed the capabilities of most managements for sound decision making in this area. As Mike Hugos observed in our conversation, at that point only too often a CIO ends up getting fired, and it's like a cab driver who gets stiffed on his tip for delivering the person to the wrong address, even if it was the passenger who gave the wrong information in the first place. Actual strategic alignment of IT with the business was the promise of the CIO position, but except for the exceptions that confirm the rule, it is yet to be realized. But we're spending a fortune on IT in the name of progress!!!
We also keep fooling ourselves that we're creating economic value with all the presumed productivity that results from this IT spending. Cheered on by Alan Greenspan and the backup chorus at Business Week (See a recent front page article on "Why the Economy Is A Lot Stronger Than You Think" BW Feb13, 2006), which is full of the type of delusional self-congratulatory nonsense about creating value in the "knowledge economy," which created the dot-com bubble and bust, and which now presumably is applied to the US economy as a whole. These are the kinds of musings of slightly deluded folk with pink-colored glasses, who really want us to believe that you can replace substance with arbitrary value that is created only courtesy of revising the standards after the fact. This is a process akin to social promotion in schools, that results in functional illiterates with highschool diplomas.
Oh well, enough for today. More about my translation fiasco in a later post.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
By the same token the current spate of outsourcing of IT all too often serves to hide incompetence, and dress it up in a halo of cost savings, and "contributions to the bottom line," when the real story is a strategic misalignment. For if companies truly understood the strategic value of IT, they would not put it too far out of their reach - which is not to say that certain parts of development cannot be productively outsourced, but the opportunity is far more limited and surgical in nature than current trends indicate.
Last year I had the opportunity to meet with Michael Hugos, formerly CIO at a distribution coop, who clearly has done a remarkable job there, and has at the same time become a best-selling author at John Wiley with his book on Supply Chain Management, modestly titled "Essentials of Supply Chain Management" (now in a second edition John Wiley & Sons, 2006).
In a recent conversation he expressed to me his eagerness at competing against any company that implements SAP. However, they are becoming harder to find, for the drive to conformity, in particular in public companies makes the pressure to conform to the norm almost too much to bear, and being a public company in the US in that sense is almost a recipe for disaster. Announce a deal with SAP and your stock will go up. What CEO could resist that, particularly if he is compensated with lots of options?
The whole experience brought to mind the fiasco at Pitney Bowes when they implemented SAP, at a time when there were still the big five accounting/IT consulting firms, and they went through four of the five, firing all of them but the last one, realizing they were running out of options to implement it successfully. I became instrumental in bringing in another consulting firm to try and save the day by actually managing the communication between PB management and the implementers, and keeping an eye on strategic alignment as far as possible.
As soon as we got involved - even at the proposal stage - interesting issues of strategic alignment began to surface, and it became apparent that one of the problems of the implementation was in the fact that Pitney Bowes' business model is based on leasing, and the SAP model did not accomodate that, so everything had to be customized. Hence the last proposal from #5 of the big five was for a $300 million implementation budget. A few years later the job was apparently completed successfully "below budget," as I heard. So they likely got away by reflecting only $299 million of the cost explicitly on the books, but the disastrous inefficiencies that no doubt resulted will be paid for over and over and over again for years.
The next brilliant management move then is to outsource the maintenance of the disaster, so that no-one actually ever has to have the intellectual honesty and courage to look at the disaster for what it is, and to do something that actually benefits the business. When in between you meet a business which really understands IT, and leverages it to the max, that is like a breath of fresh air. On the whole however, it seems as though the consumer trends of buying "boxed" software, has all but overwhelmed the capabilities of most managements for sound decision making in this area. As Mike Hugos observed in our conversation, at that point only too often a CIO ends up getting fired, and it's like a cab driver who gets stiffed on his tip for delivering the person to the wrong address, even if it was the passenger who gave the wrong information in the first place. Actual strategic alignment of IT with the business was the promise of the CIO position, but except for the exceptions that confirm the rule, it is yet to be realized. But we're spending a fortune on IT in the name of progress!!!
We also keep fooling ourselves that we're creating economic value with all the presumed productivity that results from this IT spending. Cheered on by Alan Greenspan and the backup chorus at Business Week (See a recent front page article on "Why the Economy Is A Lot Stronger Than You Think" BW Feb13, 2006), which is full of the type of delusional self-congratulatory nonsense about creating value in the "knowledge economy," which created the dot-com bubble and bust, and which now presumably is applied to the US economy as a whole. These are the kinds of musings of slightly deluded folk with pink-colored glasses, who really want us to believe that you can replace substance with arbitrary value that is created only courtesy of revising the standards after the fact. This is a process akin to social promotion in schools, that results in functional illiterates with highschool diplomas.
Oh well, enough for today. More about my translation fiasco in a later post.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Wednesday, December 21, 2005
Overdoing IT
There are many ways Information Technology has been misused, it is as prone to fads and foibles as any other human endeavor. One of the chief temptations lies in over-reliance on quantitative approaches. It is only natural that IT started in the business world with the idea of automating bookkeeping - at that time it usually resorted under a CFO. Then came the time that it became fashionable to create a new "C" level position, the CIO, not to mention CTOs and CISOs, all under the banner that businesses began to understand that IT was indeed strategic to their success.
And presently we are coming full circle again, with Sarbanes-Oxley causing many CFOs to try to reassert their control, on the ostensibly logical grounds that they're the ones that go to jail if something goes wrong. Of course it is an illusion that those issues are resolved in any way by demoting or altogehter removing the CIO and putting IT back under the CFO again. In fact, logically that is the same error as thinking that your computers are your IT system, or that security exists by hosting your systems on-site. The illusion of ownership of the physical assets (or people), then masquearades to create the illusion of control over the system (or their work). One way or another there will be adjustments. Some will stick, some won't.
Personally, my experience included getting involved in IT from a base in business management, and taking various roles in IT development. I came to appreciate very quickly how afraid people are of the finite and quantitative aspects of IT, or conversely prone to overuse them once they think they understand them. The following anecdote may serve:
Sometime in the mid 80's there was another oil-price spike, and I had the good fortune of being in charge of corporate planning for a shipping company, and report to a president who was a self-proclaimed "oilman," having come to the job from an oil major. He knew just what to do: hedge our oil price risk, and yours truly was charged with implementing the program, the details of which would need board approval. Naturally also the job included confirmation and official endorsement of the "knowledge," and "expertise" of the "oilman" in charge.
After going to work with a reputable oil industry consulting firm, and obtaining the necessary pricing data, I quickly proved that there was no futures market at the time where we could hedge marine fuel price risks, because the kinds of oil and derivatives that were traded were not statistically correlated to marine fuel and/or diesel. Consequently I advised the President and also the CFO that unfortunately the hedging program (we had already taken positions), was a speculative venture, which increased business risk and consequently would have to be disclosed on the books as an incremental business risk, outside of our main line of business. Naturally this outcome was not acceptable to our "oilman," and he was not going to take it lying down.
I was immediately charged with bringing in some Wall Street talent with proposals for risk management. One of the parties who came through for us and made a presentation to our board, offering a feasible solution to manage this significant finacial exposure of our firm was Merill-Lynch, who showed up complete with powerpoints (in those days I think it was still Lotus 1-2-3), and with a Ph.D. in Mathematics in tow. Needless to say, they delivered an impressive presentation, and a clear solution, which was endorsed by the board, subject to final review by yours truly since I had expressed that I could not reproduce the results they presented, even though they were ostensibly based on the same data series I had used.
Off to the McGraw-Hill bookstore in New York for me, where I bought myself a stack of literature on time-series analysis and options pricing, and locked myself into a room with my own copy of Lotus 1-2-3, until I could reproduce the results of the Ph.D. I found it quick enough. He had dazzled our board with his higher math, by applying a Durbin-Watson correction to two time series that were clearly unrelated, and all the textbooks point out that it should only be used to filter out minor disturbances if there is no doubt otherwise that two time series are correlated. I called the Ph.D. and told him my findings, observing that in fact he had done the equivalent of prescribing acne medication for a case of advanced skin-cancer. The next day the proposal was withdrawn by Merill-Lynch. I would not doubt they, and everyone else on Wall Street did these things routinely, and banked on the fact that nearly no-one checked the math. About a year later Procter & Gamble won a settlement of ca $150 million against ChaseManhattan for being sold inappropriate risk management solutions, which were found on closer inspection to INCREASE business risk, and in fact caused serious losses. I suspect the brother of above Ph.D. probably worked for Chase Manhattan...
The above is one of the many examples where the temptation is to apply quantitative methods because it is easy, and not because it is right. War stories of this nature are endless, the infamous failure of LTCM being merely the biggest one to date, for which we're still waiting for the sequel to come out. Warren Buffet among others has pointed out it is only a matter of time, for these "risk management" instruments are so little understood, it's scary. LTCM essentially went wrong because the continued accuracy of some of the underlying assumptions in their models were never scrutinized, so while the world changed, the fancy mathematics did not keep pace. The result was massive failure and a near melt-down of the global financial system.
It is fair to say that overreliance on quantitative approaches is a very common problem and is perhaps far more dangerous, and potentially costly than the under-use of appropriate IT solutions in other areas. Yet there is a lot of investment here, because it appears to yield "easy money," and it pays film star salaries to a lot of "quants." At this point it is definitely in vogue, and so boards feel important voting for these types of solutions. I suspect that the lesson is to focus on the basics, and the KISS principle in order to deliver solutions that work, for real business problems, not made-up ones that are a distraction. Of course there are many areas where quantitative modeling can be extremely helpful, not to mention the fact that risk-management done well can really work too, but overreliance is a risk whenever the underlying assumptions of such methods are not continually verified, and/or the models are operated by people who do not really understand the process well enough to see if something is out of whack. Too often the reality is that with the illusion of a solution a problem merely goes out of mind for a while, and then comes back to haunt us later.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
And presently we are coming full circle again, with Sarbanes-Oxley causing many CFOs to try to reassert their control, on the ostensibly logical grounds that they're the ones that go to jail if something goes wrong. Of course it is an illusion that those issues are resolved in any way by demoting or altogehter removing the CIO and putting IT back under the CFO again. In fact, logically that is the same error as thinking that your computers are your IT system, or that security exists by hosting your systems on-site. The illusion of ownership of the physical assets (or people), then masquearades to create the illusion of control over the system (or their work). One way or another there will be adjustments. Some will stick, some won't.
Personally, my experience included getting involved in IT from a base in business management, and taking various roles in IT development. I came to appreciate very quickly how afraid people are of the finite and quantitative aspects of IT, or conversely prone to overuse them once they think they understand them. The following anecdote may serve:
Sometime in the mid 80's there was another oil-price spike, and I had the good fortune of being in charge of corporate planning for a shipping company, and report to a president who was a self-proclaimed "oilman," having come to the job from an oil major. He knew just what to do: hedge our oil price risk, and yours truly was charged with implementing the program, the details of which would need board approval. Naturally also the job included confirmation and official endorsement of the "knowledge," and "expertise" of the "oilman" in charge.
After going to work with a reputable oil industry consulting firm, and obtaining the necessary pricing data, I quickly proved that there was no futures market at the time where we could hedge marine fuel price risks, because the kinds of oil and derivatives that were traded were not statistically correlated to marine fuel and/or diesel. Consequently I advised the President and also the CFO that unfortunately the hedging program (we had already taken positions), was a speculative venture, which increased business risk and consequently would have to be disclosed on the books as an incremental business risk, outside of our main line of business. Naturally this outcome was not acceptable to our "oilman," and he was not going to take it lying down.
I was immediately charged with bringing in some Wall Street talent with proposals for risk management. One of the parties who came through for us and made a presentation to our board, offering a feasible solution to manage this significant finacial exposure of our firm was Merill-Lynch, who showed up complete with powerpoints (in those days I think it was still Lotus 1-2-3), and with a Ph.D. in Mathematics in tow. Needless to say, they delivered an impressive presentation, and a clear solution, which was endorsed by the board, subject to final review by yours truly since I had expressed that I could not reproduce the results they presented, even though they were ostensibly based on the same data series I had used.
Off to the McGraw-Hill bookstore in New York for me, where I bought myself a stack of literature on time-series analysis and options pricing, and locked myself into a room with my own copy of Lotus 1-2-3, until I could reproduce the results of the Ph.D. I found it quick enough. He had dazzled our board with his higher math, by applying a Durbin-Watson correction to two time series that were clearly unrelated, and all the textbooks point out that it should only be used to filter out minor disturbances if there is no doubt otherwise that two time series are correlated. I called the Ph.D. and told him my findings, observing that in fact he had done the equivalent of prescribing acne medication for a case of advanced skin-cancer. The next day the proposal was withdrawn by Merill-Lynch. I would not doubt they, and everyone else on Wall Street did these things routinely, and banked on the fact that nearly no-one checked the math. About a year later Procter & Gamble won a settlement of ca $150 million against ChaseManhattan for being sold inappropriate risk management solutions, which were found on closer inspection to INCREASE business risk, and in fact caused serious losses. I suspect the brother of above Ph.D. probably worked for Chase Manhattan...
The above is one of the many examples where the temptation is to apply quantitative methods because it is easy, and not because it is right. War stories of this nature are endless, the infamous failure of LTCM being merely the biggest one to date, for which we're still waiting for the sequel to come out. Warren Buffet among others has pointed out it is only a matter of time, for these "risk management" instruments are so little understood, it's scary. LTCM essentially went wrong because the continued accuracy of some of the underlying assumptions in their models were never scrutinized, so while the world changed, the fancy mathematics did not keep pace. The result was massive failure and a near melt-down of the global financial system.
It is fair to say that overreliance on quantitative approaches is a very common problem and is perhaps far more dangerous, and potentially costly than the under-use of appropriate IT solutions in other areas. Yet there is a lot of investment here, because it appears to yield "easy money," and it pays film star salaries to a lot of "quants." At this point it is definitely in vogue, and so boards feel important voting for these types of solutions. I suspect that the lesson is to focus on the basics, and the KISS principle in order to deliver solutions that work, for real business problems, not made-up ones that are a distraction. Of course there are many areas where quantitative modeling can be extremely helpful, not to mention the fact that risk-management done well can really work too, but overreliance is a risk whenever the underlying assumptions of such methods are not continually verified, and/or the models are operated by people who do not really understand the process well enough to see if something is out of whack. Too often the reality is that with the illusion of a solution a problem merely goes out of mind for a while, and then comes back to haunt us later.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
Tuesday, December 13, 2005
Opportunity in Services for Under-served Markets
When Muriel F. Siebert was banking commissioner for the State of New York she came to realize that the poor pay excessive amounts of money for subpar financial services. Her Personal Finance Program which was developed by the Muriel Siebert Foundation, was the result of that insight. It is a high school curriculum in personal finance that has since become mandatory in the State of New York, and hopefully will be adopted by many other states as well. A link to the program can be found by clicking on the title of this entry.
The thoughts that inspired this book, are also the business case for better financial services for under-served markets. Any smart company that truly has for a business objective to make money providing better financial services could use the notion of education and better consumer information to build a business plan, for the need for basic financial education does not end at high school.
And marketing financial services to under-served markets should be easy with todays technology. Too many providers seem to make their money by misinforming people about financial matters, and getting them into as much debt as possible. They are mostly in the legal loansharking business, including rent-to-own furniture, payday loans, "refund anticipation loans," credit cards, and other forms of "sub-prime lending." Buyer beware seems to be the adage. The opportunity may be in educating the buyer, and providing real solutions.
However, in looking at the alternative of making money on financial services, there is a tremendous opportunity for companies who pull these needs together and provide an easy way to service them. Via the net, no doubt. Looking at the habits of people in under-served markets, there are check-cashers, bill payers, money transmitters, and loan-sharks, some legal, some not. Each and everyone of these over-priced services offers an opportunity for better service at a lower price and can be marketed through effective use of INFORMATION. Education in effective use of these services could be and should be the driver of changing the existing order of business.
Experience proves again and again that people will learn to use effective services overnight. I have experienced that first hand in the phone card business in the mid nineties, when in short order with the appearance of discount phone cards we educated the public to use prepaid phonecards. The big phone companies could not sell a phone card for all their massive advertising budgets, for they had the wrong cards (60 cents/minute) and targeted the wrong people and therefore had to sell expensively in a vain attempt to create the perception of a need. With discount cards all we needed was a handful of $2 cards to give away and simple posters with the rates. A week later people were standing in line for the cards. Presently the success of cellphone-based payment gateways in some of the developing world prove again that effective services will be adopted at the speed of light. Such a payment service when launched by the Philippine post office was overwhelmed when it was still in beta deployment.
The message is clear, effective communication will sell worthwhile products that fill real needs. In those cases guerilla marketing is the order of business. Neighbors telling each other will do the rest. The delivery vehicle for such services definitely is the Internet or future cell (or Voip!) phone services, and the Internet café model may well have a revival, even in the form of kiosks at convenience stores and rest stops. Education is easy. Would you rather send money with Western Union for $10 or with your cellphone for $5, or even $2? People will get that very quickly. In other cases the information maybe more intricate to represent, such as the interest rates on rent-to-own furniture, where people pay $3,000 for that $500 sofa, but the basic logic is always the same. Integration can happen around strong authentication and security, providing meaningful Personal Computing, and he ability to manage one's finances effectively, bypassing a lot of expensive infrastructure (check cashers etc.) and instead perhaps having an Internet kiosk based on a cheap thin client architecture at a convenience store or a coffee shop. Squash the thought of personal computers for everyone. Personal computING for everyone is the motto, and shared infrastructure is what makes cost efficiencies possible.
As in so many cases, the regulatory environment actually creates new business opportunities. The basic business process of money transfer is very problematic, because of today's Know Your Customer requirements. But if strong authentication is built into a cell phone, KYC requirements can be met on a one time basis at enrollment of each new customer. Once that step is done, the rest of the business process is easy. The same goes for other on-line authentication mechanisms.
There are endless possibilities, once the fundamental on-line identity problems are resolved in a satisfactory way. Tontines, Mutual Guarantee Associations, Community Money all potentially become easier to manage, administer and control. Insights from the microfinance industry show the power of these institutions. See for example:
http://www.ilo.org/public/english/employment/finance/download/wpap2.pdf
From a macroeconomic standpoint providing more capable and more fluid financial infrastructures, including certain forms that are self-managed at a community level are better than most forms of aid, and should tremendously help economic resilience and development. Opportunity beckons for all concerned.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
The thoughts that inspired this book, are also the business case for better financial services for under-served markets. Any smart company that truly has for a business objective to make money providing better financial services could use the notion of education and better consumer information to build a business plan, for the need for basic financial education does not end at high school.
And marketing financial services to under-served markets should be easy with todays technology. Too many providers seem to make their money by misinforming people about financial matters, and getting them into as much debt as possible. They are mostly in the legal loansharking business, including rent-to-own furniture, payday loans, "refund anticipation loans," credit cards, and other forms of "sub-prime lending." Buyer beware seems to be the adage. The opportunity may be in educating the buyer, and providing real solutions.
However, in looking at the alternative of making money on financial services, there is a tremendous opportunity for companies who pull these needs together and provide an easy way to service them. Via the net, no doubt. Looking at the habits of people in under-served markets, there are check-cashers, bill payers, money transmitters, and loan-sharks, some legal, some not. Each and everyone of these over-priced services offers an opportunity for better service at a lower price and can be marketed through effective use of INFORMATION. Education in effective use of these services could be and should be the driver of changing the existing order of business.
Experience proves again and again that people will learn to use effective services overnight. I have experienced that first hand in the phone card business in the mid nineties, when in short order with the appearance of discount phone cards we educated the public to use prepaid phonecards. The big phone companies could not sell a phone card for all their massive advertising budgets, for they had the wrong cards (60 cents/minute) and targeted the wrong people and therefore had to sell expensively in a vain attempt to create the perception of a need. With discount cards all we needed was a handful of $2 cards to give away and simple posters with the rates. A week later people were standing in line for the cards. Presently the success of cellphone-based payment gateways in some of the developing world prove again that effective services will be adopted at the speed of light. Such a payment service when launched by the Philippine post office was overwhelmed when it was still in beta deployment.
The message is clear, effective communication will sell worthwhile products that fill real needs. In those cases guerilla marketing is the order of business. Neighbors telling each other will do the rest. The delivery vehicle for such services definitely is the Internet or future cell (or Voip!) phone services, and the Internet café model may well have a revival, even in the form of kiosks at convenience stores and rest stops. Education is easy. Would you rather send money with Western Union for $10 or with your cellphone for $5, or even $2? People will get that very quickly. In other cases the information maybe more intricate to represent, such as the interest rates on rent-to-own furniture, where people pay $3,000 for that $500 sofa, but the basic logic is always the same. Integration can happen around strong authentication and security, providing meaningful Personal Computing, and he ability to manage one's finances effectively, bypassing a lot of expensive infrastructure (check cashers etc.) and instead perhaps having an Internet kiosk based on a cheap thin client architecture at a convenience store or a coffee shop. Squash the thought of personal computers for everyone. Personal computING for everyone is the motto, and shared infrastructure is what makes cost efficiencies possible.
As in so many cases, the regulatory environment actually creates new business opportunities. The basic business process of money transfer is very problematic, because of today's Know Your Customer requirements. But if strong authentication is built into a cell phone, KYC requirements can be met on a one time basis at enrollment of each new customer. Once that step is done, the rest of the business process is easy. The same goes for other on-line authentication mechanisms.
There are endless possibilities, once the fundamental on-line identity problems are resolved in a satisfactory way. Tontines, Mutual Guarantee Associations, Community Money all potentially become easier to manage, administer and control. Insights from the microfinance industry show the power of these institutions. See for example:
http://www.ilo.org/public/english/employment/finance/download/wpap2.pdf
From a macroeconomic standpoint providing more capable and more fluid financial infrastructures, including certain forms that are self-managed at a community level are better than most forms of aid, and should tremendously help economic resilience and development. Opportunity beckons for all concerned.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
Saturday, December 10, 2005
Check21: Progress or More Dysfunctional IT?
The American banks are making progress towards making check clearing electronic, and somehow we're supposed to applaud this effort in making an obsolete process more efficient, with our dollars, for consumers are paying for it. First with bank fees, and then with taxes for legislators to legislate all this nonsense. This is a typical example of what not to do in IT, making an obsolete process marginally more efficient instead of re-engineering the process.
At a recent Ziff-Davis conference on Real Time Web business, this particular piece of progress was being touted as a proud accomplishment. I modestly made some comment about the Dutch postal bank where I worked ca. 1975 and where two day clearing was a reality then, so that I have wondered to this day about the ridiculous inefficiencies of the American banking system. The real point of my question obviously was not to repeat that particular solution, which is now also obsolete, but that there would be in fact other ways to solve the problem, which are more effective: a paradigm shift, or at least a re-engineering of the business process. The meteoric take-off of cellphone based money transfer in the Philippines, Vietnam and other developing countries may have more to teach us than is generally realized.
Likewise, what Kofi Annan needs to do is not support the illusion of computer literacy with $100 computers, which only creates more posters with pictures of kids happily staring at computer screens instead of learning something useful. It is tantamount to repeating the dumb mistakes of the West (the "personal computer revolution") at a lower price and relabeling it progress. In the process Nicholas Negroponte unwittingly becomes a lackey in the palace Bill Gates' silly delusion that a computer for every person somehow would bring world peace. Or, to put it differently, the focus on cheaper computers, or computer literacy per se, is similar to the focus of many managements who confuse their computers with their IT-systems, focusing on the 15% of their budget they can see, and ignoring the 85% they can't see (people and licenses), but which make it work. The real mission is educating enough people in IT to develop a local industry in every country, and to teach them to really think, i.e. study the mistakes of the developed world first, and stop repeating the mistakes of the early adopters, and instead create real solutions that mean something based on the realities on the ground. The developing world potentially has the edge in IT for the future for one reason only: they do not have to fight the enormous sunk cost of the first generation infrastructures which the developed world has to write off, no different from AT&T writing off enormous amounts of obsolete switching gear in the course of the breakup of the Bell system.
To underscore the above observation, suffice it to say that anyone who has worked in IT, knows that most of our "computer literate" users barely know how to turn on the switch, and can only just about complete a few simple tasks without screaming for help or having to reboot their dysfunctional Windows PCs. And the better part of people in IT are focused on the maintenance of the T and not the I, let alone are allowed to apply any real intelligence to their solutions. Thus computer literacy is largely an illusion, and mostly an exercise in futility. People will however learn very fast to utilize any technology that truly helps them. the rip-roaring success of cellphone based payment gateways in the developing world is indeed a case in point.
The direction for the solution is to make electronic banking, safe, secure, convenient and reliable, up and to including mobile solutions, voip solutions, etc., but the banks by and large have resisted it under the perception that security is a cost, not a business opportunity. So security solutions are not looked at as business opportunities. The resulting situation means that the slow adoption rates of electronic banking are at least in part a self-inflicted wound, while lots of dollars are being spent on creating an electronic version of the hopelessly fraud prone (more so with copiers and laser printers) system of checkwriting.
As solutions involving strong authentication and advanced security become a reality countries who have not gone this route have an opportunity to skip generations of useless technology. In short the "developing world," may indeed have several opportunities to skip some expensive stages of financial infrastructure development, and do things far more efficiently than the developed world, and have the last laugh in some of these areas, potentially ending up with advanced infrastructure at a fraction of the cost. Unfortunately, as per usual most so-called development aid is focused on exporting obsolete technology, and charging future generations of indigent tax payers in the developing world for them, in order to provide a steady stream of the indentured servants, also known as illegal immigrants. For that is the upshot of the current geopolitical system.
As far as Check21 is concerned, doing it was probably a necessity after all,
but major progress it isn't. Like all IT projects which fail to reengineer the basic business process, it probably just means making the same old mistakes except faster. So that checkfraud besides being easier on account of digital printing, will now also be faster courstesy of real time processing. The rationale that electronic banking did not take off as fast as expected is mostly a self-inflicted wound, caused by not making that alternative more compelling, as it easily could be. So now we'll first have check21, and then we still have to make e-banking viable anyway. So much for the "developed" world.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
At a recent Ziff-Davis conference on Real Time Web business, this particular piece of progress was being touted as a proud accomplishment. I modestly made some comment about the Dutch postal bank where I worked ca. 1975 and where two day clearing was a reality then, so that I have wondered to this day about the ridiculous inefficiencies of the American banking system. The real point of my question obviously was not to repeat that particular solution, which is now also obsolete, but that there would be in fact other ways to solve the problem, which are more effective: a paradigm shift, or at least a re-engineering of the business process. The meteoric take-off of cellphone based money transfer in the Philippines, Vietnam and other developing countries may have more to teach us than is generally realized.
Likewise, what Kofi Annan needs to do is not support the illusion of computer literacy with $100 computers, which only creates more posters with pictures of kids happily staring at computer screens instead of learning something useful. It is tantamount to repeating the dumb mistakes of the West (the "personal computer revolution") at a lower price and relabeling it progress. In the process Nicholas Negroponte unwittingly becomes a lackey in the palace Bill Gates' silly delusion that a computer for every person somehow would bring world peace. Or, to put it differently, the focus on cheaper computers, or computer literacy per se, is similar to the focus of many managements who confuse their computers with their IT-systems, focusing on the 15% of their budget they can see, and ignoring the 85% they can't see (people and licenses), but which make it work. The real mission is educating enough people in IT to develop a local industry in every country, and to teach them to really think, i.e. study the mistakes of the developed world first, and stop repeating the mistakes of the early adopters, and instead create real solutions that mean something based on the realities on the ground. The developing world potentially has the edge in IT for the future for one reason only: they do not have to fight the enormous sunk cost of the first generation infrastructures which the developed world has to write off, no different from AT&T writing off enormous amounts of obsolete switching gear in the course of the breakup of the Bell system.
To underscore the above observation, suffice it to say that anyone who has worked in IT, knows that most of our "computer literate" users barely know how to turn on the switch, and can only just about complete a few simple tasks without screaming for help or having to reboot their dysfunctional Windows PCs. And the better part of people in IT are focused on the maintenance of the T and not the I, let alone are allowed to apply any real intelligence to their solutions. Thus computer literacy is largely an illusion, and mostly an exercise in futility. People will however learn very fast to utilize any technology that truly helps them. the rip-roaring success of cellphone based payment gateways in the developing world is indeed a case in point.
The direction for the solution is to make electronic banking, safe, secure, convenient and reliable, up and to including mobile solutions, voip solutions, etc., but the banks by and large have resisted it under the perception that security is a cost, not a business opportunity. So security solutions are not looked at as business opportunities. The resulting situation means that the slow adoption rates of electronic banking are at least in part a self-inflicted wound, while lots of dollars are being spent on creating an electronic version of the hopelessly fraud prone (more so with copiers and laser printers) system of checkwriting.
As solutions involving strong authentication and advanced security become a reality countries who have not gone this route have an opportunity to skip generations of useless technology. In short the "developing world," may indeed have several opportunities to skip some expensive stages of financial infrastructure development, and do things far more efficiently than the developed world, and have the last laugh in some of these areas, potentially ending up with advanced infrastructure at a fraction of the cost. Unfortunately, as per usual most so-called development aid is focused on exporting obsolete technology, and charging future generations of indigent tax payers in the developing world for them, in order to provide a steady stream of the indentured servants, also known as illegal immigrants. For that is the upshot of the current geopolitical system.
As far as Check21 is concerned, doing it was probably a necessity after all,
but major progress it isn't. Like all IT projects which fail to reengineer the basic business process, it probably just means making the same old mistakes except faster. So that checkfraud besides being easier on account of digital printing, will now also be faster courstesy of real time processing. The rationale that electronic banking did not take off as fast as expected is mostly a self-inflicted wound, caused by not making that alternative more compelling, as it easily could be. So now we'll first have check21, and then we still have to make e-banking viable anyway. So much for the "developed" world.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
Friday, December 09, 2005
How Food Stamps Pay for Crack, and What to Do About It
Under the title of this article is a link to an article in CIO Insight on how Business Intelligence beat back food stamp fraud in Louisiana. Very interesting reading is also contained in the following report:
http://www.fns.usda.gov/oane/MENU/Published/FSP/FILES/ProgramIntegrity/Trafficking1999-2002.pdf
While this all is fascinating information on a common sense use of statistics in crime fighting, in the end it is a demonstration that a paradigm shift is required, and that bringing in the heavy (statistical) artillery is not a solution but a stopgap measure until better technology arrives.
Bank cards (and EBT cards are merely a manifestation of that phenomenon, riding the same infrastructure) are ridiculously unsafe as payment instruments, and it is a wonder the level of fraud is not higher than it is. So this is an example of inappropriate technology, and particularly developing countries, which today do not have a developed infrastructure to support this technology, should probably bypass it as obsolete, except for a few ATMs for foreign tourists. Mechanisms can and will be developed for secure transfers of money via cellphone and even on-line, and all of those have a lower infrastructure cost associated with them than private banking networks, except if they're already paid for (i.e. they are a sunk cost). Yet at the moment development of ATM networks in the developing world is still counted as progress, and little attention is paid to the fact that it is perhaps an exportation of over the hill technology, and little better than the recycling of used computers which end up in toxic dumps in the third world.
Back to EBT abuse. In terms of the study from Louisiana, while it appears fair and balanced, I would suggest that it gravely underestimates the problem in other ways, for lack of on the ground-level observation. In fact food stamp fraud is only one element in a crime wave, that unsurprisingly involves the usual culprit: drugs. To demonstrate this point, I offer following example, which from personal research I would suggest is very typical:
It starts with a struggling convenience store, which in many places means either every single one or every other one. One day the local crack dealer stops in and befriends the owner, suggesting that he sell crack paraphernalia. The profit margins are terrific, like 80, 90% and there is no risk since these items are sold under neutral names, and only become crack paraphernalia in the presence of crack cocaine. But wait a minute, it goes on, for once the local crack addicts get wind of where to buy the paraphernalia, they also go to the same store with their foodstamps, and engage the owner of the same struggling store in discounting of foodstamps, usually with 40-50% profit margins for the store, the "discount." But it doesn't stop there either, for the same desperate store owner is a great informal fence, particularly if the addicts can steal some merchandise, or other necessities, equipment, etc. and offer it for sale to the struggling store. This, roughly speaking is the pattern.
It does make it very clear why statistical methods are going to be very effective in catching the discounting of benefits, since there are obviously strong statistical correlations to both stores and users. But it also underscores the fact that if the fraud was $28 million in one state, there was probably an associated $100 million crime wave, of which the discounting of benefits was merely one of the pillars. The EBT fraud by the way manifests in multiple levels of crime, e.g. the real user illegally withdrawing cash, the store illegally issuing cash from foodstamps, or someone using a stolen EBT card (you only need to know the pin).
Moreover, in terms of the EBT fraud element, it is all fine and dandy that there are statistical methods to find it and fight it, which are surely more effective than prosecuting it at the store level, but it is still a dysfunctional stopgap measure to support an inappropriate technology, which is simply not fit for the purpose.
Simply put, strong authentication is the word, and the technologies that support it are increasing in number. Most of the conversation seems to be around the internet, some is around bank cards, but the emerging field is cellphone based payment gateways, and soon VOIP based payment gateways. Banks are doing some lame experiments with smart cards, and other derivative technologies, all of which cannot conclusively solve the problem, unless they involve strong authentication and encrypted transactions.
This is an area however where high security actually represents a business opportunity. Clearly if one small state has $28 million in annual fraud in EBT alone, nationwide the fraud is far larger, by simple extension in the billions. With Social Security due to go the EBT route sooner or later, the numbers will be staggering. Rather than fighting a rear guard action with tools that reduce the problem but don't solve it -- the intellectual acumen and prowess of the folks who came up with this solution notwithstanding -- perhaps a more rigorous solution would be in order. The time for secure transactions has surely arrived, and countries that have the least infrastructure may realize the transition faster than mature countries with a lot of sunk cost parked in paid-up infrastructure.
A similar paradigm shift is in the works on another side of banking. Just as the banks finally put the finishing touches on the Check21 process, strong authentication will finally end up making internet banking potentially more secure than any check based transactions, and the transition can start to get going for real. Again my point is that some of the worst failures of appropriate use of IT are here not there, and we have a whole digital divide to worry about in the developed world, since we often can't see the forest for the trees. Very often the sunk cost of inappropriate solutions stands in the way of progress, and with proper analysis the developing world might just learn from and bypass our mistakes. Some of the early cellphone payment gateways may be a little rickety, but the direction has been set, and efficient and secure banking and financial services may do more for development in the long run than a lot of other things. Moreover, if it's done right, it should pay for itself, and quickly, which is quite an innovation in development.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
http://www.fns.usda.gov/oane/MENU/Published/FSP/FILES/ProgramIntegrity/Trafficking1999-2002.pdf
While this all is fascinating information on a common sense use of statistics in crime fighting, in the end it is a demonstration that a paradigm shift is required, and that bringing in the heavy (statistical) artillery is not a solution but a stopgap measure until better technology arrives.
Bank cards (and EBT cards are merely a manifestation of that phenomenon, riding the same infrastructure) are ridiculously unsafe as payment instruments, and it is a wonder the level of fraud is not higher than it is. So this is an example of inappropriate technology, and particularly developing countries, which today do not have a developed infrastructure to support this technology, should probably bypass it as obsolete, except for a few ATMs for foreign tourists. Mechanisms can and will be developed for secure transfers of money via cellphone and even on-line, and all of those have a lower infrastructure cost associated with them than private banking networks, except if they're already paid for (i.e. they are a sunk cost). Yet at the moment development of ATM networks in the developing world is still counted as progress, and little attention is paid to the fact that it is perhaps an exportation of over the hill technology, and little better than the recycling of used computers which end up in toxic dumps in the third world.
Back to EBT abuse. In terms of the study from Louisiana, while it appears fair and balanced, I would suggest that it gravely underestimates the problem in other ways, for lack of on the ground-level observation. In fact food stamp fraud is only one element in a crime wave, that unsurprisingly involves the usual culprit: drugs. To demonstrate this point, I offer following example, which from personal research I would suggest is very typical:
It starts with a struggling convenience store, which in many places means either every single one or every other one. One day the local crack dealer stops in and befriends the owner, suggesting that he sell crack paraphernalia. The profit margins are terrific, like 80, 90% and there is no risk since these items are sold under neutral names, and only become crack paraphernalia in the presence of crack cocaine. But wait a minute, it goes on, for once the local crack addicts get wind of where to buy the paraphernalia, they also go to the same store with their foodstamps, and engage the owner of the same struggling store in discounting of foodstamps, usually with 40-50% profit margins for the store, the "discount." But it doesn't stop there either, for the same desperate store owner is a great informal fence, particularly if the addicts can steal some merchandise, or other necessities, equipment, etc. and offer it for sale to the struggling store. This, roughly speaking is the pattern.
It does make it very clear why statistical methods are going to be very effective in catching the discounting of benefits, since there are obviously strong statistical correlations to both stores and users. But it also underscores the fact that if the fraud was $28 million in one state, there was probably an associated $100 million crime wave, of which the discounting of benefits was merely one of the pillars. The EBT fraud by the way manifests in multiple levels of crime, e.g. the real user illegally withdrawing cash, the store illegally issuing cash from foodstamps, or someone using a stolen EBT card (you only need to know the pin).
Moreover, in terms of the EBT fraud element, it is all fine and dandy that there are statistical methods to find it and fight it, which are surely more effective than prosecuting it at the store level, but it is still a dysfunctional stopgap measure to support an inappropriate technology, which is simply not fit for the purpose.
Simply put, strong authentication is the word, and the technologies that support it are increasing in number. Most of the conversation seems to be around the internet, some is around bank cards, but the emerging field is cellphone based payment gateways, and soon VOIP based payment gateways. Banks are doing some lame experiments with smart cards, and other derivative technologies, all of which cannot conclusively solve the problem, unless they involve strong authentication and encrypted transactions.
This is an area however where high security actually represents a business opportunity. Clearly if one small state has $28 million in annual fraud in EBT alone, nationwide the fraud is far larger, by simple extension in the billions. With Social Security due to go the EBT route sooner or later, the numbers will be staggering. Rather than fighting a rear guard action with tools that reduce the problem but don't solve it -- the intellectual acumen and prowess of the folks who came up with this solution notwithstanding -- perhaps a more rigorous solution would be in order. The time for secure transactions has surely arrived, and countries that have the least infrastructure may realize the transition faster than mature countries with a lot of sunk cost parked in paid-up infrastructure.
A similar paradigm shift is in the works on another side of banking. Just as the banks finally put the finishing touches on the Check21 process, strong authentication will finally end up making internet banking potentially more secure than any check based transactions, and the transition can start to get going for real. Again my point is that some of the worst failures of appropriate use of IT are here not there, and we have a whole digital divide to worry about in the developed world, since we often can't see the forest for the trees. Very often the sunk cost of inappropriate solutions stands in the way of progress, and with proper analysis the developing world might just learn from and bypass our mistakes. Some of the early cellphone payment gateways may be a little rickety, but the direction has been set, and efficient and secure banking and financial services may do more for development in the long run than a lot of other things. Moreover, if it's done right, it should pay for itself, and quickly, which is quite an innovation in development.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
Sunday, December 04, 2005
EWD: A Personal Reflection
Here is a link to the EWD archives at the University of Texas, a bit superfluous perhaps, for the same link is in the links section of this blog, but it's there for the reader's ready reference.
I want to quote here one sentence from the opening page of that site:
I made a visit to Austin on April 3rd 1985 to do an interview with EWD for a now defunct magazine, HollandUSA, which was distributed by KLM in its executive class. My own interest was then very acute because I was struggling daily with a company where the management completely misunderstood both the potential and limitations of IT. This is the territory I explored in depth with Dijkstra for what was presumed to be an executive magazine. In personal correspondence Dijkstra later called this interview the best of his life. Unfortunately the magazine never saw fit to publish it, even though they paid for the rights including for my trip to Austin. Quite evidently they did not understand the importance or the relevance of this brilliant countryman of theirs.
My visit with him was a fresh breeze. It was everything I expected and more, including the discovery that we went to the same high school, the Gymnasium Erasmianum in Rotterdam, and one of his early nostrums was that if you want to become a programmer, learn Latin.
I am writing this note simply as one of these life experiences that seems worth sharing, and as an invitation for the reader to explore Dijkstra's work, be it through the archives at UT, or through his books. He taught from a profound understanding that programming was a branch of applied mathematics, and it was this understanding that made him very perceptive in terms of the opportunities and limitations of programming in the business world, because many meaty business problems are quite intractable from a mathematical point of view, and simplification is done at the user's risk, and usually at the expense of profitability.
Dijkstra's life in the deeper sense was spent in the pursuit of making people think. Making people think through a problem before they put pen to paper. He was popular, but his students sometimes disliked him as much as they--grudgingly one would think-- respected him, because he insisted on handwritten papers and would not accept output from a word processor. His reasoning: by the number of corrections he could see if the person was thinking before they wrote, something he considered an essential skill in programming. So he lived what he taught, and made his students do the same. His extensive notes that can be found in the archives are often almost an equivalent of zen koans for the world of IT, and one could only hope that future generations of IT architects keep EWD's dedication to the basics high on their list of priorities, for otherwise IT solutions are bound to wander down the path towards irrelevance and early obsolescence.
For me personally, it was Dijkstra's sense of what computer science and programming are and what they aren't which served to define the near end of the digital divide, and keep a clear focus on the effective, reasonable and functional use of computing in business. It helped me understand the difficulties of implementation (the digital divide at home - full of executives who fight IT all the while supporting it in name) to the risks of over-promising and pursuit of inappropriate--for not mathematically tractable--applications.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
I want to quote here one sentence from the opening page of that site:
In addition, Dijkstra was intensely interested in teaching, and in the relationships between academic computing science and the software industry.While I was a long time reader of Dijkstra's books, this was where I connected with him some time in the early 80's as I was in the middle of developments in architecting a series of strategic transaction processing and Decision Support tools for the ship-owning company where I worked. After leaving the company I was finally recognized as the architect of all their strategic systems, which were in operation for some 27 years in the end.
I made a visit to Austin on April 3rd 1985 to do an interview with EWD for a now defunct magazine, HollandUSA, which was distributed by KLM in its executive class. My own interest was then very acute because I was struggling daily with a company where the management completely misunderstood both the potential and limitations of IT. This is the territory I explored in depth with Dijkstra for what was presumed to be an executive magazine. In personal correspondence Dijkstra later called this interview the best of his life. Unfortunately the magazine never saw fit to publish it, even though they paid for the rights including for my trip to Austin. Quite evidently they did not understand the importance or the relevance of this brilliant countryman of theirs.
My visit with him was a fresh breeze. It was everything I expected and more, including the discovery that we went to the same high school, the Gymnasium Erasmianum in Rotterdam, and one of his early nostrums was that if you want to become a programmer, learn Latin.
I am writing this note simply as one of these life experiences that seems worth sharing, and as an invitation for the reader to explore Dijkstra's work, be it through the archives at UT, or through his books. He taught from a profound understanding that programming was a branch of applied mathematics, and it was this understanding that made him very perceptive in terms of the opportunities and limitations of programming in the business world, because many meaty business problems are quite intractable from a mathematical point of view, and simplification is done at the user's risk, and usually at the expense of profitability.
Dijkstra's life in the deeper sense was spent in the pursuit of making people think. Making people think through a problem before they put pen to paper. He was popular, but his students sometimes disliked him as much as they--grudgingly one would think-- respected him, because he insisted on handwritten papers and would not accept output from a word processor. His reasoning: by the number of corrections he could see if the person was thinking before they wrote, something he considered an essential skill in programming. So he lived what he taught, and made his students do the same. His extensive notes that can be found in the archives are often almost an equivalent of zen koans for the world of IT, and one could only hope that future generations of IT architects keep EWD's dedication to the basics high on their list of priorities, for otherwise IT solutions are bound to wander down the path towards irrelevance and early obsolescence.
For me personally, it was Dijkstra's sense of what computer science and programming are and what they aren't which served to define the near end of the digital divide, and keep a clear focus on the effective, reasonable and functional use of computing in business. It helped me understand the difficulties of implementation (the digital divide at home - full of executives who fight IT all the while supporting it in name) to the risks of over-promising and pursuit of inappropriate--for not mathematically tractable--applications.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
Wednesday, November 30, 2005
The Digital Divide in the Corporate World
Walter Wriston did pioneering work in the use of IT in the corporation, and he foresaw that it would flatten hierarchies politically as well as in the corporate world. Yet Citibank remains one of the most hierarchical organizations around, and 25 years after Wriston's pioneering work they were still doing management workshops to get people to stop hogging information to build their powerbases in the company.
That story I got from a friend whose wife worked for Citibank a few years ago. But I've had plenty of comparable experiences of my own. These cases are interesting and important, for they are absolutely material clues to the frequent failures of IT projects. Interestingly also Microsoft, arguably one of the more successful software companies around really succeeded by focusing on the easy stuff, some programming languages at first but then personal applications. That is to say they solved the problems of secretaries and other administrative staff before they ever got into hairy stuff like networking infrastructure and server software, not to mention business applications which they are now entering, and which are truly an intractable area of only a few hard fought successes. Or, to put it differently they built their fortune based on solutions which left the hard part - business analysis - to the user. And now they're getting to the hard part.
I once did an interview with Prof. Edsger Dijkstra, in which we explored in depth his insights around the frequent IT failures in business, and he was very clear that many business problems can be mathematically quite intractable, and Database logic is about the hardest thing there is.
But it is the control issue that really kills a lot of IT projects. My own most interesting experience revolved around a Decision Support technology in the shipping company where I worked in the early 80's. In conjunction with an MIT based OR consulting group we prototyped a Decision Support workstation for the company's fleet of chemical tankers, including evaluation of all combinations and permutations of a given trading pattern, and the ability to do load maximization and optimal pricing. We had good economic models indicating that the project had the potential for upto 20-30 million dollars of incremental intramarginal profits compared to the then somewhat computer supported, but really manual/personal decision making about major changes in trading patterns. One of the interesting examples was a change in voyage pattern we discovered at a certain point, yielding an extra $1 million per trip, but by the time we discovered the pattern, we had already missed the opportunity three times, in essence because it involved the need of three people talking about different parts of the world. That was the clearest ever indication of why such technology could change things for the better.
The project got shot down, essentially because the then sixty-five year old founder of the company had an emotional aversion to giving up decisions he ultimately regarded as his prerogative, and the head of operations, who perfectly well understood that I was actually right, saw the project as a threat to his job.
Then in 2001 I was in the company as a vendor, and the new CIO, who had a background at AMR Corp, and therefore understood yield maximization, told me he was then implementing the project which had been abandoned in 1987. I never found out what became of it, but I wondered how much was the compound return on an extra $25 million per year for 14 years? I never did the calculation.
In short "management" in many cases feels as much threatened by information technology as factory workers do by machines. It is this friction more than anything which is an actual manifestation of the "digital divide," in a practical way, which means that many people who do have access to the technology, misuse it for trivial tasks because they are afraid of it.
The above scenarios are just another way of looking at how we often fail to make use of the availability of IT solutions even when they are plentifully available. In this sense the digital divide is here, not there. And as long as we don't understand it here, we can't solve it there. To think that solving the digital divide means providing access to personal computers and the internet is silly nonsense. Bridging the digital divide requires extending useful applications and solutions to people in a way that's easy to use and access. It may be through an internet café, a cell-phone, a fat client or a thin client as the case may be, but success means usability, not how it's delivered.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
That story I got from a friend whose wife worked for Citibank a few years ago. But I've had plenty of comparable experiences of my own. These cases are interesting and important, for they are absolutely material clues to the frequent failures of IT projects. Interestingly also Microsoft, arguably one of the more successful software companies around really succeeded by focusing on the easy stuff, some programming languages at first but then personal applications. That is to say they solved the problems of secretaries and other administrative staff before they ever got into hairy stuff like networking infrastructure and server software, not to mention business applications which they are now entering, and which are truly an intractable area of only a few hard fought successes. Or, to put it differently they built their fortune based on solutions which left the hard part - business analysis - to the user. And now they're getting to the hard part.
I once did an interview with Prof. Edsger Dijkstra, in which we explored in depth his insights around the frequent IT failures in business, and he was very clear that many business problems can be mathematically quite intractable, and Database logic is about the hardest thing there is.
But it is the control issue that really kills a lot of IT projects. My own most interesting experience revolved around a Decision Support technology in the shipping company where I worked in the early 80's. In conjunction with an MIT based OR consulting group we prototyped a Decision Support workstation for the company's fleet of chemical tankers, including evaluation of all combinations and permutations of a given trading pattern, and the ability to do load maximization and optimal pricing. We had good economic models indicating that the project had the potential for upto 20-30 million dollars of incremental intramarginal profits compared to the then somewhat computer supported, but really manual/personal decision making about major changes in trading patterns. One of the interesting examples was a change in voyage pattern we discovered at a certain point, yielding an extra $1 million per trip, but by the time we discovered the pattern, we had already missed the opportunity three times, in essence because it involved the need of three people talking about different parts of the world. That was the clearest ever indication of why such technology could change things for the better.
The project got shot down, essentially because the then sixty-five year old founder of the company had an emotional aversion to giving up decisions he ultimately regarded as his prerogative, and the head of operations, who perfectly well understood that I was actually right, saw the project as a threat to his job.
Then in 2001 I was in the company as a vendor, and the new CIO, who had a background at AMR Corp, and therefore understood yield maximization, told me he was then implementing the project which had been abandoned in 1987. I never found out what became of it, but I wondered how much was the compound return on an extra $25 million per year for 14 years? I never did the calculation.
In short "management" in many cases feels as much threatened by information technology as factory workers do by machines. It is this friction more than anything which is an actual manifestation of the "digital divide," in a practical way, which means that many people who do have access to the technology, misuse it for trivial tasks because they are afraid of it.
The above scenarios are just another way of looking at how we often fail to make use of the availability of IT solutions even when they are plentifully available. In this sense the digital divide is here, not there. And as long as we don't understand it here, we can't solve it there. To think that solving the digital divide means providing access to personal computers and the internet is silly nonsense. Bridging the digital divide requires extending useful applications and solutions to people in a way that's easy to use and access. It may be through an internet café, a cell-phone, a fat client or a thin client as the case may be, but success means usability, not how it's delivered.
Copyright © 2005 Rogier F. van Vlissingen. All rights reserved.
Tuesday, November 29, 2005
From Prepaid Phonecards to Financial Services
Did anybody write a decent history of the phone card business yet? It would be fascinating. I know, I was there.
In the early nineties I was trying to market some of the early prepaid phonecards, with my American friends wondering what was the point. Being from Europe I was convinced they would succeed, though it took me a while to find out why.
At one point a friend organized a luncheon at a phonecard convention. At that particular time a few small companies were marketing phonecards, and trying to cook up a business case. Many were trying to do promotional cards on the European and Asian model without success, because consumers didn't know what phonecards were for, and threw them out. For some time the collectible market was buoyant, mostly because of foreign buyers, who did not appreciate the meaninglessness of every Tom, Dick and Harry printing phonecards, and going out of business the next year, not to mention the fact that "unused" was frequently not a useful distinction for pin-based cards, unless the pins were covered by a scratch-off strip, which was often not the case in the early days. All the majors at that time had retail product at 60 cents per minute for domestic US traffic, and multiples for international traffic, and the biggest successes were vending machines in Hotel lobbies, supplying cards to visitors from Japan and Europe who already knew what a phonecard was, and did not realize the price gauging. The majors were spending themselves silly on trying to market these cards, without any meaningful success.
I had a chance to speak at that luncheon. My comment boiled down to a question to the majors: "Why are you marketing to the wrong people?" I proceeded to point out that a prepaid card was a financial instrument not a phone product, because it removed credit as an impediment for using the phone system. Therefore its natural market was 30 million under-served consumers in the US who did not have home phones because of credit problems. These folks were looking for a discount product, not for 60 cents a minute. Not a hint of any appreciation from the collected MBAs working for the big phone companies, but two months later someone else who was at that meeting called me to tell me they were testing a card which addressed the market I described. Would I be interested in checking it out? I said yes. It was the TLC phonecard, the first serious (somewhat serious at least...) discount phonecard. My phonecard business went from $3,000 in sales the first year, to $30,000 the second to $300,000 the third (the year TLC was launched), to $3 million in its fourth year (1996), after which the market collapsed and many companies, including TLC went out of business. But by that time however, the case was made that the market was discount cards, and even the majors didn't take more than another 10 years to figure it out, though they never really succeeded at it either.
In the practice of marketing these cards, we did not need any advertising, except some posters with rates. What I did do was to go into a convenience store and give away one or two $2 cards to the last people on the line, and tell them how to use the cards. The next week when I came in the owner of the store would want to buy phonecards. In other words, the real marketing was word of mouth. This was an experience that was reinforced again and again, such as in early 1997, when I had a card with specials to W. Africa, and within two weeks I knew every Senegalese store owner in Connecticut. Suddenly Senegalese people came chasing me down the street to be able to sell the cards in their stores.
In short if you're selling a product that meets a real need, you don't need much advertising. This is very different from selling to wealthy consumers and competing for disposable income with a million other products. For that type of business you need heavy marketing budgets, and the normal marketing logic is start at the high end, and lower prices with volume.
But along the lines of realizing that phonecards were a financial product, not a phone product, I began to think a lot about the fact that there is a huge pent-up demand for effective financial solutions and that check-cashers, bill-payers, money-remitters, pawnshops, and payday loan operators were making a lot of money delivering inferior service, and were ripe to be taken out by effective solutions enabled by superior IT and the internet. It is now 2005 as I write this, and it still has not really started to happen, but inevitably it will.
Copyright, (c) 2005, Rogier F. van Vlissingen. All rights reserved.
In the early nineties I was trying to market some of the early prepaid phonecards, with my American friends wondering what was the point. Being from Europe I was convinced they would succeed, though it took me a while to find out why.
At one point a friend organized a luncheon at a phonecard convention. At that particular time a few small companies were marketing phonecards, and trying to cook up a business case. Many were trying to do promotional cards on the European and Asian model without success, because consumers didn't know what phonecards were for, and threw them out. For some time the collectible market was buoyant, mostly because of foreign buyers, who did not appreciate the meaninglessness of every Tom, Dick and Harry printing phonecards, and going out of business the next year, not to mention the fact that "unused" was frequently not a useful distinction for pin-based cards, unless the pins were covered by a scratch-off strip, which was often not the case in the early days. All the majors at that time had retail product at 60 cents per minute for domestic US traffic, and multiples for international traffic, and the biggest successes were vending machines in Hotel lobbies, supplying cards to visitors from Japan and Europe who already knew what a phonecard was, and did not realize the price gauging. The majors were spending themselves silly on trying to market these cards, without any meaningful success.
I had a chance to speak at that luncheon. My comment boiled down to a question to the majors: "Why are you marketing to the wrong people?" I proceeded to point out that a prepaid card was a financial instrument not a phone product, because it removed credit as an impediment for using the phone system. Therefore its natural market was 30 million under-served consumers in the US who did not have home phones because of credit problems. These folks were looking for a discount product, not for 60 cents a minute. Not a hint of any appreciation from the collected MBAs working for the big phone companies, but two months later someone else who was at that meeting called me to tell me they were testing a card which addressed the market I described. Would I be interested in checking it out? I said yes. It was the TLC phonecard, the first serious (somewhat serious at least...) discount phonecard. My phonecard business went from $3,000 in sales the first year, to $30,000 the second to $300,000 the third (the year TLC was launched), to $3 million in its fourth year (1996), after which the market collapsed and many companies, including TLC went out of business. But by that time however, the case was made that the market was discount cards, and even the majors didn't take more than another 10 years to figure it out, though they never really succeeded at it either.
In the practice of marketing these cards, we did not need any advertising, except some posters with rates. What I did do was to go into a convenience store and give away one or two $2 cards to the last people on the line, and tell them how to use the cards. The next week when I came in the owner of the store would want to buy phonecards. In other words, the real marketing was word of mouth. This was an experience that was reinforced again and again, such as in early 1997, when I had a card with specials to W. Africa, and within two weeks I knew every Senegalese store owner in Connecticut. Suddenly Senegalese people came chasing me down the street to be able to sell the cards in their stores.
In short if you're selling a product that meets a real need, you don't need much advertising. This is very different from selling to wealthy consumers and competing for disposable income with a million other products. For that type of business you need heavy marketing budgets, and the normal marketing logic is start at the high end, and lower prices with volume.
But along the lines of realizing that phonecards were a financial product, not a phone product, I began to think a lot about the fact that there is a huge pent-up demand for effective financial solutions and that check-cashers, bill-payers, money-remitters, pawnshops, and payday loan operators were making a lot of money delivering inferior service, and were ripe to be taken out by effective solutions enabled by superior IT and the internet. It is now 2005 as I write this, and it still has not really started to happen, but inevitably it will.
Copyright, (c) 2005, Rogier F. van Vlissingen. All rights reserved.
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