» Archive for January, 2009

Whither Skype?

Thursday, January 29th, 2009 by Jonathan Spira

Recently, there has been some degree of speculation in the blogosphere as well as the mainstream press about the future of Skype, given eBay’s disappointing profits in 2008.  The Industry Standard went so far as to predict that Google will acquire Skype by August 31, 2009.

Whether or not there is any truth to the rumor – and this Skype for sale rumor has come and gone several times before -  it does present us with a good opportunity to focus on Skype as a company.

The 2005 acquisition of Skype, founded in 2003 by Niklas Zennström and Janus Friis, by eBay for $2.6 billion was somewhat of a mismatch, yet it allowed Skype to flourish and innovate largely unimpeded. Today, Skype needs to continue to build its business and grow on the successes of last year but eBay may not be in a position to support that model going forward.  Indeed, eBay needs to get its own house in order and improve its financial picture.

As I wrote in my 2005 analysis of eBay’s acquisition of Skype, the purchase of Skype served notice to the telecommunications industry that voice was merely another service to be delivered in a data setting, and that the market for voice calling, as we know it today, was simply fading away.

EBay’s acquisition of Skype made little sense at the time (the company attempted to justify the acquisition by promising to use the service to connect buyers and sellers and it did indeed add Skype functionality to auction pages).  Today it makes even less sense for eBay to continue to hold onto the company and management might as well cash in if they find a willing buyer.

Meanwhile, Skype has become a global telecommunications giant, with 405 million users worldwide (a 47% increase from 2007).  In 2008, Skype accounted for 8% of the world’s international calling minutes.  Surprisingly, or perhaps not, 30% of Skype usage is for business purposes.  25% of Skype-to-Skype calls use video.  And in Q4 2008, Skype experienced a 61% increase in SkypeOut calls (a total of 2.6 billion minutes).

A new parent might be able to find new synergy with the company, which could be used to expand Skype’s current largely consumer base into the small- and medium-sized business market and beyond.

The fact that Skype has continued to grow as an entity despite the mismatch with eBay is a testament to the potential this market has.

EBay purchased Skype in 2005 because it could.  Google, the News Corporation, Microsoft, and Yahoo were all said to have had an interest in acquiring the company but eBay was willing to put up the most cash and, because of the differences in business models, was also willing to leave the company alone to continue to innovate (unlike the course of action that Google or Microsoft may have followed).

In theory, potential acquirers could include Verizon or AT&T, a move that would give one of these traditional telephony companies a gigantic push into 21st century consumer communications.  Microsoft or IBM might also be interested, the latter less so given the consumer nature of the business.  Cisco is yet another contender: they certainly have the cash and Skype’s core functionality aligns nicely with what Cisco is doing in multiple areas but Cisco may simply not be that interested in what is perceived largely as a consumer offering.  We can surely rule out Yahoo, which continues to be on Microsoft’s acquisition radar, and while Google has progressed with its own technology a land grab still might work for them and they have the cash to make the purchase.

Regardless of what transpires, I suspect that we will be hearing a lot more from Skype in the not-to-distant future.

Jonathan B. Spira is CEO and Chief Analyst at Basex.

Lotusphere: Blue is the New Yellow

Thursday, January 22nd, 2009 by Jonathan Spira

This week was the 16th annual Lotusphere conference in Orlando, Florida.  It was my 16th as well, although my count includes three Lotuspheres in Berlin.

As has been the custom all these years, IBM once again unleashed a flood of information, both in the general session and throughout the event.  For those allergic to information overload, Orlando was a dangerous place.

The news, from a somewhat modder, hipper, Lotus, which trotted out the Blue Man Group (one had to wonder why it took Big Blue over a decade to book them) and Dan Aykroyd to further underscore the message of collaboration and this year’s theme of resonance.  Last year, incidentally, we said that “yellow is the new black.”   Regardless of color, the tools coming from Lotus allowing knowledge workers to share knowledge and collaborate are stronger and more powerful than ever.

Indeed, resonance can be “very very powerful,” Lotus GM Bob Picciano (attending his first Lotusphere following his appointment to the top position eight months ago) pointed it out in the opening session.  When it’s working at its full potential, he added, it will “absolutely shatter windows.”

With Research in Motion CEO Jim Balsillie present, IBM celebrated the tenth anniversary of the BlackBerry mobile device by unveiling a new BlackBerry client for IBM Lotus Sametime, IBM’s unified communications and collaboration platform, that supports Web conferencing, file transfer, public groups, and enhanced presence.  BlackBerry addicts, excuse me, users, can also open Lotus Symphony word processing documents attached to e-mail or Sametime, with eventual access to presentations and spreadsheets.   They can also download, edit, and post to Lotus Quickr team software.

The new BlackBerry client for IBM Lotus Connections social software platform integrates with e-mail, camera, media player, and the browser, and supports blogs, activities, and communities.  It also supports enhanced profile information including name pronunciations and pictures.  Previously, users on BlackBerry devices could only access Connections’ profiles and tag tools.

But there was more, lots more.

Lotus Sametime
IBM also announced Lotus Sametime 8.5.  Not surprisingly, the new version sports a brand new user interface.  It also includes a tool kit that allows customers to use Sametime to add collaborative capabilities such as presence, instant messaging, and click-to-call, to their business processes.  Sametime features enhanced meeting support, including an Ajax-based zero-download Web client and the ability to add participants by dragging and dropping names.  Other enhancements include improved audio and video, persistent meeting rooms, better support for the Mac and Linux platforms, and the ability to record meetings in industry standard formats.  The Sametime Connect client includes connectivity to profiles within Lotus Connections and pictures from contacts in Lotus Notes.  Sametime Unified Telephony ties Sametime to corporate telephone systems and allows knowledge workers to give out one phone number and set up rules that allow them to be reached based on various conditions (if one is in a meeting, the call could go directly to voicemail unless it’s one’s manager, in which case it would ring on the mobile).

LotusLive
After a year of public beta using the code-name “Project Bluehouse,” IBM announced LotusLive.  The new cloud-based portfolio of collaboration tools and social software supports e-mail, collaboration, and Web conferencing. LotusLive is built using open Web-based standards and an open business model allowing companies to easily integrate third party applications into their environment.  Two LotusLive services are available from the site, Meetings and Events.  Meetings integrate audio and video conferencing; events supports online conferences including registration.

The IBM Web site also lists LotusLive Notes, or IBM Lotus Notes Hosted Messaging in more formal IBM parlance, but unlike Events and Meetings, you can’t sign up and start the service online.  The only button to click is the one that says “Contact Sales.”

Partners for LotusLive: Skype, LinkedIn, Salesforce.com
IBM also announced that LotusLive will support Skype, LinkedIn, and salesforce.com.  LinkedIn members will be able to search LinkedIn’s public professional network from within LotusLive and then collaborate with them using LotusLive services.  Salesforce users will be able to use LotusLive’s collaborative tools in conjunction with the customer and opportunity management tools available in the Salesforce CRM application.  LotusLive users will also be able to call Skype contacts from within LotusLive

LotusLive Engage
IBM also announced the beta of LotusLive Engage, a “smarter” meeting service according to IBM.  Engage is a suite of tools that conflates Web conferencing and collaboration with file storage and sharing, instant messaging, and chart creation.  It allows knowledge workers to continuously engage – not just for one meeting – in a community-like environment.

IBM and SAP present Alloy
IBM and SAP announced their first joint product, Alloy.  Previewed at last year’s Lotusphere under the code name “Atlantic,” Alloy presents information and data from SAP applications within the Lotus Notes client and Lotus Notes applications.

If you want to look back at news from past Lotuspheres, feel free to click back to 2008, 20072006, 2005, or 2004.

Jonathan B. Spira is the CEO and Chief Analyst at Basex.

The Third Post-Steve Jobs Era

Thursday, January 15th, 2009 by David Goldes

The third post-Steve Jobs era arrived much sooner than anyone imagined.  Shortly after the markets closed in the U.S. on Wednesday, a news release arrived with a copy of Jobs’ e-mail to Apple employees in which he wrote that he “learned that my health-related issues are more complex than I originally thought.”  The company barely survived his first, and forced, exit  (1985-1997) but did run smoothly during his absence for cancer treatment  (the second era).

It was less than two weeks ago that Jobs sent out a similar note, in which he acknowledged his weight loss and attributed it to a “hormone imbalance” for which he was already in treatment.  He termed the remedy as being “relatively simple and straightforward” and promised to continue as CEO.

Jobs is a popular figure in the computer industry, not only as the cofounder of Apple but as the revanchist CEO who ousted the regime at Apple that had ousted him in 1985, and then returned in 1997 to turn around the company.

Because Jobs is deeply involved (some say too much) in every aspect of Apple’s operations and successfully revived the then-struggling computer maker in the late 1990s with such products as the iMac, his health is a matter of concern, not only to family and friends but to Apple employees and investors.  Since a bout with cancer, treated successfully with surgery a few years back, pundits have counted his every sneeze.  The disclosure immediately sparked new concerns about a recurrence of cancer and about how much information Apple was holding back.  The hormone imbalance disclosure was roundly criticized by medical and corporate-governance experts earlier in the month as having been much too general.

The news caused the company’s shares to drop ca. 8% in after-hours trading.  Analysts suggested the stock could drop further when markets reopen and it was down almost 3% as we went to press.

The company’s COO, Tim Cook, who filled in for Jobs in 2004 when he took a leave of absence to battle pancreatic cancer, will also assume the reins now.  Cook is known more for his operations prowess than design prowess but the company has a skilled team of designers in place, all schooled in the Steve Jobs school of design, so it is likely that innovations will continue to appear from Apple for the foreseeable future.´

We don’t know what’s wrong with Steve Jobs but one doesn’t take a six-month leave of absence if it isn’t serious.  Wednesday’s note also included a promise: “As CEO, I plan to remain involved in major strategic decisions while I am out” so, health permitting, he will still be able to act as a kind of editor-in-chief even if not involved in day-to-day operations.  Change in any organization is a fact of life: at some point, Apple will have a new CEO and the new person will be filling some very large shoes.  Jobs has imbued the company with a mission, a way of doing things, and a very clear sense of good design.  It is likely that all of these will continue as Jobs’ legacy, when and if he should no longer be CEO.

To see how this might work out, Apple has to look no further than Redmond, where Microsoft is getting along quite well on a day-to-day basis without Bill Gates.

David M. Goldes is the president of Basex.

Whither Nortel? Bankruptcy Court

Thursday, January 15th, 2009 by Jonathan Spira

It was clear that Nortel Network’s situation was precarious.  Last November, the company announced a $3.41 billion quarterly loss and laid off 5% of its workforce.  On Wednesday, it and a number of its affiliates filed for bankruptcy protection, one day before it was scheduled to make an interest payment of $107 million.  The company’s affiliates in Asia, including LG Nortel, and in the Caribbean and Latin America, as well as Nortel Government Solutions (NGS) are not subject to these proceedings and will continue operations unimpeded.

As we observed back in November, the company has not caught a break since 2005, when CEO Frank Dunn was “terminated for cause” in conjunction with the discovery of his manipulation of Nortel’s financials to generate higher bonuses for himself and several colleagues.

In addition, Nortel has a decade-long history of failed and expensive acquisitions.  Their strategy, which was to buy established companies, didn’t work, largely due to an inability to integrate products from the newly-acquired entities into a common vision.  In 1998, Nortel purchased Bay Networks for $9.1 billion, quickly followed by the 1999 and 2000 acquisitions of software maker Clarify and then Alteon Web Systems for a total of $10 billion.   (The buying spree continued with Cambrian Systems for $300 million, Shasta Networks for $340 million, all the way to DiamondWare (3-D stereo conferencing) and Pingtel (SIP software) in 2008.)

Nortel’s strategy contrasts greatly with that of companies such as Cisco, which only acquired small and innovative companies at much lower cost and then successfully integrated them into the business.  It is also a stark contrast to Nortel, then Northern Telecom, in 1976 when it announced Digital World, a family of digital telecommunications products that were industry leading.  The DMS-100 became a mainstay of telephone company central offices (thanks in part to its ability to handle 100,000 subscriber lines) and the DMS product line contributed greatly to Nortel’s bottom line for 15 years.

As competition has intensified from North American, European, and low-cost Asian rivals, among them Alcatel-Lucent and Huawei Technologies, the  company’s shares sank into the penny range in recent months.  In addition, the global economic crisis has slowed spending on the gear that Nortel offers (which includes equipment for the enterprise as well as for telephone companies).

Is it too late for Nortel?  The conflation of economic conditions, competition, and scandal may remove it as an industry leader forever but it could still reinvent itself as a strong niche player while it reorganizes under Chapter 11. On the other hand, the company could break itself up and sell its main businesses to rivals. A likely acquirer (at least in my opinion) for Nortel’s enterprise unit would be Siemens Enterprise Communications, which has been in growth mode since it became a joint venture between Siemens AG and the Gores Group.  The next installment will be telling.

Jonathan B. Spira is CEO and Chief Analyst at Basex.

What People Don’t Understand About Information Overload

Friday, January 9th, 2009 by Jonathan Spira

Since we announced an approximate cost of Information Overload ($900 billion p.a. to the U.S. economy for 2008), there has been a lot of discussion both in the media and the blogosphere about the problem. Some bloggers have written that this is much ado about nothing and mistake what we are saying for an attempt to measure productivity as if knowledge workers should be all work and no play.

That is so far from the reality of the situation that I felt it necessary to address it here.

Information Overload is a problem because it creates a bottleneck that stops us from absorbing all of the information being thrust at us. Clearly, some information is left behind. Some of it might even be useful or important. What’s worse is that we don’t generally know what we don’t know, so we may make decisions based on the information we have available to us, even though we are overlooking some information (that may or may not be critical) simply because we’re unaware of its existence.

Should knowledge workers not stop and take a break, visit a Web site that is not work related, stop and smell the roses, go to the water cooler, play a game? “All work and no play makes Jack a dull boy” goes the aphorism. My version would read something like “All work and no play makes Jack a burnt out knowledge worker.”

So let’s set the record straight.

Knowledge workers need mental breaks and down time from their work during the course of the day, but they need to be at a time and place of the knowledge workers’ choosing, not when an interruption breaks their concentration.

Reducing Information Overload is about increasing productivity, and the ROI for the organization’s knowledge workers. Understanding the potential impact, i.e. the amount of money that it takes to pay knowledge workers during time that they may not be at their peak efficiency, allows organizations to conceptualize the problem and begin to take action.

If you don’t know how much Information Overload is costing you, you can find out at the Information Overload Calculator. But be prepared.

Jonathan B. Spira is CEO and Chief Analyst at Basex.

Information Overload To Swamp The National Archives

Friday, January 2nd, 2009 by Cody Burke

As we prepare for the transition from the Bush administration to the incoming Obama administration, the National Archives, charged with preserving and indexing presidential records, has launched an emergency plan to deal with the looming deluge of electronic records. The incoming data will be comprised of around 100 terabytes of content, which is 50 times the amount the Clinton administration left behind.

Much of the content is in the form of e-mail, which has exploded in use over the last eight years, and is expected to make up to 20-40 terabytes. This number can only be expected to grow in future administrations. There is no doubt that Obama and his team, judging by his admitted addiction to his BlackBerry, will generate even more data that will have to be archived and indexed.

The effort to incorporate the records has been complicated by foot dragging by the current administration; they have been reluctant to provide details about the size and format of the records they will be turning over. The format issue is particularly relevant, many of the records are expected to be in unfamiliar formats, and without preparation the National Archive will struggle to process them. Specifically, there are large quantities of digital photographs and the White House’s “records management system” that provides the index for the text-based records.

In addition to the size of the records, there are concerns that the proprietary format of the records will become obsolete. This has already happened at NASA, there are millions of files on 8″ and 5 1/4″ floppy diskettes, various obsolete tape cartridges, and NASA’s earliest photographs of the earth that are mostly inaccessible with today’s technology.

Despite a new $144 million computer system, concerns abound about the ability of the National Archives to absorb the content. In the words of Paul Brachfeld, the archives’ inspector general, “Just because you ingest the data does not mean that people can locate, identify, recover and use the records they need.”

While only a fraction of the information turned over to the National Archives will be of any interest to researchers and the public, by law it must all be archived, and without a plan in place to index and store the data, it may be rendered utterly useless. As the amount of electronic content increases, this may prove to be only the tip of the iceberg.

Cody Burke is a senior analyst at Basex.

Teaching The Thumb Generation May Mean Throwing Out The Chalk

Thursday, January 1st, 2009 by Cody Burke

The adoption of technologies in the educational arena has perennially lagged behind both the business and consumer markets.  There is a reverence for old knowledge in academia and a respect for tradition; literary classics are held up as ideals and the philosophers of ancient Greece still impact our sense of humanity and our role in the world.  It is natural that a system that values established and verified knowledge would be reluctant to embrace new tools and technologies, particularly those that challenge the way that knowledge itself is defined, created, and used.

In contrast, to remain competitive the business world has embraced technological advances in knowledge management, networking, and IT.  Ever since the introduction of VCN ExecuVision in 1983, slide presentation tools have been standard issue; we at Basex have had interactive whiteboards since the mid 1990s, while the classroom standard is still a basic black- or whiteboard and an overhead projector.

In recent years there have been significant improvements in offerings geared specifically for this educational market.  As students live an increasingly interactive digital life through social networking Web sites, mobile phones, IM, and chat, it isn’t only necessary to use these channels for educational purposes, but they present tremendous opportunities for interactive and collaborative learning.

Providing these technologies to students may soon be moot.  Students now come equipped with their own screens.  Be it an iPod, a smartphone, or a laptop, chances are that a student has some sort of LCD device on his person upon entering a classroom.  Students and businesses have something in common, they both know that embracing new technologies is in their interests, it now falls to the educational community to follow suit.

In the coming weeks we will be looking into the challenges and opportunities presented by these issues.  In the meantime, tell us what you think by e-mailing your thoughts and comments to thumbgen@basex.com.

Cody Burke is a senior analyst at Basex.


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