Saturday, May 09, 2015

Goodbye, SaaS — Hello, Containers-as-a-Service

This post was also published in VentureBeat.

When Salesforce’s Marc Benioff first started pitching on-demand CRM software, people thought he was insane and were convinced software-as-a-service would never work. Although we are now living in a SaaS heaven with all of the benefits of software that is always available and up-to-date, we are also beginning to see the SaaS hell naysayers were warning us about.

When selling Salesforce to a mid to large organization, Salesforce expects multi-year contracts with pre-negotiated user counts, exactly like the on-premise predecessors it ridiculed during its early days. The whole idea of “pay for what you use” has been subsumed by the realities of the sweet cash flow dynamics of a traditional enterprise sale, which ends up as shelfware when customers over-provision.

Compounding this issue is that the expense is accounted as an operating expense that affects EBITDA, a key Wall Street metric, while on-premise software was accounted as a much more palatable capital expense.

There are some other cracks in the SaaS armor. In a world of “big data,” enterprises are starting to realize that SaaS solutions do not offer unfettered access to their own data. Salesforce’s API access to your own data is metered and hinged off of user counts or API purchases – an enterprise has to take out its wallet and pay these vendors for scaled access to its own data. In a world of extreme security consciousness among CIOs, security is fully delegated to the SaaS provider. The multi-tenant model shares data infrastructure to the benefit of the vendor, not the customer. Integrating various SaaS silos has become so complicated that the field now has dedicated systems integrators like Appirio.

SaaS has become the orthodoxy du jour, with an ecosystem ranging from accelerators to post-traction venture funds focused solidly on SaaS. After 15 years of SaaS, you do have to ask, what’s left to SaaS-ify? In many segments, we are now on the third or fourth iteration of software that offers essentially the same workflow, such as Namely and Betterworks on the heels of Workday. The latest entrants are forced to target verticals in sluggish industries like construction and energy. So the question is, what’s next?

Containers and Containers-as-a-Service

There has definitely been a lot of buzz about Docker containers. The ability to separate an application, microservices, and their configuration from the underlying Linux operating system is very attractive. Orchestration layers built on top of containers such as Docker Swarm and Google’s Kubernetes make it easier to manage and scale clusters of containers.

The three major cloud providers, Amazon, Google, and Microsoft, have all added CaaS (Containers-as-a-Service), allowing any Docker container to run on their platform, filling a void between IaaS (Infrastructure-as-a-Service) that requires a lot more system administration and configuration, and PaaS (Platform-as-a-Service) that is typically very limiting in terms of language support and libraries.

Containers have been around for quite a while. As Bill Coleman, the former head of Sun Micrososytems’ Software group, recently reminded me, Solaris offered containers in 2005. What’s changed is that the new generation of Docker-powered containers have widespread support and are easy to learn. Now that there is a standard way to manage and deploy applications, there is the potential to reinvent how cloud software is delivered.

The Potential for CaaSi to Fix SaaS

Imagine a world where when you can purchase software or rent an application, then run it in the public or private cloud of your choice. Just like SaaS, the software would be automatically maintained by the vendor. But you would own and control all of your data, including the access by the vendor.

Until recently, this would have seemed like a pipe dream due to the intricacies of hosting, managing, and updating the software. Now, we are almost there. With some small incremental improvements, CaaS can evolve into CaaSi – Containers-as-a-Service for ISVs (Independent Software Vendors). Whether in a public cloud or in your own private cloud, the vendor would have the access and keys to manage and update the containers on your schedule rather than theirs. The vendor would not, however, have the ability to access your data without your explicit permission.

With the new CaaSi model, software customers have the best of the on-premise world combined with the best of the SaaS world. When customers buy software, just like with on-premise software, they have complete visibility into the hosting costs, full ownership of their data, tightly controlled security, and also the flexibility to use capital expense accounting. Just like with SaaS, they have the ability to scale as needed and receive automatic updates from the vendor.

Given such a huge transition on the horizon, it is no wonder that Docker is a newly minted billion-dollar unicorn with companies like CoreOS and Mesosphere battling over the best implementation of Google’s Kubernetes. In order to build out a CaaS/i future, CaaS providers need to add better support for immutable infrastructure by maintaining the separation between application containers and their underlying data, along with the delegated management of containers, usage metering for billing and abstraction for services such as logging and monitoring.

One highly material benefit that customers receive from SaaS is the network effect – the ability of the vendor to analyze in aggregate how all of the users are using the system and accelerate that usage in new features. In order to provide a similar level of functionality in a CaaS/i world, customers would need to opt-in to anonymous collection of their data usage in order to receive the same benefits of the analysis. But rather than a drawback, perhaps this is the point: the vendor should have to ask permission in the first place, and the customer should control their sensitive data.

A few startups are kicking off this trend. My own company, Sapho, is enthralled about the ship-as-a-container option and has launched that alternative., an orchestration backend, is only available as Docker containers. And Replicated and Infradash are providing the infrastructure for an independent software vendor to ship and manage Docker containers. The coming year should see a lot of activity on this front.

Friday, February 13, 2015

Small Screens, Big Decisions: How Mobile is Forcing Businesses to Rethink Software

This post was also published in VentureBeat.

One of the biggest problems in software is feature bloat. Even sprightly new companies that base their competitive strategy on minimalism and ease of use can eventually fall prey to the same force that bogged down their predecessors.

For example, one could argue that thanks to feature bloat, Salesforce is more complicated today than Siebel was when Salesforce first promised a simple, cloud-based solution. The promise of simplicity must quickly meet the business reality of closing deals or improving productivity — and for many software vendors, the promise of simplicity gets lost as they add customers, all of whom have feature requests.

Feature bloat happens because as software vendors add diverse customers, they end up adding features that are rarely used or only applicable to fringe use cases — many of the same ones that plague their incumbent competitors — ultimately slowing down the software and adding unnecessary complexity.

A new vendor that adds 10 features for each thousand customers ends up with quite a bit of bloat. It’s very common for enterprise software vendors to add “appeasement features” (those features added to make a sale or appease a customer) even if it’s known that a sizeable chunk of the user base will ignore it. One classic XKCD comic about a university’s home page mocks how rare it is that a home page shows the items users actually need. Recall the last time you used a copy machine; did you use any of the hundreds of options, or did you simply hit the big “Copy” button?

The trouble is that feature bloat isn’t just a traditional software problem anymore. As workers mobilize and take business software with them on their devices, feature bloat can follow, resulting in heavy and cumbersome mobile apps. For instance, Workday’s mobile app piles on hundreds of new features, very few of which users actually requested. Software bloat is particularly noticeable and problematic on mobile devices because they’re small and their screens can only fit so much, in spite of the recent trend of phablets and larger phones. Show too little, squeeze too much, or make it difficult to navigate, and the app becomes virtually unusable and engagement plummets. We’re often left thinking: Where’s the big “Copy” button?

Knowing that space is limited and users increasingly demand a superior mobile experience, app developers have to put a great deal of thought into what to show and how users will interact with it. Consumer apps, for example, are unbundling themselves into easy-to-use single purpose apps ranging from Instagram to SnapChat to Tinder — all of which are able to maintain incredibly high user engagement.

Thus, small screens present a beautiful challenge: As businesses develop mobile apps, they have a unique opportunity to prioritize what is shown on a device screen and determine what is actually usable and actionable for users. At last, a forcing function to limit the feature bloat of enterprise software, at least on mobile devices.

Too Much Information, Too Little Space

Recently, one of our customers at Sapho complained that one of their mobile business apps was taking a long time to load. Upon investigation, we discovered that they had replicated a desktop web experience on mobile. Their 16-column Excel-style table with hundreds of rows was being shoe-horned into a “mobile-friendly” app. “Mobile-friendly” it was not; the sheer volume of data displayed made it completely unworkable, from the loading process to viewing and editing.

This customer is not alone; plenty of enterprises create mobile apps with the intention of replicating the desktop experience on mobile. The result is the opposite of their ultimate goal — to enable users to be more productive away from their desktops — because the unwieldy app becomes difficult to access and interact with.

Choose Your Most Important Data

The first big decision for an enterprise mobile app is to choose which data to bring to the mobile experience and then accept the fact that the rest is best left behind on desktop. Not all data is valued in the same way, and mobile presents distinct use cases. Did the Sapho customer need all 16 columns of data on its mobile app, or could it have selected the six that its users truly wanted on the go?

Consumer services have been faster to catch on to this. The website of a weather service might display a wealth of information: granular data on sun and moon cycles; the exact time of today’s civil twilight, nautical twilight, and astronomical twilight; and historic average rainfall for each month of the year. The same company’s mobile app would narrow its focus, showing the user a smaller and more mobile-relevant subset of information about weather conditions at the current location for the current week.

Rethink Workflow

The second big decision is to rethink the user’s workflows as they interact with data, redesigning the basic architecture of the information itself for a fundamentally mobile experience. If desktop software is a meal, we need to course it out and cut it up into manageable bites if it’s expected to be consumed on mobile. In the case of our Sapho customer, we moved the data into selection lists that let users delve deeper as needed — as opposed to showing one big spreadsheet — resulting in dramatically decreased load times and enabling users to navigate and engage with the data quickly and easily. Think about which areas of the software are used most, from the data itself to the editing tools, action buttons, text fields, banners, and more, and ensure that the most-used areas are front and center while less-used areas remain hidden.

Build in Notifications

The third big decision is how to incorporate notifications for the enterprise mobile app. The best way to remove features from an app is to make it intelligent and predictive. The current enterprise software paradigm forces users to remember what they need from an app and then perform an action. It’s the only paradigm we’ve ever known. But just as iTunes and Amazon make recommendations based on your previous spending behavior, enterprise software must learn about its users and deliver relevant information to them. Users on mobile increasingly expect software to process on their behalf and notify them of important events, and the next generation of enterprise apps should offer notifications that let users know when something important happens in their business.

The thoughtful prioritization of data and its organization into new workflows with notifications create the foundation for a rich and powerful mobile experience, offering businesses the opportunity to finally harness enterprise software for an entire organization. IT organizations and vendors have the opportunity to renew a conversation about how to make the big decisions that make sense for their company; the big decision that will finally make small screens valuable across the organization.

Saturday, November 08, 2014

The Rise and Fall of the Full Stack Developer

This post was also published on TechCrunch.

It seems as though everyone in tech today is infatuated with the full-stack developer. Full stack may have been possible in the Web 2.0 era, but a new generation of startups is emerging, pushing the limits of virtually all areas of software. From machine intelligence to predictive push computing to data analytics to mobile/wearable and more, it’s becoming virtually impossible for a single developer to program across the modern full stack.

When I first started programming computers as a kid in the pre-mobile, pre-web late 1970s/early 1980s, a single person typically wrote a complete software program from start to finish, and there weren’t many other layers of software between the programmer and the hardware. Using assembly language was the norm for programmers trying to squeeze more performance and space out of machines with 8-bit processors and very limited memory.

Programming applications quickly evolved into a team sport with the advent of client/server computing in the late 1980s and early 1990s, and the wave of Internet computing in the late 1990s and early 2000s. Each facet of new technology was so complex that a specialist was often required, sometimes one for different tiers (e.g. front-ends, databases, application servers, etc.) Managing a business website became a specialty that included operating networking equipment, such as routers and load balancers, tweaking Java virtual machines, and using various database indexing mechanisms.

By the mid-2000s, creating virtually anything — from simple websites to next-generation SaaS services — became prohibitively expensive. The rising expense was directly correlated to the overhead of numerous individuals from the various tiers communicating (and often miscommunicating) with each other, and changes in one tier cascading into other tiers and into deployment parameters. As Marc Andreessen pointed out in a recent tweet storm about burn rates, “More people multiplies communication overhead exponentially, slows everything down.”

Conversely, the technology to create the new generation of Web 2.0 sites became increasingly streamlined and simplified. Programmers switched from using the more complicated enterprise Java stack and databases such as Oracle to the more straightforward LAMP stack (Linux, Apache, MySQL, PHP/Python/Perl). New languages and frameworks such as Django and Ruby on Rails automated the layer between the website and the database. Front-end frameworks such as jQuery helped abstract all of the intricacies between different browsers. Cloud services such as Amazon Web Services simplified deployment and provided turnkey networking.

By the late 2000s, it became possible for many programmers to deliver a complete consumer or SaaS site, including a dynamic web client, server-side business logic, a scalable database, deployment, and operational support. This new breed of full-stack developer could run circles around teams of programmers attempting the same task. When projects scaled up, adding more full-stack programmers allowed a single person to add a single feature across all the tiers of an application, which accelerated feature delivery over the communication overhead of having different people own the feature in each tier.

If you’re building a website on the full stack illustrated above, find full-stack developers who can effectively wear these hats. But these days — and call me crazy — I’d consider this a less-than-full-stack. Here’s a fuller full stack:

I’d wager that there are zero individuals with advanced-level knowledge in each of these areas that would be capable of single-handedly delivering this next generation kind of application. Just keeping up with the advancements and new programming interfaces in each category is almost a full-time job.

We are in the midst of a rapid shift to more complicated technologies that, as in days gone by, require experts at each tier. Developing excellent iOS and Android applications requires experts in those platforms that understand the intricacies. Operationally, tending to new object databases such as Mongo requires constant attention and tweaking. Running an application on cloud services such as Amazon requires knowing the ins-and-outs of its various services and expertise on how to failover across regions. Even the venerable web front-end has evolved into CSS4, JSON and JavaScript MVC frameworks, such as Angular.js and Backbone.js.

In this brave new world, it is critical to have at least one person with at least a functional understanding of each of the composite parts who is also capable of connecting various tiers and working with each expert so that a feature can actually be delivered. In a way, these tier-connecting, bridge-building software architects — who are likely experts in only one or a couple of tiers — are less full stack developer and much more full stack integrator.

Rest in peace, full stack developers. Welcome, full stack integrators, in addition to engineers with deep technical skills in particular areas. It’s a fascinating world of software out there and we need you more than ever.

Saturday, August 23, 2014

Why Are PC Sales Up And Tablet Sales Down?

This post was also published on TechCrunch.

When iPads first came out, they were hailed as the undoing of the PC. Finally, a cheap and reliable computing device for the average user instead of the complicated, quirky PC. After a few years of strong growth for iOS and Android tablets and a corresponding decrease in PC sales, the inverse is suddenly true: PC sales are up and tablet sales are “crashing.” What happened?

The tablet slowdown shouldn’t be a surprise given that tablets have hardly improved beyond relatively superficial changes in size, screen resolution, and processor speed. The initial market for tablets is now saturated: grandparents and kids have them, people bought them as Sonos controllers and such, and numerous households have them around for reading. People that want tablets have them, and there’s just no need to upgrade because they more than adequately perform their assigned tasks.

Businesses and consumers alike are again purchasing PCs, and Mac sales are on the rise year-over-year. Businesses in particular are forced to upgrade older PCs now that Windows XP is no longer supported. When purchasing a new PC, the main driver to choose a PC versus a tablet is fairly obvious: If you are creating any type of content regularly, you need a keyboard, a larger screen, and (for most businesses) Microsoft Office.

Reigniting Tablet Growth with “Super Tablets”

For the tablet category to continue to grow, tablets need to move beyond what Chris Dixon calls the “toy phase” and become more like PCs. The features required for a tablet to evolve into a super tablet are straight from the PC playbook: at least a 13” screen, 64 bit processor, 2GB of RAM, 256GB drive, a real keyboard, an actual file system, and an improved operating system with windowing and true multitasking capability. Super tablets form factors could range from notebooks to all-in-one desktops like the iMac. Small 7” and 9” super tablets could dock into larger screens and keyboards.

The computer industry is littered with the detritus of failed attempts to simplify PCs ranging from Sun Micrososytems’ Sun Ray to Oracle’s Network Computer to Microsoft’s Windows CE. But this time, it’s actually different. The power of mass-produced, 64-bit ARM chips, economies of scale from smartphone and tablet production, and — most importantly — the vast ecosystem of iOS and Android apps have finally made such a “network computer” feasible.

Businesses Need Super Tablets

As the former CIO at CBS Interactive, I would have bought such super tablets in droves for our employees, the vast majority of whom primarily use only a web browser and Microsoft Office. There will of course always be power users such as developers and video editors that require a full-fledged PC. A souped-up tablet would indeed garner corporate sales, as Tim Cook would like for the iPad … but only at the expense of MacBooks.

The cost of managing PCs in an enterprise are enormous, with Gartner estimating that the total cost of ownership for a notebook computer can be as high as $9,000. PCs are expensive, prone to failure, easy to break and magnets for viruses and malware. After just a bit of use, many PCs are susceptible to constant freezes and crashes.

PCs are so prone to failure that ServiceNow — a company devoted to helping IT organizations track help desk tickets — is worth over $8 billion. Some organizations are so fed up with problematic PCs that they are using expensive and cumbersome desktop virtualization, where the PC environment is strongly controlled on servers and streamed to a client.

And while Macs are somewhat better than Windows, I suggest you stand next to any corporate help desk or the Apple genius bar and watch and learn if you think they are not problematic.

The main benefits of super tablets to enterprises are their systems management and replaceability. Smartphones and tablets are so simple and easy to manage that they are typically handled by an IT organization’s cost-effective phone team rather than more expensive PC technicians, who are typically so overwhelmed with small problems that they cannot focus on fixing more complex issues. Apps can be provisioned and updated by both IT and end-users without causing conflicts or problems. If a device is lost, it is easy to remote wipe data and to provision a new device with all of the same settings.

Programs like BYOD (Bring Your Own Device) just accentuate the fact that smartphones and tablets are so easy to manage that enterprises are comfortable letting their employees pick the devices themselves. Users also get great benefits, including instant-on, long battery life, simplicity, and access to legions of apps from the iTunes and Play app stores.

Why Can’t the Big 3 Deliver a Super Tablet?

Former Apple executive Jean-Louis Gassée has long pointed out that Apple is gradually converging Mac OS X and iOS and will likely replace Intel processors with ARM processors. However, Apple is steadfast in maintaining a separation between the tablets and PCs and is bridging the divide with its new Continuity features. While Microsoft is willing to hack a touch interface onto a desktop experience, Apple will understandably not go there until the experience is perfect.

Apple will have to make this switch at some point soon, however, as users are increasingly expecting every screen to be touch-enabled. Tim Cook claims that he is not afraid of cannibalizing businesses, but Apple seems reticent to cannibalize its growing $20 billion Mac business.

Google’s Chromebook is essentially a PC that can only run web apps. As many commentators have puzzled, Google should be focusing on a desktop version of Android rather than Chrome OS. The market has decided that it wants native apps on smartphones and tablets, so clearly users are going to want native apps on their PC replacements, as well.

Android has a huge advantage with its large app store and developer community. The Chrome OS has an inherently flawed mission – why try to compete with Windows whilst Microsoft itself is moving beyond Windows? The new generation of ChromeBooks based on ARM chips closely matches the specs of a super tablet – there just aren’t any apps because of the Chrome OS constraint. The hardware is right, but the operating system is wrong.

Microsoft is actually very well positioned for a super tablet world with its Office 365 for iPad and Android, since as a subscription product it can draw revenue long after a manufacturer cashes in the thin margins on the hardware itself. This is an opportunity for Microsoft to make more money on a Mac than Apple does, as Microsoft did in the 1990s. Microsoft has already written off making money on Windows on low-end hardware and is setting itself up for a post-Windows future around devices and services under Satya Nadella’s leadership.

Microsoft’s Surface Pro 3 is a somewhat valiant attempt to reinvent the PC as a super tablet; however it is expensive and has a small screen, a subpar keyboard, a power hungry Intel processor and all of the headaches of managing Windows. The much-panned Surface 2 with Windows RT is ironically a step in the right direction, but its 32-bit ARM processor is underpowered and there aren’t many apps in the Windows Store. Microsoft coincidentally offered Windows CE devices in the late 1990s that were actually quite close to super tablets, but like with Windows touch tablet, they entered the market far too early.

The ecosystem around building, distributing and maintaining PCs is massive and Apple, and the PC companies are understandably reluctant to cannibalize their sales. Lenovo offers a 10″ Android notebook and HP is reportedly soon shipping one, but these are intentionally small and underpowered in order to not compete with notebooks. This vacuum presents an opportunity for companies like Sony that have exited the PC business but continue to sell smartphones and tablets.

Samsung in particular is reportedly looking to shutdown its PC business, and must be evaluating how to grow its tablet business now that its smartphone sales have slowed. Samsung could offer up Office 365 bundling in exchange for royalty-free device sales in its next patent conflict with Microsoft.

The Enterprise Legacy Web Holdup

An interesting side note is that large enterprises typically run numerous legacy web applications that do not work on modern web browsers, with some legacy web applications only working on ancient browsers like Internet Explorer 6. Many of these applications were built in the first wave of the Internet to enable “employee self-service” and have not been touched since that era. Perhaps the move to a simpler, cheaper PC replacement will finally shift the cost/benefit equation such that these web applications will finally be upgraded or replaced with SaaS solutions.

Here’s hoping that the Apple, Google and Microsoft can soon move into a super-tablet future where most businesses and consumers will be able to manage and customize their PCs as easily as they manage their phones and tablets … and us techies can move on from our part-time tech support jobs.

Saturday, July 26, 2014

BMW Vs. Tesla: A Real Live Innovator’s Dilemma

This post was also published on TechCrunch.

Jill Lepore genereated quite a fracas in Silicon Valley with her New Yorker article that questions disruptive innovation and posits that large incumbent companies often survive and subsume disruptive technology with small incremental gains. Fortunately, we have a live Petri dish: BMW’s new electric i3 is an ongoing case study of a legacy manufacturer facing an innovator’s dilemma in the face of Tesla, a very aggressive new competitor with next-generation technology.

Elon Musk has defined the standard for a future mass-produced electric car – it must cost around $40,000, have a range of 200 miles, and be comparable to a BMW 3 series. In order to achieve that audacious goal, Tesla is embarking on a plan to build a “Gigafactory” capable of producing batteries at an efficient and lower cost that would make such a dream car feasible. Investors are betting that Tesla will be able to dominate the electric car market when it achieves scale, continuing a growth rate that values Tesla at $28 billion even though it only produces 35,000 vehicles a year. It is interesting that Musk directly compared the Tesla’s upcoming mass market Model 3 directly to the BMW 3 series, given that BMW is now delivering its new i3 to the US market in accessible volumes.

There are lots of great lessons for entrepreneurs to learn from watching the BMW versus Tesla battle since cars are so tangible and manufacturer sales tactics are so transparent.


Even though it has a “3” in its name, the i3 is decidedly not a 3 series BMW. It is two feet shorter, and should instead be in the BMW 1 series product family. The i3’s electric range of 80-100 miles makes it more similar to electric cars like the Nissan Leaf and the Chevrolet Volt and nowhere close to a technological wonder like the Tesla Model S.

Despite its limitations, the i3 is clearly resonating, with rave reviews and a price that is spiking over the last month on TrueCar, indicating high initial demand in the United States. BMW has (mis)used the power of the 3 series brand to its benefit, and can now add features like longer length and range incrementally as battery technology improves.

Lesson: Legacy companies can mislabel their products to leverage their brand, especially if an upstart compares itself directly to a particular model.

Tesla Model 3 (Estimated) BMW i3 BMW 320
Passengers 5 5 5
Range ~200 miles on electric 80-100 miles on electric, 185 miles with gas range extender(Total hack!) 380-576 miles on gas
Base Price ~$40,000 $41,350 $32,750
0-60 N/A 7.2 seconds 7.1 seconds
Dimensions ~182” long x ~71” wide (Matching BMW 3 series) 157” long x 70” wide (Not even close to a 3 series!) 182” long x 71” wide
Availability 2017 2014 2014


BMW invested tremendous resources in its electric car platform to develop an all-electric vehicle platform, and it is willing to integrate legacy technology in order to deliver immediate value to its customers. Conversely, Mercedes chose a partnership route and is buying the drivetrain and battery technology for its upcoming electric car from Tesla. Both BMW and Mercedes are well ahead of Tesla in advanced vehicle technology like self-parking and cruise control that can automatically follow highway lanes and maintain distance from other vehicles.

Rather than waiting for battery technology to evolve to make an all-electric car with a 200-mile range at a mid-range price point, BMW is selling an optional “range extender” consisting of a two cylinder motorcycle engine that maintains the batteries at a 5 percent power level and extends the car’s range an additional 80 miles. Since the range extender powers the batteries rather than a gas engine, the i3 is not a hybrid, but the range extender can be continually refilled so that the car is never stuck without power. It’s a total hack, but is well thought out and competitive. BMW’s engineers must have been giggling when they came up with this one.

With the i3, BMW has delivered a “good enough” luxury electric car for the urban driver and average commuter, who can also optionally use the car for longer trips without having to plan for supercharger stations.

Lesson: Legacy companies are often willing to hodgepodge new technology with their older technology to stave off new competitors.


Tesla shipped its first car in 2006 and is expecting sell 35,000 Model S sedans in 2014, or roughly 17,500 units in the second half of 2014. BMW started selling i3’s in 2014 and sold 6,000 i3’s in the first half of the year, primarily in the European market, which now has 3 to 6 months waits for the car. Now that demand is spiking, BMW increased production to 20,000 units annually and is now producing 100 units a day, a run rate of over 30,000 units annually. The fact that a legacy manufacturer is on the verge of outselling Tesla in its own luxury electric segment in the first year of shipping is fascinating given Tesla’s superior product and years of market lead.

Lesson: Once legacy companies have hodgepodged technology, they can produce it at scale.


While Tesla is right in attempting to disrupt the antiquated dealership business model, BMW will be able to leverage its extensive dealer network to deliver to consumers worldwide, and consumers can use web services like TrueCar and Beepi to bypass the hassle of negotiating with dealers on the price of a new car and trade-in amount. BMW also has access to a deep well of financial incentives to drive consumers to buy cars. Auto manufacturers and their dealers are fighting Tesla with regulatory measures to slow the company down and limit market penetration.

Lesson: Innovators should not underestimate the power of a legacy company’s large, lumbering sales channel.

Market Entry

Tesla had to enter the market at the high-end in order to deliver batteries capable of long ranges at a margin that would deliver profits to fickle investors, years before it could deliver a mass market mid-range vehicle. BMW’s breadth enables it to enter at the mid-market and then move up into the ultra high-end next year in the U.S. with its i8 supercar. To BMW, the distinctive, urban-friendly i3 is essentially a rolling advertisement for BMW’s innovative and green future, so the company could even sell them at a loss and come out ahead.

Tesla’s high-end first approach could turn into a liability as the Tesla S is quite large and therefore not well suited for urban environments – it is wider than and almost as long as a 7 series BMW. Large, luxury four door sedans are typically purchased by upper middle class men over the age of 35 which, as a member of the demographic, I unfortunately have to admit we’re not exactly the most hip crowd. BMW examined the market thoroughly and is targeting hip, young, urban professionals with the i3’s forward design, a smaller urban-friendly size, and the brand’s proven appeal with a younger demographic.

Lesson: Legacy companies are often in numerous segments of a market and leverage their scale to beat an upstart’s roadmap.

Who Exactly Is Getting Disrupted?

The big question is what industry exactly are electric cars are disrupting? At first it seemed like the legacy auto manufacturers would not be able to step up to an electric car challenge. They have widely adopted hybrid electric cars, are now delivering somewhat competitive electric cars, and are continually experimenting with hydrogen fuel cells. From a broader view, it is possible that ExxonMobil and Chevron will be more disrupted by electric vehicles rather than BMW and Chevrolet.

Elon Musk is an entrepreneurial hero who is concurrently disrupting the passenger vehicle, space transportation and electric utility industries. Some of the legacy companies in those industries were bound to wake up at some point and respond aggressively. Fortunately, Musk can rest assured that the United Launch Alliance will not be as agile against SpaceX as BMW has been against Tesla!

Disclosure: The author is number 6,250 on the Tesla Model X waitlist.

Saturday, June 14, 2014

Google's Push Past Search

This post was also published on TechCrunch.

As a recent analysis indicated, Google’s traditional search is not working on mobile as well as it did on the desktop web. Sifting through organic search results on a mobile device is a sub-optimal experience, especially when compared to the push notifications and personalized streams of cards that have made mobile apps from Facebook, Twitter and Tinder so habit-forming and successful.

Google is getting well ahead of its mobile organic search problem, especially on Android where it has full control of the end-to-end mobile experience. Google has strung together push notifications, a stream of predictive answers and an answer box in an attempt to answer a search query three times before showing organic search results.

Answer Attempt No. 1 – Notify you that something important is happening before you even ask

Google’s primary push play is its much-maligned Google Now, which is increasingly becoming more functional and relevant, especially for Android users. Google Now uses mobile notifications for important events. This feature has initially focused around calendar appointments and location, with more recent additions such as sports scores for teams you follow.

When you have an upcoming calendar appointment, Google Now checks travel routes and notifies you when you should leave in order to arrive at the appointment on time. Google Now sometimes gets confused about where you are going and doesn’t know when you are going to work or skipping an appointment. However, when it works, the feature really feels like magic.

As Google Now learns what you are interested in, this notification feature will likely incorporate big stock swings in your portfolio, major news events of interest to you and important emails from your boss. The calendar notifications themselves will likely be a lot smarter, with features like Refresh or RelateIQ that provide context around a meeting. Right now, Google Now is a lot like type-ahead: when it works, it’s great. When it doesn’t, it’s a real pain. But it is slowly getting better and more context-aware.

Answer Attempt No. 2 – Show you things you might search for before you even search

In an ideal situation, Google Now would anticipate what you want and deliver you a card before you even thought to ask. Perhaps Google will get there one day. In the meantime, Google wants its users to form habits around its Google Now cards as much as possible.

When you type a Google search on a mobile Android device, Google automatically pushes the Google Now stream, which attempts to predict what you might be searching for by showing a stream of updates to websites that you have recently visited, new content for search terms you have searched, real world events such as a new episode of a television show whose website you have visited, and nearby places in case you are looking for a café or a restaurant. Google uses your search history and profile information to build the cards, so the cards are generally very relevant.

Google Now is becoming increasingly anticipatory about new search results you might find interesting by incorporating the Google knowledge graph into search. It can tie various web pages together based on distinct entities such as a band. When you search for a band and listen to its YouTube song, Google Now will tell you when they’re coming to town to play a show.

Yes, Google is not only crawling the entire web, it is now crawling the entire web on your behalf and flagging pages it thinks will be interesting to you. In addition, Google is even trying to figure out things like where you parked and if you are on public transport to notify you when it’s your stop.

Answer Attempt No. 3 – Answer your query with an answer box

If Google fails at answering what you want with a push notification or its predictive stream of cards, it still shows you a card above the search results. The Google “Answer Box” is where Google really shines, delivering cards that contain the answer to many common and even obscure queries. Google takes in context such as location and responds to voice and written queries with the answer to a question. The thing to realize is that most answer boxes will eventually become a Google Now card, delivering answers to questions before you even ask.

I see no search results – looks just like Google Now!

As users become increasingly accustomed to Google answer cards, they will be less and less surprised when these cards start to materialize before they have even entered a search query.

Answer Attempt No. 4 – Show the search results that we once loved and now disdain on mobile

Yes, Google’s organic search, which we have known and loved since the late nineties, is now a failure condition of a failure condition of a failure condition. Going through and clicking on search listings on a mobile device is just painful. Every time I get the search results, I wish Google had instead returned an answer box – why can’t the Google knowledge graph just show me the date of the event I’m looking for?

The shift away from showing organic search results on mobile devices will have a profound effect on websites that rely on Google for traffic, on top of the devastation wrought by the Google algorithm updates of the past few years.

Are these “cards” just a deconstructed portal? Yes in some ways, and that’s just great

Wait, haven’t we seen little boxes of relevant data before? Google Now in some ways is the new, smarter portal that figures out what you should know. Google Now doesn’t show your entire stock portfolio, it only shows the top movers in your portfolio. It is not a coincidence that Google launched Google Now for desktop Chrome soon after it killed its iGoogle portal. It is ironic that Yahoo, which essentially invented the portal category, is now trying to reinvigorate its search product, while Google is moving past search and what is effectively a next generation portal.

Google is the stalwart of Web 1.0 and Web 2.0 “Pull Computing,” with interaction hinged around a user deciding to search for something and sifting through results and advertising. Google is now reinventing itself on mobile with a “Push Computing” paradigm. Push Computing, where server computers curate and organize content to send to a client, is the backbone of successful mobile companies.

There were attempts in the late 1990s to push-enable portals with products like PointCast, but they were cluttered with too much content to consume and required too much bandwidth for the time. Google is addressing those problems by curating what is sent to clients with extensive machine learning.

The Google search experience was not going to carry Google into the future, and Google is getting well ahead of the problem by predictively pushing cards into notifications and a stream. And just like they did last time with search, they can figure out how to monetize later. Google Shopping’s answer box is entirely paid (although not in the EU due to antitrust issues) and on a mobile screen there is plenty of room to add a single, very expensive AdWord ad to every answer box. As Google learned the first time around, there are a lot of ways to make money when you’re the on-ramp to everyone’s Internet.