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.

Brand

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

Technology

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.

Volume

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.

Sales

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.

Sunday, March 30, 2014

The Resurgent, Post-Windows Microsoft


This post was also published on TechCrunch.

Microsoft had become an oft-ignored, behemoth to the North, despite $77 billion in revenue, $57 billion in gross profits and $21 billion in net income. It seemed that the mobile revolution had passed it by. Although Steve Ballmer was already making many of the right moves, it took new CEO Satya Nadella to fully accept that Microsoft had to move beyond Windows into a new future of apps and cloud services.

The future of Microsoft is in selling its software, such as Microsoft Office 365, Microsoft Dynamics CRM and ERP, and Microsoft servers in the Azure cloud to business customers on whatever platform they like. Each of these products is arguably best-of-breed and cloud-based, and has a large customer base. Microsoft indeed has the ability to pivot, and pivot hard, as it did when it switched from pushing MSN to competing with Netscape in the Internet space. And Microsoft is once again not encumbered by antitrust restrictions from aggressively pursuing these markets.

There was a time when, if Redmond aimed its guns at a market segment, startups fled. Since the launch of the iPhone almost seven years ago, Silicon Valley startups have operated without any fear of Microsoft competing aggressively in apps and device-agnostic cloud services.

As the first step towards its new OS-agnostic future, Microsoft recently released its OneNote note-management software for the Mac OS, rounding out a full multi-platform strategy for the software, including Windows, Windows Phone, Mac, iPad, iPhone, Android and web.

Microsoft quickly followed up with Office 365 for iPad, in addition to its existing Android, iPhone and Mac support. Microsoft Office 365 is remarkably good, and offers a web only option that is priced the same as Google Drive with far better features and the familiarity of Office. Power users can pay more per month for small business premium that includes the desktop versions of the apps, so an IT department can offer different versions to different types of users. Office 365 now only has three different versions, versus the headache-inducing menu from years past. Most business buy Microsoft software through enterprise license agreements which will bypass the Apple 30 percent cut.

Although it is a huge step for Microsoft Office to now be available on all of these platforms, just touch-enabling software does not necessarily make it mobile first. Microsoft has to keep a sharp eye on startups like Quip that have completely rethought the office experience for mobile.

Microsoft Dynamics CRM and ERP are a billion dollar plus business and growing rapidly. Dynamics CRM is available as SaaS on all platforms including iOS and Android. Dynamics ERP is available as a cloud hosted solution but is not yet available on other client platforms.

Windows Azure cloud, which is rumored to be rebranded to “Microsoft Azure,” is also growing rapidly and provides a growth platform for .Net development platform, Microsoft’s Windows Server, Active Directory, and SQL Server database products.

Microsoft has an army of loyal developers who love its easy-to-use tools, and it is rumored that it’s going to acquire Xamarin, which lets Microsoft .Net developers build apps for iOS and Android. The companies recently signed a partnership, but an acquisition of this technology would be a huge step forward for Microsoft’s new mission of platform agnosticism.

So what of Windows?

Microsoft is not giving up on Windows, but it is going to stop tying its growth products to only one operating system. Windows 8.1, for all of its faults, is the same as Windows 7 once you ignore the Modern UI. And on a tablet, the Modern UI actually works quite well. I have been using a Lenovo Yoga exclusively for almost a year and have actually quite enjoyed it despite its quirks. In addition, Windows Server is seeing a renaissance as part of Azure cloud.

There is a report that Microsoft is seriously considering giving away a version of Windows 8.1, much like Google gives away Android and Chrome OS in order to drive more Google Search revenue, and Apple now gives away Mac OS upgrades.

Microsoft’s OEMs have been struggling to increase margin and have been extracting lower Windows licensing fees and even no licensing fees in some cases. However, these discounts could be used as a lever to finally get hardware OEMs into line with more stringent hardware standards.

With a free Windows on decent hardware and a $99 Office 365 home subscription, Microsoft can retain legions of value-oriented consumers (think Costco shoppers) that want to use the same computer at home that they use at work. While some urban Apple devotees may look with disdain on this strategy, there are many high growth, high profit companies that sell exclusively to middle America.

The saving grace for Windows Phone is that at some point, the apps market is going to calm down, and there will be 1,000 apps that matter to 99 percent of the population. Microsoft can pay each of those app developers up to $500,000 to port to Windows Phone, so it would cost $500 million for Microsoft to offer a phone that has the top 1,000 apps. Quite achievable for a company that has a $2.5 billion annual marketing budget and more than $100 billion of cash. The much-maligned Surface tablet is now a break-even business with almost $1 billion in sales. Even if consumers don’t buy them, Microsoft is selling large volumes to businesses such as Delta.

The operating system story for Microsoft is now one of slow growth and middling progress, which keeps it somewhat in the game without bogging down its application growth engines.

The other businesses

As many an analyst has stated, the Xbox and Bing businesses should be spun out. One option is to sell Xbox to troubled Sony so it can combine the declining consoles market into a single larger entity and gain efficiencies in production and retain AAA game developers. Yahoo could pick up Bing in order to accelerate its renewed focus on search.

Perhaps I have a tendency to favor the underdog, but Nadella has a great shot to make Microsoft relevant again with its new focus on selling its high-growth software to businesses on whatever platform they want. There was a time in the early 1990s when Microsoft made more money on every Mac sold than Apple did. With its new platform-agnostic strategy, this is a metric that Microsoft could attain again for every device sold to a business.

Saturday, March 15, 2014

Why Can't a Startup Build a Self-Driving Car?


This post was also published on TechCrunch.

On a 10- to 20-year horizon, large-scale technological innovation is going to center around machine intelligence, robotics and sensors. Each of these fields requires gargantuan amounts of capital and a lot of patience, a combination well beyond the scope of even the most progressive venture capital firm.

As Google has demonstrated with its self-driving car, the combination of machine intelligence, robotics and sensors can already perform better than a human at a complex task such as driving a car, something that 10 years ago was unthinkable to most people.

No doubt, Tesla has built an amazing car and after much trial and tribulation, brought it to market. However, General Motors had already shipped a production electric car years before. Tesla took advantage of the innovator’s dilemma, where legacy car companies are virtually incapable of embracing electric-only cars and integrating modern electronics.

Tesla’s roadmap includes “autopilot” and eventually “autonomous” features. Perhaps Tesla also will deliver these features slightly before legacy car manufacturers do, including Mercedes and Lexus, which are aggressively adding similar features. But the winner in this game is Google, which has a multi-year technology lead and can extract enormous licensing fees.

The amount of raw computing horsepower necessary for cognitive computing is massive. Integrating next-generation sensors such as LIDAR is extremely complicated. The regulatory environment for introducing smart machines is extremely unpredictable, and the required experimentation and unpredictable timelines of this type of work puts it squarely in the “research” side of research and development. And venture capitalists inherently hate research – they like development.

Even the biggest venture-backed play in machine intelligence, DeepMind, with $50 million in very patient funding and 75 top researchers on staff, was recently acquired by Google for $500 million. Google has been on a massive buying spree lately, snapping up the building blocks of future technology with robotics acquisitions, other AI acquisitions such as DNNresearch, and key hires such as Ray Kurzweil, who is considered by many to be the godfather of commercial cognitive computing. Google is among the only customers of D-Wave, a much-maligned quantum-computing company.

Companies like Google, IBM and Microsoft have been building out machine-learning teams that can leverage their investments in vast networks of computers built around the globe. The amount of transistors needed to match the number of neurons in a human brain is a tremendous 100 billion, and it will take us until around 2025 to replicate on a computer chip, according to Kurzweil, although this might be aggressive due to the physics around increasingly smaller transistors in microchips.

The market uptake of machine intelligence is going to take a while. IBM has shown that a computer can outperform humans at chess and Jeopardy, and is transitioning its cognitive computing work into fields such as medicine. Even at the scale of an IBM, shareholders are complaining about the cost of this transition and the head of the Watson group was recently replaced. If IBM’s Watson were a startup, its investors would have long ago forced it to sell so that they could put their capital into more efficient short-term and mid-term investments.

Other companies with large computing grids are starting to get into the game. Facebook recently kicked off an artificial intelligence lab with the hire of Yann LeCun from NYU, and also acquired speech recognition company Mobile Technologies. EBay hired Hassan Sawaf from SAIC to spearhead its machine-intelligence efforts. Yahoo! has spun a deal with Carnegie Mellon to access their researchers. Apple, with its relentless focus on the client side of computing, is struggling to keep up with making its email systems scalable, let alone keep its Siri acquisition on par with Google’s relentless drive towards machine intelligence.

The upside is huge. Every sector of the economy will soon enough have its own version of a self-driving car, even fields as advanced as medicine. As anyone with an undiagnosed or somewhat diagnosed medical condition can tell you, the amount of guesswork and over specialization of medical professionals is maddening. A computer can take a holistic approach and quickly narrow down what a problem could be, and iterate with exclusionary tests. Given the fundamental shift required, it will take quite a while for this transition to happen in fields such as medicine.

Despite repeated fears, startups are definitely taking on far bigger challenges than just photo and chat apps. But will startups be able to compete with these giants in areas such as machine intelligence? Perhaps Google, IBM and Amazon will offer Cognition-as-a-Service that would usher in a wave of new companies, much like Amazon’s Infrastructure-as-a-Service offering reignited the web.

IBM has created a $100 million investment fund for Watson-based companies and just made its first investment. Amazon could kickstart a cognition service by acquiring nascent cognition service companies such as Wise.io, Expect Labs, and BigML and offering them at scale. Now that would unleash a generation of “smart” startups.