Anyone innovating?

First off, I’ve been a bit quite on the blogging front for a little while – sometimes real work takes over and it’s hard to get motivated to post a meaningful blog….

So, I’ve sat through two rather dull technology events the past few weeks. First off Apple really did disappoint with their new releases, nothing new there at all. No, tell a lie, I did quite like the pressure sensitive screen feature on the new iPhone. It’s quite innovative, but its value is really hard to justify. Would I upgrade to the new phone because of that? Nope, but that doesn’t mean millions of “fans” wont, quite the contrary really. The second event was that of Google. Now this was awful. Dull devices and nothing new at all….

One thing though that I did notice in both events is the desire to copy innovation from a company that apparently is uncool and hasn’t innovated since the late 90s…Yeap, Microsoft. It seems that Microsoft new approach to a single OS across all devices is starting to pay off. Mix that with the Surface Pro range of devices, and there is a real movement in the market towards “hybrid” tablet/laptops. This is clear to see by the launch of the iPad Pro and some new Google option (its name is awful and reminds me of a fax machine). The Google copy though is blatant. The device looks like a Surface Pro all day long….

Why copy?

It seems that people are starting to realise that they can have a single device that acts as their tablet, but can also be their tool of choice when it comes to productivity. Business IT departments have started to realise this and now it seems are some of us consumers. I myself use a Surface Pro 3 to replace my laptop and my work desktop PC. It works brilliantly in both environments, especially with the Docking station. I also use it as my “tablet” machine that does find its way to the sofa – where it is of great use like most tablet devices.

With this in mind, both Apple and Google have to be aware that maybe “mobile” only tablets have a shelf life, after all, can both companies really expect businesses and consumers to continually shell out for multiple devices when one could do the job of three? I think there is an awakening that actually, Microsoft has been the innovator in the past 18months, and with its Windows 10 OS and launch of Surface Pro 4 coming any day now, that there could be a real market shift away from dumber tablets towards tablet/laptop hybrids. If that’s the case, Microsoft is a long way ahead of the game here, with both Apple and Google only offering lightweight mobile Oss on their devices.

Will HCE revive NFC mobile payments? No.

As of late there has been a lot of press coverage regarding HCE (Host Card Emulation), which in a nutshell allows devices to make NFC based mobile payments without needing the mobile operators secure element on the device. Both VISA and MasterCard are backing this new approach, in the hope that finally, they can kick start mobile payment offering with NFC, effectively locking merchants back into the card schemes for mobile. Google is also heavily behind HCE, because they need a way of getting their Wallet distributed on actual devices and networks. Google has already had a rocky time with NFC, supporting it, then ditching it, only to now attempt to bring it back to their offering through HCE.

There are many companies pinning their hopes to HCE, touting their solutions and the promise of mobile payments. But is HCE really the saviour of NFC based mobile payments, or is it simply the same old issues dressed up in a new party frock?

 

Secure NFC in the cloud

Effectively HCE allows secure details to be stored in the cloud. This makes a lot of sense if you want to bypass the mobile operators and effectively quash their mobile payment offerings (ISIS in the USA and WEAVE here in the UK). But does it actually add any value for the consumer or for the merchant? Is there actually any real difference? The answer is pretty much no.

If you are using the solution in its pure form, then your phone (no matter how it gets details, from the cloud or a secure element on the device) will broadcast card scheme data to the merchant’s terminal. No matter what that data is, it is being broadcast and is data that is used to complete the payment. This is actually very powerful if you are looking for mass distribution, potentially. I say potentially because though there are businesses accepting NFC contactless payments, they are still small in their numbers. In addition, the merchant still has to opt into accepting contactless payments – and it is worth noting that contactless payments in pure card form are not the same as contactless payments using your mobile phone. In many cases the “handshake” is different requiring businesses to invest yet again in contactless for mobile phone. Do we really think SME owners will continue to invest in technology for zero benefit to their business?

So does HCE make any difference here? No…

 

Availability

HCE and NFC are only available on Android based devices (and not all of them). Though Windows Phone 8 supports NFC, it is locked very much into the Secure Elements, so no HCE support there. If we then look at the most successful mobile smartphone out there (iPhone), we should note no NFC or HCE support (and it doesn’t look like there ever will be). So with this in mind, you are only available to customers on 1 of the top 3 mobile platforms. Though many will say that Android has the lion share in the mobile world, it’s worth noting that they are a distant third in their share regarding mobile web being used. This indicates that the majority of Android users are not embracing all the features on their smartphone, and as such, these probably are the same users that will not look to be early adopters of any form of mobile payment.

Essentially, the consumer base that could potentially look to HCE and NFC payments is quite limited.

 

The customer experience

Many articles will talk about adding value into the mobile phone payment option, but when we do this, any distribution advantages you may have due to card schemes and contactless being accepted vanishes. You may ask why, but the fact is that the acquiring banks (the people who actually operate those contactless card devices) will not be accepting data regarding a discount, or loyalty scheme. To be blunt, they simply can’t accept that data as it’s meaningless to VISA, MasterCard, the Acquiring bank and the customers bank. So in order to accept that data, the mobile payment provider needs to sign the merchant up to their particular version of mobile payments, in order for them to enjoy any added value. Therefore the argument for NFC as an open loop environment using card scheme rails doesn’t fly.

So what does HCE bring my customers in terms of experience over what they have currently with a card. The answer is nothing, unless I buy into a particular vision of HCE by a particular company, and if I am going to do that, I may as well look at alternative payment solutions, that save my business money.

 

Payment processing costs

Do these decrease with HCE? Nope, the poor old merchant is still paying full wack for their card processing, and maybe in some situations more. They will be paying for more expensive NFC based infrastructure on a monthly basis too, so mobile is now costing businesses more to accept. That’s simply not good news for any business owner.

 

HCE a game changer? Nope…

To make mobile attractive to businesses it must be cheaper for businesses to run, maintain and it must bring some added value to their business. It also needs to be available to the vast majority of my customers, so that means available to the top 3 mobile operating systems (Android, iOS, Windows Phone). HCE simply doesn’t stack up on any of these basic business needs. It’s more expensive and provides no added value.

Mobile will no doubt be a game changer in the payments world, but it will not be changed by solutions that look to the same old rails dressed up in a pretty new mobile dress. It will be companies that offer real added value through mobile services, and companies that deliver savings back to businesses with large reductions in payment processing fees.

So if you are a small business, look to see what alternative payment solutions out there provide you with the added value and services you want to move your company forward, helping you increase sales and increase your profitability? It’s an exciting time, and a chance for businesses to break away from the old and embrace the new more productive world.

Payment Security. Has it been forgotten?

People may think I’m not being serious with this post title, but I really am. These past few weeks yet more examples of security not being taken seriously in the payments market have emerged. It started with an article I read on Finextra regarding Google bypassing the secure element on an Android phone for NFC based transactions. It’s the launch of HCE (Host Card Emulation).

 

HCE and NFC

I’m not going to go into too many details and technicalities about it, but my own take on the whole situation with HCE, NFC and Google is that Google and the card schemes are changing the rules in which payments are supposed to be made. They are doing this to better fit with their own solutions, and to potentially lock out ventures like ISIS in the US and WEAVE here in the UK and at the risk of security.

There are strict reasons behind PCI compliance and the use of EMV (secured chip and pin to most of us) and it seems that these are now causing issues for Google and others, so instead of looking for real solutions they change the rules. A great take on this can be found on finextra here

 

QR/Barcodes in transactions

These are the choice of many payment solutions out there, including my own companies CloudZync with Zwallet. However, QR and Barcodes are easy to create, especially static ones, so using these for passing payment information has to be taken into consideration, and I would never allow an authorisation of a payment to be made just because a valid code has been scanned. Yet I have witnessed many solutions out there now that do this…

With Zwallet we always make sure the consumer is involved in the authorisation process fully, so we keep intelligence in the process at the cost of 1 second in the transaction process. For me, 1 extra second making a payment is well worth it to aid in security. (I would like to point out that Zwallet transactions are still dramatically quicker than typical card based transactions, even with the added 1 second for security).

 

Security underlying cause for concern?

So what is the underlying cause of security concerns with payments? What really causes so much effort to go into technology a trying to patch security issues or catch fraud post a transaction? The answer is the actual card scheme itself and the infrastructure behind it.

Let’s be real. Cards are amazing. For the last 40 years they have steadily dominated the way in which most of us pay for goods and services. But, has security increased much in that time? A little is the answer. There is a lot more technology backed behind it, but fraud is back on the rise again, so we must ask ourselves why. And the answer is simple, cards were never designed for the digital economy. Everything that we do to utilise the card infrastructure is a cludge, a patch/hack in tech terms. All this technology and security to try and secure something that is very insecure, 16 digits on a card, mixed with two dates and 3 digits on the back.  If we lose control of those details then a fraudster can do whatever they want with our cards, and that’s why so much is invested in fraud detection post a transaction and so much is invested in risk management.

My fear is, while card based transactions using Chip and Pin remain ok, the way we use cards digitally isn’t so secure. Throw into the mix mobile payments and companies actively trying to utilise card details in their solutions to make payments, and holes start to appear. In essence, trying to use technology to secure something that by its nature is not secure causes all sorts of issues. And though great lengths to make things much more secure are possible, the costs behind these rack up.

No matter how you try to secure card details, or to what lengths you go, the fact remains that the infrastructure for cards requires those simple card details, and fraudsters are becoming increasingly intelligent, innovative and capable of getting their hands on those details and using them.

 

The security solution

The only real secure option is to start with a blank sheet of paper for payments and wake up and realise that the digital economy requires payments to be carried out on an infrastructure that is designed for digital transactions from the ground up. It also MUST include more human elements in the process and not just require everything to be automated.

Real intelligence still remains with the consumer and the business. By removing them from the process more and more, we may make the payment process a little quicker, but we increasingly make it less secure. After all, the process of me having to know my PIN to make a payment is far more secure if I have lost my card, compared to just waving my card in front of a reader and making a payment.

These are the reasons behind the security approaches we have at CloudZync, the reasons why we make sure the consumer has to actively be involved in the purchase process and actively have to authorise each and every payment. If we remove them too much, then there are more gaps for fraudsters to exploit.

I’m not saying everything can be 100% secure, it simply can’t, and intelligent innovative fraudsters will always find a way to exploit processes and technology, but we must actively make it as hard as possible, and currently, in the race to stamp authority on possibly the payments method of the future, security seems to be being overlooked…That is a great concern of mine, and should be a great concern for each and every consumer out there and business owner…

September, a big tech month…

Ever since Apple started making big announcements in September a few years back, it’s become increasingly popular to be the month of big tech news. Samsung copied Apple a few years back and started making their announcements just a few days before Apple, and often September is the month we also get some form of announcement from Google and or Microsoft. September 2013 has been no different.

 

Samsung announcements

These have been pretty odd affairs in recent years, and to be honest, I’m not sure they have been that successful. This year we are talking wearable technology and specifically smart watches. Are these the next big thing? Hmmm. I’m not entirely sure, if technology on your wrist was really going to take off, I think my Casio watch with calculator was quite a “killer” back in the late 80s. I heard a great quote today in relation to wearable technology, “people only wear something that looks good”. That means it needs to look equally as good as something like a Rolex, Tag or Omega watch before it really really has appeal. Let’s face it, no matter what the best looking tech company in the world has to offer (which is Apple not Samsung), I’m convinced tech on my wrist won’t get better looking than that produced by brands like Omega.

Obviously there will be a market for wearable technology, I just don’t feel it will be something the masses adopt, especially when we think how much bigger phones are getting (not smaller). Wearable technology like a watch will not replace my smart phone, so why would I have it?

If you are thinking about Google glasses for example, then again, this kind of tech has other pitfalls. For one, if you already wear glasses I’m not sure the tech even works for you. If you, like me, hate having things distract your eye, then again the tech is not going to be for you. Throw on top of that the fact the glasses don’t look great (and there is a massive market in laser eye corrective surgery so we don’t have to wear glasses) I start to think a lot of this is tech for tech sake…

IMHO, wearable tech may have a place, but its not for the masses and no one should be seeing this as the future and the replacement of the phone, not at least a fair few generations (try 15)…

 

Apple’s big do…

Every September the online media get excited, and I read so much about what will Apple deliver, and what we expect from Apple, and oh, this is what we think this invitation means…I am still amazed at how much coverage a simple invitation gets, and that’s before anything has been announced. Only last night I caught some tech news on the TV and the breaking news was the Apple invitation that had been sent out with colour spots on it! I mean, really, is this massive tech news, especially compared to what really was the ground breaking story of the month, Microsoft purchasing Nokia!

That being said, we are expecting some new form factor iPhone 5s. Now I am not sure how much new tech, if any the new iPhone will have, but it no doubt will be received with a lot of excitement, that’s what brand Apple receives no matter what these days. I personally don’t think we will be seeing anything major in this latest version of the iPhone 5, some colour options, maybe a little more configuration, but there wasn’t any real innovation with the iOS 7 refresh, so don’t expect anything on the hardware front if the OS didn’t offer anything new.

 

Microsoft and Nokia

No matter what Apple or anyone does in September 2013, the big news must be that of Microsoft purchasing Nokia’s devices division. This is a massive shift away from Microsoft’s original vision, that Microsoft delivers software only, not hardware. This shift may have been on the cards, and for some time – since the Nokia announcing it would go all in with Windows Phone – I’ve been stating it’s only a matter of time before Microsoft buy Nokia.  I think further clues should have been taken from the Surface tablet release. Surface may not be doing as well as Microsoft would like, but it’s been a bold move by them, and is basically a statement that “Microsoft no longer has confidence in OEMs to deliver the hardware and the design to best show off Windows technology”. In many ways I have to agree with this. It should also have been clear that Microsoft would need a devices arm after Google purchased Motorola. That makes Google, Microsoft and Apple now all in the mobile phone devices game, which must be a concern for makers like HTC and Samsung, since they have the hardware but rely on software from other sources. Perhaps they will be moving into the software game (I hope not, but you never know).

It’s also not a bad time for Microsoft to really get aggressive with mobile. It’s had some good news as of late, Windows 8 has gained some traction and now commands a greater market share than Mac OS X, and Windows Phone has moved into 3^rd regarding smart phones.

Though Microsoft are now well and truly in the hardware game, I firmly believe that Microsoft will continue to license its software and that Windows Phone will be available to OEMs such as Samsung, HTC and many more, because after all, software is still Microsoft’s core business. What it means though is Microsoft can now ensure there are devices in the mobile and tablet market places that can compete in terms of design, performance and build quality with those delivered by Apple. By ensuring this level of design, it forces OEMs to deliver the same, or surpass Microsoft’s efforts, or simply become irrelevant.

Many people may claim Microsoft is a dying company, that they haven’t done anything in years, blah blah blah and that Nokia is dead and should have gone with Android. To me, these are statements from people who don’t understand the two companies, don’t understand business and require glasses when it comes to looking into the future. These are probably the same people who said Apple is dead only months before the launch of the iPod.

Microsoft is still a massive powerhouse, and don’t think that Windows is a poor operating system. Just spend a few days being totally open minded and use Windows 8, on a PC, tablet or phone. The OS is far from perfect, but it really makes sense. The user experience is very slick, the capabilities of the OS is far more powerful than any of its competitors and Microsoft provides development tools that are simply second to none. Throw into the mix its Windows Azure operating system, its dominance in the business world and you can start to see that Microsoft may know after all how to become popular with the consumer again. If you don’t believe me actually try the OS with a fresh mind. On a mobile phone, the experience is second to none it really is, but I appreciate the look and feel is not for everyone, and nor should it be or ever be. Mobile phones are personal devices, and as such an element of personal taste will always come into play. The big problems for Windows 8, be it on the phone or tablet, is the lack of relevant apps in the market place. Size of the app store means nothing, most apps available on all the platforms are really a waste of time, but what kills Microsoft is currently the lack of “expected” apps. I really believe Microsoft has got to get paying some companies to bring their apps to Windows 8, be it phone or tablet. Only then, once consumers know they are getting at least the same apps on a Windows device will they make the switch…

 

So, Microsoft and Nokia, a single OS with no compromises across all devices, on hardware that is reliable, looks good, performs well and is innovative, that’s visionary, that’s big thinking. Now all Microsoft has to do is win back love from developers (which its more than capable of doing) and it really is back in business with the consumer…Oh, and controlling your own hardware surely will be a big tick in the additional profits column (if all goes well, if not a rather big drain).

iPhone 5: What Apple got right

September 12^th was the big day and Apple finally showed us their new iPhone 5. However there wasn’t anything there that many of us didn’t know about already, such was the extent of leaks leading up to this event.  So far the reaction to the event is one of underwhelming acceptance…It seems that Apple hasn’t been an innovative company for some time now, rather everything they do is playing catch-up with other people’s ideas and innovations while attempting to maximise and squeeze yet more revenue from their current customers. This, Apple does exceptionally well at…

iPhone 5, it got no NFC right at least: Picture from engadget

Catch up on the iPhone 5 launch event here at engadget

So while there are many blogs, articles, reviews out there that show what’s wrong with the iPhone 5, and there is quite a list, I am going to focus on something they did get right, and that flies in the face of all the technology journalists, who on this subject often show they know nothing about technology and or business combined…Apple got it right when they opted NOT to include NFC in their device.

 

No NFC for the iPhone

While many reviewers are saying this is dangerous omission I have to say it’s highly sensible. If you believe what tech journalists are saying, then we should all be making NFC enabled mobile payments pretty much now, and they have based this belief not on fact, rather on marketing gumph from a few companies out there, VISA, Google and a bunch of phone networks. What they all fail to take into account is that customer experience is being put ahead of practicality, security and cost. In the real world, this means most businesses will not be using it.

The payments industry is pretty much in a mess, there is nothing wrong with the customer experience of using cash or cards, yet there is a common belief amongst businesses and customers that they should be able to make payments with their mobile device. This has lead to endless different approaches to mobile payments, almost all of which centre around NFC capabilities. However, let’s just think for a moment. Cards are not secure things; we know this by how easy it is to make fraudulent transactions, especially in a digital age. NFC is not a secure form of communication, VISA even state this in their own Patent applications. So put the two together and you get…A great demonstration of how we can use mobiles to make contactless payments, but ultimately a nightmare for merchants with endless costs and charge backs, essentially fraudsters saying “don’t mind if I do”. No wonder most merchants say “no thank you”….

Other phone manufacturers may have embraced NFC in their devices, but even then, each manufacturer and device OS uses it in different ways. Just because your device supports NFC doesn’t mean it supports contactless payments. We see this mess with Googles own Wallet only being able to support the one bank card, its own pre-paid card having to be pulled and you not being able to use your Google Wallet at a typical contactless payment point. Throw in the fact that the phone carriers want a bit of the NFC action and you can quickly see how messy this environment is. Sure it’s competitive, but it’s competitive because no one is doing the same thing and everyone is arguing over who owns what part of an NFC based transaction. Even Microsoft’s Windows 8 phones support NFC based transactions, but you need to get yourself a secured NFC SIM with your card details on it. Not exactly lending itself to you simply adding all your payment cards to the device. But this is because the phone carriers want some of the payment transaction action, and it’s a way to stay friends (at the detriment of practicality, customer experience and security).

I haven’t even spoke about costs of supporting NFC for the merchant, which essentially means new hardware, firmware, support and maintenance for that hardware and perhaps updates to their POS if they want to distinguish between a chip and pin card transaction, signature, card not present, or contactless payment, even mobile contactless payment.

So while so many seem to be singing the praises of NFC and perhaps mentioning concerns that the iPhone 5 doesn’t have NFC, I would say no NFC for Apple is a wise move. Apple usually only embrace a technology once it really has proved itself, so not to deter from the customer experience of using their devices. NFC is no different….As a reviewer of the iPhone 5 there are many areas of concern, lack of NFC is for sure not one of them…

Grasping the tech giants business models

It’s rare that I bother to post about business models, economics or company balance sheets, and that’s simply because I don’t find them half as interesting as what’s going on with technology or methodologies. However, for the past 12 years these sorts of things have taken up almost 50% of my working time, and can be interesting from time to time, especially when you look at the tech giants, Apple, Microsoft and Google…

In an earlier post I blogged about the worrying trend for “free” services from the web, and how that business models that were built purely on advertising can be fraught with danger, and essentially only work well for the very few (for Google it works massively well).  However, today I want to look at Apple, Microsoft and Google in terms of their business models, how they differ, where they are similar and their financials to understand the companies better and to understand where we could be heading…

 

Business model

Each one of the big three has their own unique business models when you look at them in broader terms. Apples business is about delivering premium luxury devices mainly, running them with its own software and being tied into its own ecosystem (pretty much exclusively). Apple doesn’t really provide any software services, or software that we buy and run on any old device, rather everything is focused on its own platforms and own devices. One of the big benefits here is if your brand is strong (and Apples is very strong at the moment) then you can command premium rates and rake in larger profits because you control everything, the software, the hardware, the ecosystem even to an extent the distribution channels. This model is a massive earner potentially, but relies purely on your brand being un-equalled in the eyes of the consumer.

Microsoft on the other hand is purely software and software services (well almost purely). Microsoft delivers is software to consumers and businesses alike, it charges licenses for these and subscription fees for its services. Anyone can purchase Microsoft software and services, and most of them will run on any platform, including Apples MAC and iOS. This business model relies on your software and services delivering to the customer’s requirements, but does open up the enterprise as well as the consumer. It also allows Microsoft to enter so many different software market areas, and there pretty much isn’t an area where Microsoft isn’t present. Though each individual sale is nowhere near as profitable as an Apple sale (as Apple sells the hardware too) it is none the less highly profitable and due to its diversitiy, allows Microsoft to support other areas of its business with ones that are doing well. These types of services, aren’t quite brand dependent, rather are feature and function dependent.

Then we come to Google, Google is all about marketing, selling you a marketing services via its search. Everything else Google does is related to gaining more information to increase the value of those marketing services that it sells to SMEs and large corporations. This is again a very profitable business model, but depends 100% on people using your search services, in order to show value for your marketing services. If Google’s search is seen to be not as good as a competitor, or looses market share, then the value of its marketing business also drops away – which puts pressures on every other aspect of the business.

So do we see any cross over? Well the companies do share common grounds, and that is in the entertainment and content consumption area. At the moment, Apple is a little more mature here than the others, but essentially both Microsoft and Google are playing catch up in delivering content through their ecosystems down to their customers. Microsoft has marketplace (which is still branded Zune in some areas), Google has Play and we all know Apple as iTunes.

In addition, both Google and Microsoft appear to be now dabbling in the hardware arena a lot more too. You could argue Microsoft has always dabbled, especially when the company produced the modern mouse as we know it, keyboards etc in the early days. They also deliver the XBOX and now, perhaps, Surface tablets too. So is Microsoft trying to increase its revenues by controlling hardware too? Probably not, though XBOX is now a profitable business for them, this exercise is about showing Microsoft products can be related to high end devices. Google though has got into this more seriously, delivering their own tablets and purchasing Motorola. I personally think this is more about ensuring its OS is running on devices that tie back to its search than about actually competing in the hardware arena or with Microsoft directly for OEMs love…

 

Experiences and current position

The Apple business model relies on belief that their brand delivers a better experience. This is the situation currently for the masses; hence they are the biggest player here in many ways in mobile and tablet. However, this wasn’t always the case. The Apple experience was poor back in the 90’s, I’m sorry it really was, not matter what anyone says. I remember using them at Uni and I will be honest, the UNIX machines delivered an experience I, and pretty much everyone else, agreed with was better than the Apple. Don’t be fooled that people flocked to MS just because, we all used Windows 3.11, 95, 98 etc because it was a far superior end user and business user experience (even with the blue screen of death).  You could also do so much more with the Windows based PCs, networking, support more peripheral devices etc etc.

Apple didn’t die though; instead it reinvented itself with a great experience on a tiny device, the iPod. That experience was and still is, far better than its competition, and it was that experience that led to us consumers looking at just what else Apple delivered. Apple really seized the day here, and improved everything they do 100%. Their devices always looked funky, but now they looked really top of the range, sleek, fast and designer. Throw in their improved operating systems (and a change at the core) and things started to look up. The iPhone moved this on from the iPod, and in many ways Apple defined what we see as a smart phone today (though they weren’t the first, even Nokia had prototype devices that looked like and behaved like the iPhone, they just were stuck on Symbian and never got them to market – shows poor forethought that). The iPhone experience was second to none (even though it lacked in features at first), and that experience is what drove customers to Apple. At the same time, people were getting fed up with the blue screen of death, and the viruses that now plagued Windows machines (and you can’t blame them). In many ways the Apple experience was now superior to that of Microsoft’s. With that experience and belief in place, the Apple business model really did and does flourish…

But are things starting to change again? Well maybe not just yet, but there is a real perception that they could, with many pundits and market watchers believing that Windows 8 across all devices could start to show a better experience to that of Apples on all those devices. Who knows, if that does happen then the pendulum will no doubt swing back to Microsoft away from Apple. The difference between the two companies though is their ability to thrive through poor consumer sales or customer perception…

Microsoft’s brand with Vista hit a real low. Yet the company still managed to rake in big profits, and that’s because of the numerous other businesses Microsoft runs. Microsoft has a highly successful business and server division, and that income keeps them strong even at a time of Vista. Essentially Microsoft can weather storms better than anyone, due to their business model and the diversity of their software and services. If indeed the masses of consumers start opting for devices running Windows 8 over Apples own devices, then Apple will be hit far harder than anything Apple has done to Microsoft in the past 10 years. It’s interesting that both Bill Gates and Steve Jobs see/saw Apple as a premium product and the masses opting for Windows devices, if this again becomes the case in mobile and tablet, then the quarterly incomes that we see posting from Apple will be slashed, none the less they will still operate at a very handy profit on every device they sell (something Google must learn at some point you would think).

 

Financials

By far and away Apple rules here. Though Q2 figures aren’t out for 2012, Q1 figures for Apple have the company posting record revenues of $46b, these up from $26b in the same quarter a year ago. That shows that Apple is moving from strength to strength and quickly. 58% of those revenues come directly from device sales, keep that in mind, such as iPhones, iPods, iPads and Macs. Almost all devices Apple produce have defined the market and command massive market share, with the exception of the Mac, which in desktop market share is a tiny player.  What’s interesting is that Apple doesn’t have any areas where the company loses money, and that’s why it’s such a strong company.

In second place we have Microsoft with its own record $18b for Q2 2012. Though the company had to write off a $6b investment in an advertising company (which meant Microsoft’s first ever loss), the company looks to make around the $6b each quarter, almost none of which comes from device sales. Microsoft is sitting on assets of excess of $121b up from $108b just 12 months ago so it’s a rich company that is growing in every area – though some are running at a loss. Microsoft makes money from a number of software and services divisions, but these also end up supporting many other software and service divisions that run at a loss. Bing for example has never managed to get close to profit, yet Microsoft plug away at it, and even Bing is heading in the right direction. Microsoft does play a very long game with these divisions, and it has the cash reserves and the income to be able to do that…

Finally we have Google, who also posted record quarter revenue, this time of around $12b. Interestingly enough Google makes no money from so many ventures, but its core business model allows them to still operate at a nice profit and command such sales. Almost everything Google makes comes from marketing…

 

Long term projects

Microsoft has always led the way in R&D investment, and it seems to be ramping this up. Many could argue the company has been stagnant for many years, which could be true. However, Apples re-emergence has meant Microsoft needs to up its game if it wishes to remain a big player in the home, and that’s exactly what they appear to be doing. Microsoft plays a very long game, and is prepared to give its businesses a very long time to move into profit, think XBOX and the entertainment divisions which now operate at very healthy profits, that wasn’t always the case. Bing may be losing Microsoft money each quarter, but it is losing less money than it was each quarter. The whole thing here is that Microsoft is involved in so many different areas which many of which aren’t profitable…Yet…

Apple on the other hand has been very fortunate. Not only were they fortunate to survive (with some cash from Microsoft there too) they stumbled along for many years offering not much innovation and poor experiences. However, that all has changed dramatically. Since the iPod and the additional revenues that brought in, Apple has invested and innovated, carving out not 1 but 3 market places for itself to dominate.

Google has always been the golden company of search, however mobile is a real challenge for them, delivering their marketing services down to devices. Here Google search isn’t as strong as it is on the desktop or as effective at delivering adds, so Google has to have a strong mobile presence with Motorola and Android to safeguard its core business.

 

Conclusion

All the tech companies are growing, and that’s due to us consumers demanding more from the internet and from our devices and software. The mobile and tablet marketplace is quite new, and it’s where the tech companies need to do battle, and will do for the coming years.

Mobile for Apple is the linchpin of their business, the iPhone and the iPad command massive market share and is charged at a premium. Any dent into the perception of the user experience or brand itself will hurt the company massively since it depends so much on device sales.  Likewise new competitors in this market place who gain market share from Apple will have a big impact on Apples financials (though Apple is simple so strong at the moment it’s hard to see).

For Microsoft, it must grab more market share in mobile and tablets to ensure it remains relevant in the consumer marketplace. Though Microsoft is strong in so many business areas, such as business and server, it is aware that for the consumer marketplace, it needs to get a good hold in mobile and tablet, hence the big push with Windows 8.

Finally, Google needs to retain a large market share in mobile to ensure it grabs enough user data and can deliver its own core marketing services to users. If it cannot do that well for mobile, then Googles business model becomes very fragile indeed.

I personally think that the next few years will be interesting. I’m excited by Windows 8 and the one OS for all devices – to me it makes sense and as a consumer that one experience across everything, that seamless usage between all those devices while not compromising on the things I want to do with them makes a compelling case and delivery of a better experience. If Microsoft gets it right, and its marketplace store continues to grow and deliver the content we as consumers want, then Microsoft will no doubt be delivering a superior experience and will start to grab market share in mobile and tablet. This will lead to more record quarters from MS I’m sure, and that will in turn lead to far more R&D and new divisions it starts that run at a loss for a long period of time too, until they too make a profit.

Apple has, and will always have, a strong loyal brand following, so though I don’t see Apple holding onto its massive market share in mobile and tablet, its future remains very bright. Apple will command a premium and will have customers flocking for its products. The company makes very good profits on all its devices and most of its businesses, so the company seems set for many years to come.

My concern is for Google if I am honest. Though the company is growing, the mobile war is far more important to them than anyone else. If Android loses market share, then the number of people relying on Google services for search will drop (especially as more of us use our mobiles).  This means their core business revenues will take a knock. The Motorola deal for Google is so important, if Google can make money from actual devices, while gaining greater data and ensuring its browser and search services are delivered to devices, it can retain its core revenue. The problem is, their business model relies on Android success, and if companies like Samsung start selling more Windows Phone devices, then Google almost becomes dependent on Motorola’s success. If that is the case, has Google got time enough to try and build that brand to compete with the likes of Samsung, and more importantly Apple?

Will Mobile kill free services?

Sorry to be blogging about Mobile again, but at the moment it’s my main focus of work….In this post I want to have a quick look at the problem mobile presents to companies that live, and potentially die based on advertising revenues.

 

The advertising model

The biggest player in building their business solely on advertising revenue is without doubt Google. Almost everything it does is based around gaining more information on us users, so that it can effectively deliver adverts back to us in a better fashion, so we are more likely to click on them, and Google gets paid. The more clicks, the more Google earns and can even charge. It’s this model that allows Google to deliver pretty much all of their services, and software (Android springs to mind) for free, all funded by charging for adverts. Don’t kid yourself that Google delivers services for free because it’s a loving, don’t be evil company. Most of the things Google deliver for free are there to help Google gain more data so they can advertise more effectively. Mobile is a great example, and one of the reasons Google purchased Android, so they had a mobile presence to locate us and advertise based on geographic locations.

Google isn’t the only company that lives by charging for adverts, there are many businesses out there, small and large, especially online, that make their money mainly from delivering adverts. How many times do you go to a website and there are adverts delivered on it? How many times do you read a blog with adverts delivered on it? Quite a few. Even Facebook only makes money because it charges for adverts that are delivered on the website to us users.

So what happens to companies if they cannot effectively deliver adverts any longer?

 

The Mobile Problem

Currently Facebook is becoming rudely aware of this problem, so much so that its newly floated stock is now trading almost $10 down on its launch. Why? Well it’s all to do with the company’s ability to monetize and take advantage of its 900m user base. You see, on Facebook the website (used from a desktop) we have adverts constantly being shown to us. These are tailored ads, based on what I like, what I talk about, my own personal status, and as such Facebook can charge for these. However, if I use Facebook on my mobile phone, these ads simply aren’t there. The concern is then, with so many more of us using our mobile phones as our primary device to access the web that companies won’t want to pay for adverts if no one is able to see them. This basically means Facebook can no longer deliver ads effectively.

This problem isn’t limited to Facebook. Think of those free apps we have all downloaded that have ads being displayed. They are free because the ads are paying for them. But how much space do those ads take up, and typically you can only see one single advert. The problem is that ads jar the mobile user experience, they don’t fit in well and the user finds themselves scrolling to see the actual content they use the app for. I for one have un-installed 5 or 6 apps now where I simply got annoyed with the adverts.

Don’t think though Google is exempt here. Using search on your mobile is fine, and Google still can display its sponsored links there, however, a chunk of Google’s revenue is displaying ads on other peoples websites, blogs etc. As more of us turn to mobile to access the web, these adverts start to disappear, and therefore so does Google’s revenues from these ads. The next mobile problem is that many of us prefer Apps over a browser experience on our mobile phones. This means we start to not even search using websites like Google.com, rather we use an app. I for one use the Bing app, the user experience is far better than visiting the mobile website version, and it integrates with other tools and functions, such as QR code scanning, voice and local scout (which delivers search results local to me and includes such things as local restaurants, points of interest etc.) This means the only adverts I have any chance of seeing are those sponsored links that come back in a handful of searches.

With all this in mind, can the likes of Google even see revenues falling as it too struggles to deliver ads down to mobile devices? Sure, Google has a big enough market share of search to survive, but can it charge enough to then keep subsidising so many of its ongoing projects, and even worse, the number of failed projects that have cost millions which are raking up?

 

End of free services?

We have got used to so many free services online, Search, Social Networks, watching videos etc. All these things cost money, and currently so many of them are funded purely by the ability to deliver adverts to us online. Mobile really does threaten that model, if you can’t successfully deliver a number of ads down to user’s mobile device, then why will a business advertise with you? If revenues start to fall, then how long is it possible for companies to make losses on all these free services? Google subsidises everything it does based on adverts, but if those revenues can no longer support everything Google does, will we start seeing services getting switched off, or having to pay for them? No doubt Google search will survive, but the question is can Google afford to deliver everything else it does for free?

For the likes of Facebook, the mobile threat is even greater; it really does present a problem. Keep in mind that if this is true of Facebook, a company with some 900m active users, then it will be for any business that is built on advertisement revenues. Mobile really could be the death of free services online, unless companies can figure out a new way to deliver adverts back down to our mobile devices. That’s tough, especially since ads ruin the user experience currently. At the moment, mobile could be the grim reaper for so many free services.

…We shall see….

Protecting the web, or just lazy and greedy?

There is a lot of talk of trying to legislate areas of the web. Here in the UK, BT will cut your broadband off if you are found to be frequenting and downloading content (music, films etc) from illegal file sharing sites. Many claim this just isn’t right, and that the UK government and BT are somehow trying to censor what we can or can’t do on the web. Over in the states, Google is thinking of divorcing itself from the Chamber of Commerce, because the Chamber supports legislation that forces internet companies to police websites that peddle pirated movies, music oh and fake Viagra (the latter being rather dangerous).  So what’s your stance?

Google - plain lazy and greedy?

 

Protecting IP and consumers

The music industry really suffered first here, with copy write basically being flaunted all over the web, with millions of people globally simply downloading illegal copies of music. The same now happens with films and even drugs (though the latter is often fake versions of drugs such as Viagra).

Legislation that Google objects to is all about protecting that IP, essentially ensuring people get paid for their work and don’t have it stolen from them. Is there anything wrong with that? At the end of the day, if we all chose to illegally download music and films, would there be enough money in the industry to actually have an industry? Would we be left with “cr*p amateurs” uploading their stuff to You Tube? Yeap we would, and oh dear…It seems that individuals who have a problem with this type of legislation have a problem with it, because if effects their own habits (such as downloading free music /
films from illegal sites).

So why does Google as a web giant object to this legislation, and why could it see them pulling out of the Chamber of Commerce? Well, a source close to Google said the company is “frustrated” about paying dues to an organisation promoting legislation that would “impose new liabilities” on Google. So what does this actually mean…Well it means Google are frustrated that the Chamber supports legislation that would mean Google would have to make changes to its search algorithms, which will cost money!

 

Does protecting IP and consumers from fake drugs lead to a lack of innovation and censorship?

A cracking argument I read over and over again (when talking about legislation on cracking down on illegal websites etc) is that such legislation would threaten innovation and encourage censorship and infringe on freedom of speech on the Web…To this I have to say “what a load of shi*”.

Such legislation will mean Google has to monitor what it indexes and displays. That’s work for them. In addition it also means they can’t just take money from advertisers who peddle illegal content, again work for them. But, how does that stop innovation on the web? Would this legislation have stopped the rise of iTunes, a legal source of downloadable music? No, but it would have stopped Napster from sharing millions of music files and loosing an entire industry millions of pounds. Would legislation really lead to censorship of freedom of speech? Again No! Though some may argue WikiLeaks
would suffer…But again, is that a problem? Is stealing content and then publishing it really a good thing? Were any of those stories in the public’s interest, did WikiLeaks not break data protection laws and many others? But let’s back track, this legislation wouldn’t have stopped WikiLeaks, rather it is focusing on illegal file sharing and the selling of fake drugs etc…

 

Plain lazy

Essentially Google and others don’t like this legislation because it means they have to do something, they have to invest in changes to their business to meet that legislation. Booo hooo. If anything, companies like Google should not have been indexing illegal sites from day one; there should not have been any need for legislation! After all, Google is effectively acting as a marketing tool for these illegal businesses. If I went to a local shopping centre and advertised where people can purchase stolen goods from, directing people to that “shop”, I am sure I would be spending sometime at her majesties discretion in jail! But, if I do it online and I am Google, that’s all ok…

 

The bottom line

For too long the web has been a place where people can get away with illegal activities because it’s all supposed to be “free”.  Google is just as much a culprit as the illegal websites that it indexes. It’s about time Google did something about it, and I hope legislation is made stronger for companies that advertise / index / direct people to illegal websites. Stop whining Google, do your job properly and
legally!

The Android debate

When anyone talks about Android there is a lot to be said, be it “Android is the most popular Smartphone OS”, to comments that it’s “the stolen OS”.  Steve Jobs even stated he would “kill Android”. But there is no getting away from the fact that Android is a feature rich OS, that it has now almost 40% of the Smartphone market share (though Smartphone’s don’t even make up 30% of the overall mobile market) and that Google owns it, and now a mobile phone company…

Competition

There are so many Android devices out there now, and from a range of manufacturers, so much so, that getting your hardware noticed is tough. When you walk into a store and see so many phones all running the same OS, how do you set your hardware out to be different (especially to the average mobile punter). Price…Oh dear…

Poor mans iPhone

So many people who have Andoird have it because they couldn’t justify getting an iPhone. I know many people who have opted for Droids because of price, but they really wanted an iPhone. The same applies to the “kids” that have Androids. Essentially many have them because of price, and once they get a little older move over to the iPhone. That must be a worrying trend. However,
is it a surprise? Probably not since Android feels like a cheap clunky copy of iOS in so many ways…

 It’s free, it’s Google

One of the reason Android has been a success is that is been seen as the free OS, allowing many a manufacturer to ship it on their devices, enabling Android devices to be “cheap” and swamp the market. That is essentially how Android has got it’s market share, and there is nothing wrong with that.

But is it really free? In the past couple of months we have seen a number of patent deals being agreed with Microsoft for Manufacturers being allowed to use Android. In addition to that, we have seen Apple halting many Android devices due to patent infringement. These are problems manufacturers can well do without. Ask yourself, as HTC or Samsung, do you really want to spend a lot of time on R&D only to have your devices stopped from getting to market? Do you want to have to pay a third party company license to use software that essentially belongs to another company? No you don’t…

Throw into the mix that Google now owns Motorola and has effectively secured its own hardware for mobile devices. This must be a worry for HTC, Samsung and all those that sell Android devices. Do you really believe that Google will continue to provide updates to their OS to give away to competitors of their own devices? If they do, then that’s crazy business thinking from Google.

 

Nokia?

I have read many a comment in the past day or so that Nokia should have opted for Android, or they should be making Android devices as well as Windows Phone. But that makes no sense from a business point of view. The Android market is all ready crowded, and how does Nokia regain its Smartphone market share by entering a dog fight with pretty much every other manufacturer
out there? Especially when all they can compete on is price and some nerdy hardware specs (maybe some design too). That’s just too tough. Throw into the mix the hassles you can have with Android and the fact that Google now owns Motorola, and Android looks very risky…

Windows Phone makes perfect sense to me. In many ways it is the overlooked OS, and that’s because no one really knows about it (phone nerds do, but who else). Not many have actually seen it advertised or ever even noticed it in stores. So for Nokia, Windows Phone market is easier to enter, and they know they can sell aggressively against the other Windows Phone competition.

The Windows Phone OS is good, very good. Pretty much everyone I have seen play with it, likes it, they find it intuitive, they like the live tiles and they love it’s simply integration with social media.  It provides something very different to Android and iOS, and as such, that means making a Nokia device stand out on a shelf is made that much easier.

Finally, Microsoft want to get involved in the mobile world, and they know Nokia are the biggest mobile brand out there (still), and that Nokia can get Windows Phones into the hands of millions of people, and ensure Nokia and Windows Phone grab market share.  I wouldn’t be surprised to see Nokia grabbing Smartphone market share quite quickly, which I am sure will make other manufacturers look closely at Windows Phone and start investing more in that OS. It is already happening to some extent with HTC and Samsung…

To finish…

Android has shocked us all with how much market share it has grabbed, but should we have been surprised? In many respects it’s a free, clunky version of the iOS that DOES cost manufacturers in terms of licensing etc etc. Now that Google owns Motorola are companies confident that they will be given the same OS to compete with Motorola? How many other instances of Android devices being banned can we expect?

All in all, Android may have shot to popularity, but there are many question marks above it, and it seems many more are being raised as time moves on. Will these question marks deter manufacturers from using Android? I believe they will over time, and I believe that Windows Phone will be there to grab market share – and that at the front of that pack will be a company from Finland, a company we all used to love…A company called Nokia…

HTML 5, Flash, Silverlight, The Cloud…The future is here?

I.T. seems to be at one of those cross-roads in terms of how people use software, where they use it, and how and where they choose to store their data.

There has been a lot in the press regarding HTML 5 and I have posted some thoughts on this in the past. There has been equally as much speculation as to the future of technologies such as Flash and Silveright and whether they are now redundant technologies as HTML 5 moves closer. In addition to these, rather large discussions, we are also talking about moving content and software away from traditional servers and PCs, and handing control over to the “Cloud” and “SkyDrives” etc…

So this post is looking at indicators of where we may all end up based on feedback I have received from businesses, the general public, phone professionals and my own thoughts…

HTML 5

This is the easiest one to start with really. HTML 5 will be here, at some point. Many say a lot sooner than I personally believe and many (as there always are) saying this will change everything (which it won’t at all). What HTML 5 will do, is simply to replace the need for browser plug-in to enrich a users web experience to an extent. For example, we will no longer typically use Flash or Silverlight to just stream video, give our website some pretty animations etc etc. Some will argue that’s a good thing, and if you are a purist (in terms of open environments, using only HTML to deliver content) then yes it is. For Video and animations, yes it is a good thing…

However, there are big problems with the whole architecture and the way HTML and the web in general works. The problem here is the web browser. When the web was conceived, the browser was simply an application that displayed some content, it wasn’t to be used as an environment in which processing can occur. But, we are here, and the browser is used to run “script” and to initiate communication between the client and the webserver…HTML sets out standards, but, with everything, with multiple choices (in terms of browesers here) you get different results. No matter what standards are in place, web browsers handle, and will handle the same HTML and even script differently to each other. This is a horrendous state of affairs, meaning that the same website has “allowances” for multiple browsers. This isn’t good…From an end users point of view, “who cares”, but from a development, maintenance and cost point of view, this is not acceptable really. Even if the browsers did handle it all the same (or got very close), testing would still need to be made on each browser platform, and for every time a new browser is released / updated. But this is where we will still be with HTML 5, don’t listen to any marketing hype or to any so called “experts” on this….This is simply the facts….HTML 5 will not change the web for us at all…

Silverlight and Flash

HTML 5 will have a big impact on Flash I believe, after all sites that utilise flash do so to enrich the website. HTML 5 will do this, and unfortunately for Flash, developers will adopt this and leverage it before they look at Flash. So where can Flash go? Well there are still many things Flash can offer that HTML 5 won’t be able to, or at least won’t be able to offer consistently across all browsers. Because of this I see Flash filling small gaps that HTML 5 leaves (the same applies to Silverlight). I do think though Flash will see a massive reduction its use on the web, but will maintain its use for presentations, short movies, and games.

Silverlight is a little different. I have never really seen Silverlight as a pure web technology, and those out there who keep comparing it to Flash or HTML 5 obviously know nothing about Silverlight. Sure Silverlight can give you animation online, deliver RIAs, stream movies etc (all that Flash and HTML 5 can do), but Silverlight has a lot more to offer. The architecture behind Silverlight I feel is spot on. It mixes both the worlds of Desktop and Web seamlessly, effectively delivering desktop applications (with all their power) via the internet for installation, communication and maintenance. This is very different to HTML 5. Because of this, developers will use Silverlight for business applications, for RIAs that need to do more (integrate, carry out complex functions etc) and all without the reliance on the browser or server doing processing jobs. This reduces testing and ensures a single code base (and that’s how it should be). In addition, you get frequent updates, and full support from Microsoft, which again are good things for real developers…

There has been some confusion as of late (mainly in the media and Microsoft haters) as to the value of Silverlight to Microsoft and the fact that it is also used on the new Windows Mobile & platform. Let’s get this clear, Microsoft will concentrate more now on HTML 5 as HTML 5 is a big online technology, and it needs to keep up with others. So this is no surprise. However, Silverlight is and will remain a core development platform for the web, RIAs, Out of browser applications and experiences (which it does now). Sure the Silverlight team will also now work more on its Mobile use and adoption, and that’s because they need too. So all we are talking about is prioritisation of the progression of Silverlight. This is clear from reading up on Silverlight, looking at Microsofts future plans and listening to what is said rather than reading between lines when a press release comes from Microsoft…Silverlight will become increasingly more important to Microsoft in the future, as more developers realise that they can use a single platform to code for the web, the desktop and mobile devices…

Cloud computing, SaaS and SkyDrives

I mention SkyDrives here as that is what Microsoft terms your cloud computing storage space with Windows Live and on your windows mobile 7 phone.

I think in the past couple of weeks, I have had more feedback than ever before on the cloud and its use, from both businesses and the general public.

So let’s look at businesses. Businesses cannot move everything over to the cloud, it’s as simple as that. There are savings to be made via the cloud for business, but it has to ensure that it can move those applications and content to the cloud. That it doesn’t already have a cheaper alternative, that it can trust the cloud providers security measures etc 100% and that there is a way to port to other providers in the future. All in all, business is still wary of this and why shouldn’t they be. I see businesses embracing the cloud and SaaS for smaller elements of their operation, ones that do not require so much compliance and that are not that critical to the organisation. This is not a bad thing, rather it is a good thing, the cloud here allowing IT to provide better solutions to the business at lower costs. I don’t believe the increased popularity of the cloud will translate to vast amounts of an organisations data or services being moved to the cloud. Rather the cloud becoming another IT implementation option.

So what of individuals. Well only last week I posted that individuals may well be the big winners of cloud computing. But even here, individuals are more sceptical of cloud based services. It seems that keeping some photos online, music and videos is fine. But when it comes to more personal documentation, you cannot beat a good hard drive or storage device at home. Because of this, I don’t see the masses adopting cloud computing and sky drives….Google may want us all to use the Cloud for software and storage, but the simple fact is, we like control over everything. If our data and content is only in the cloud, then we feel vulnerable, not just to theft, hackers or work colleagues finding things out etc, but also to cloud providers themselves. Let’s face it; Google has an appalling record on data protection and our privacy.

So what is the right usage for individuals? Well Microsoft though I feel has pitched it correctly. Providing 25Gb of space in a sky drive to windows live users (perhaps a little too small really). This is enough space for most people, sure it could be larger to allow us to synch a lot more content, especially music and videos. But it’s a good start. I also love the fact that my Windows Mobile 7 phone provides options to just take a picture and have it stored in my skydrive and not on the device. But, I still have enough space on the device to cart around with me a certain level of music, pictures etc etc. (No doubt this amount of storage will grow). So it’s a nice blend, one I personally am comfortable with, and one most people I speak too are comfortable with…

Conclusion, if any?

It seems in IT, too many marketing companies, experts etc provide to much hype. Everything is also “brilliant” or “rubbish and a fail”. It’s either 100% the way of the future or 0%…There is never any middle ground, and it is the middle ground which actually is where we are heading, in terms of our web usage, devices, online services and storage…And there is nothing wrong with that at all…