Small Business: TARP Failing

Small business customers are a key customer segment for many service and application providers, as they often are more willing to make faster decisions about new communication services and software.

To the extent that firm growth is a direct driver of software, hardware and communications activity, and given that up to 85 percent of new jobs are created by small businesses, perhaps somebody should be listening to them.

A survey conducted in February 2009 by online payroll service SurePayroll found that most small business owners feel the government should be taking a different approach to boost the economy during tough times.

Nearly three out of four small business owners disagree with the way the U.S. government has allocated funds in its Troubled Assets Relief Program (TARP), and believe tax cuts would be the ideal solution.

TARP was deemed effective by only three percent of respondents, while 72 percent were clear on their disapproval and 25 percent did not have a strong opinion.

BlackBerry App World Launches: Implications for Service Creation, Business Models Clear

Research In Motion has opened its new online application store, called BlackBerry App World, according to UPI. BlackBerry App World accepts PayPal for payments and starts prices at $2.99. That move might be an effort to screen apps for quality, something some believe is an issue for Apple's AppStore.

Price options also run up to $999, suggesting RIM will push high-end downloads through the store. To access the store, BlackBerry users will need to have a least a Version 4.2 operating system on their phones.

RIM appears to be negotiating back end revenue shares with vendors of applications that generate revenue through advertising or other means. It’s unclear what the share is, but language in developer contracts suggests that a revenue share is part of the model, Alec Saunders, Iotum CEO, notes.

The broad emergence of app stores, distributing or selling a wide variety of entertainment, utility or business apps, mostly Web related or data related rather than voice related, does raise some questions about the voice "service creation environment."

It is becoming possible to assemble apps rather than "create" them, using open and loosely-coupled processes. The problem would seem to be that "assembled" apps more nearly resemble the old "over-the-top" or loosely-coupled model rather than the high-availability, vertically-integrated model that has in the past been typical of voice applications.

There are obvious business model implications. Independent software developers and device manufacturers obviously participate in the revenue stream. It is less clear how access providers participate, and, if so, to what degree.

The longer-term implications are equally momentous. Up to this point the bulk of revenue has been generated by using "big iron" or "big code." And that might continue to be true for quite some time. Value, though, increasingly is realized by assembling new apps using building blocks essentially abstracted from the "big iron" or "big code" platforms.

That isn't to say that incremental "value" is equivalent to "revenue" in a linear way. Still, it is hard to see where the trajectory leads. To some extent, access, transport, computing, storage or basic features are--though not commodities--perhaps viewed as "table stakes." The new applications, though creating relatively small amounts of revenue, increasingly are viewed as the "secret sauce."

For service providers, there's a sort of inversion of value here. Most of the cost and even the value is provided by the basic infrastructure and connectivity. Yet the "sizzle" is coming from the new apps that represent little incremental revenue. The good news is that given enough sizzle, it will be easier to keep users using the "basic" features.

Broadband Stimulus Meeting in Washington March 10

The National Telecommunications & Information Administration is holding a meeting March 10, 2009 in Washington, D.C. on the "broadband stimulus" provisions of the "stimulus" bill. Click "related article" for details.

Separately, Mark Seifert, formerly with the Federal Communications Commission, has been tapped to head up the policy side of the NTIA's allocation of broadband stimulus grant and loan money. Bernadette McGuire-Rivera will be handling administrative duties.

Representatives of the NTIA, the FCC and the Ag Department's Rural Utilities Service are meeting next week to talk about how to hand out $7 billion-plus set aside in the Obama administration's economic stimulus package to provide Internet to un-served and underserved areas.

VMWare Cloud Computing Initiative

VMware has released its new Virtual Data Center Operating System (VDC-OS), software that creates an on-demand computing capability integrating computers, storage devices, and networking equipment.

"Virtualization," the ability to partition storage so more apps can  be run on fewer servers, used to be a topic computing staffs and storage suppliers were interested in. These days, it is beginning to be interesting on a wider scale, to more enterprises, developers, content, software and service providers because of the way whole computing infrastructures now are capable of "virtualization."

The software, due later in 2009, reflects VMware's push into cloud computing, essentially a virtualized data center. By making the leap, VMware joins Microsoft, Google and Amazon.com as providers of cloud computing infrastructure. 

The world's next generation of software may well hinge, in large part, on use of cloud-based computing, especially for high-volume Web-based applications. 

Hal Varian: Data is Cheap, Ubiquitous, So Value Lies in Meaning

More than ten years into the widespread business adoption of the Web, some still fail to grasp the economic implications of cheap, ubiquitous information and communications and modular, open software. But executives are learning fast precisely what the implications are.  

Inside enterprises, ubiquitous information is reshaping and flattening organizational structures. In the broader economy, retailing and distribution processes are transforming. 

The impact is perhaps nowhere more startling than in print media, music and pre-recorded video, where value is so much altered that some distribution channels are being destroyed, others merely reshaped. 

For communications providers the changes are less direct, if no less challenging. Value and revenue now are shifting inexorably towards "data" experiences rather than simple "voice." But data experiences are precisely where loosely-coupled software, hardware and communications change value contributions so much. 

In a broad sense, the global telecom industry is going to have to learn to do what others are being forced to do: assume an environment of cheap, ubiquitous "things" and learn to create value by extracting meaning and usefulness out of those ubiquitous things. 

Global Telecom Dip in 2009 to Reverse in 2010, Climb for 4 Years

Analyst Simon Sherrington says global telecom capex is set to decline by about 0.7 percent in 2009 to around $297 billion, with steeper declines in mature markets such as the United States and Western Europe offset by investments in growth markets such as China and India, and regions such as Africa and the Middle East.

But the contraction should be short-lived. Sherrington forecasts an increase in global spending in 2010 and in the following three years, with the global capex total hitting $350 billion in 2012.

By the Time the Broadband $ is Spent, It Won't be "Stimulus"

For all of the interest companies now are showing in the $7.2 billion broadband access spending that is supposed to happen as part of the "stimulus" package, it is possible the only people who will "get" any incremental money any time soon are lawyers and consultants who claim they can help clients get some of the money.

A large percentage of the money for broadband in the stimulus package won't be spent until 2011 or later, says Jeffrey Eisenach, chairman and managing partner of Empiris, an economic consulting firm. The money, split between the U.S. National Telecommunications and Information Administration (NTIA) and the Rural Utilities Service (RUS) of the U.S. Department of Agriculture, will go out in the form of grants, and neither agency is currently set up to allocate billions of dollars, he says.

"In 2014, you're not going to need stimulus in this economy," says Robert Atkinson, president of the Information Technology and Innovation Foundation, a tech-focused think tank. "There's a sort of half-life for stimulus spending."

Blockbuster Defies Expectations

The conventional wisdom is that Blockbuster's business model is the equivalent of "toast." In fact, fears of an impending bankruptcy filing caused shares to fall as much as 86 percent early in March, as a result. 

But Blockbuster says domestic same-store sales increased 4.4 percent in the fourth quarter of 2008, representing a 5.3 percent increase when compared to a decline of 0.9 percent in the same period in 2007. 

The increase in same-store sales was comprised of a 2.6 percent decrease in domestic same-store rental comparables and a 36.5 percent increase in domestic same-store retail comparables, which was largely driven by increased sales of games, game merchandise and consumer electronics.

For the full year of 2008, Blockbuster achieved a 6.4 percent increase in domestic same-store sales, compared to a decrease of 6.9 percent in 2007. The 2008 domestic same-store comparables included a 1.2 percent increase in domestic same-store rental comparables and a 37.4 percent increase in domestic same-store retail comparables.

Companies and executives frequently manage to outperform conventional wisdom, and it appears Blockbuster has done so. 

Mobiles are Disruptive to Ad Business

Media and advertising professionals say the pullback of ad dollars and mobile devices becoming personal computers are the most disruptive forces in media today, according to a recent survey by KPMG LLP, the U.S. audit, tax and advisory firm. With media time and spending seen moving away from traditional channels, attention to social media and mobile consumption is expected to increase.

In polling more than 200 media, marketing and advertising executives, KPMG found that 49 percent of respondents indicated that the pullback of advertising dollars is the most disruptive force in media today, followed closely by mobile devices becoming personal computers (40 percent).

The KPMG survey also found that some 75 percent of executives predict that advertisers will move more than a quarter of media time and spending away from traditional channels in the next five years, while social networks and mobile marketing are expected to see increased activity.

While the marketing and branding power of social networking is expected to be increasingly harnessed in the future, 61 percent of executives indicate that fewer than 30 percent of ad agencies have a plan in place to leverage the medium for their clients.

A Humorous Look at Soccer

In my case, something more true of my grandkids than my kids, who preferred football, track and wrestling. Then again, I only have one daughter and three sons, and they managed to get to high school before the soccer craze hit. 

The grandkids have tons of "gold medals" hanging on their bedroom walls, many earned for seasons where no scores were kept and no goalies played. 

Mobile Marketing Evolution: A Prediction

There's one consistent pattern I have noticed for decades in the telecom business, and I'd be willing to bet the same pattern plays out in the mobile marketing business as well. New things start out when pioneers, typically exemplified by new companies, start making a business of the new innovations. 

As the new practices, channels, services and applications start to become mainstream, larger and established players move in and ultimately represent most of the sales volume. We saw that in the mobile business, in digital subscriber line, VoIP, the dial-up Internet access business, content distribution networks and cable TV, for example.

The big exception to this general rule is that a few of the upstarts will so dominate new parts of the ecosystem that they themselves will become the leaders. Google and Amazon come to mind. Still, over the long term, even large assets of this sort might ultimately be absorbed by other contestants in the ecosystem. 

In the mobile advertising business, that means specialists will prove the channel works. Later, though, the full-service agencies will simply incorporate mobile channels within their larger practices. We are quite some way from that sort of consolidation, however. Right now, it's a specialist's game. 

The Outcome Might be Inescapable, But Plan on 20 Years

If the newspaper and magazine business model increasingly is "toast," is TV next? You will find no shortage of observers who say the answer is "yes;" that over time, more content will shift to some Internet-delivered modality. 

It might also be worth keeping in mind that transitions of this sort typically take decades. As a journalism graduate student I worked on a Gannett-funded project on the future of journalism education as electronic forms of media became more important. Keep in mind, the World Wide Web had not yet been invented at the time we conducted that exercise. 

I hate to admit it, but that was nearly 30 years ago. Only this year have we seen massive signs that the transition is hitting print media on a permanent basis. 

So the direction might be there, but the transition will take far longer than most expect. In fact, most technology-driven displacements of this sort take longer than most observers expect. If the Internet TV displacement follows the typical curve, progress will be far more stubborn than people expect, in the early years. And "early years" can last for decades. Once the inflection point is hit, change will occur faster than people expect, though.

For those of us who have been anticipating a major shift to electronic forms of all media for quite some time, it has taken quite a long time to get here. Now that we have, watch out. The structural change now will occur far more rapidly than anybody suspects. 

That you are reading this on a blog is but one example. 

I do not think it will take 30 years for stunning change to occur in the packaged, linear video business. But neither do I think anything other than relatively incremental changes in revenue volume will occur in the near term, if only because technology substitution, and the changes in industry structure technology enables, take time to unfold.

I do believe the inflection point for print media already has been reached, and do expect massive changes on a scale and pace most practitioners are not expecting. That is one reason why I began to shift gears two years ago. Well, maybe shifting gears is too incremental an analogy.  Jumping ship is the better, if imperfect, analogy. 

Somehow, I still find myself doing "print" content. But it is not the future. 

A similar inflection point for mainstream replacement of multi-channel video services by Internet replacements is far off, yet, even though we now can see the change coming. It might be inevitable or inescapable. It will not be transformative for some time to come, though. Think decades, not years. History suggests that is the right time frame.

Help! We Need Unified Communications

Communications barriers and latencies can cost small and medium businesses up to 40 percent of their productive time, according to a Siemens-sponsored global study suggests.

On average, 70 percent of of small and medium business execitives recently surveyed say they spend 17.5 hours each week addressing the pain points caused by communications barriers and latencies, according to a global study sponsored by Siemens Enterprise Communications and conducted by SIS International Research.

Researchers at SIS International Research determined that the time spent per week dealing with communications issues was more than 50 percent higher in companies with more than 20 workers.

Companies of 100 employees could be losing more than $500,000 each year by not addressing their employees’ most painful communications issues, considering only "hard costs."

The top five pain points are inefficient coordination; waiting for information; unwanted communications; customer complaints; and barriers to communication.

Premium Video Not Conforming to Historical Patterns?

In past recessions cable operators and other multi-channel video suppliers have seen a dip in growth rates for premium services such as HBO, Showtime or Starz. That might not be happening this time. Or at least the impact has not yet been seen.

At the same time, Netflix growth seems to have accelerated as well.

Perhaps consumers will behave differently this recession than they have in the past, and in ways that are good for video providers. Better promotion from more providers or a change in the value of in-home entertainment might be explanations.

So far, this is a bit of a surprise to the upside.

Smaller Businesses Warming to Cloud Computing

The most important factors driving businesses of all sizes to implement cloud computing solutions are the same factors that have prompted companies to outsource IT services for years: lower costs, better performance and agility, according to Hosting.com, which recently surveyed 644 executives in a broad range of industry verticals, and including firms with fewer than 100 employees as well as firms with more than 1,000 employees. About 69 percent of the respondents say they have fewer than 100 employees.

The driving factors for adopting cloud services are nearly the same for all company sizes, the report suggests, and business size plays no role in how quickly the executives believe cloud technologies will be adopted.

Cost savings, availability and performance are the top three values respondents believe cloud computing represents, but scalability also ranks high.

Security and support are seen as the two top obstacles cloud computing providers must surmount.

But roughly a third of executives in the small business and mid-sized business categories think they will be using cloud computing in some way at their firms within the next 12 months.

About 70 percent of respondents say Web applications are best suited to cloud computing, but 41 percent say data base operations are best suited to cloud computing. About 37 percent see application servers as ideally suited for cloud computing.

About 18 percent of respondents prefer to buy using annual contracts while 48 percent prefer month-to-month payment schemes.

It is worth noting that Amazon Web Services (Amazon's cloud computing service) says it now has 490,000 developers in its program.