President Obama blasting bankers' bonuses

How could one disagree with the opinion expressed by President Obama regarding the bonuses some Wall Street bankers have decided to pay themselves? We’re really witnessing recklessness of untold and unprecedented proportions. Those bankers’ behaviro testifies to the fact that there is a complete disconnect between modern finance and the field reality of what we call the "real" economy. But of course when things are getting tough for their girlfriends, wives and mistresses who need to change lifestyle (see the DABA Girls blog to get a feel for the utter disconnect of this crowd from real life), these guys feel the pressure to do something, no? Sadly enough a limited number of people damage the reputation of an entire profession. Most of my contacts in the world of finance are just very fine persons, working hard and decently to fulfill their mission and serve real companies with real customers and real services and real employees and real profits and real problems. They’re part of economic life, whereas the people President Obama is targeting are causing economic death and loss of confidence. If we are serious about solving the current crisis, both they and the pervert system they’ve created must be taken out of the system.

Read on for an analysis take and a video embedded.

It’s quite clear that for this sort of things to be happening in broad daylight several conditions must be logically true:

1. 
   
   the checks and balances described in annual reports don’t check anything and don’t balance anything. There is simply no control regardless how numerous the members of compensation committees might be or how “foolproof” their procedures are considered by both internal and external auditors


2. 
   
   the individuals concerned (the beneficiaries of the bonuses) are completely out of touch with real life, living in the fantasy world of board rooms with their very special kind of fauna, i.e. professional executives and board directors who make up a closed group of individuals with virtually unlimited powers and supposedly enormous responsibility as directors. Theoretically US legislation is tough on the responsibility of directors, but that seems to be valid for everyone bar those companies that are either too big to fail or too big to be controlled and punised for any wrongdoings


3. 
   
   the set of people who hold positions as directors of major corporations, especially banks, is too small for complacency, carelessness and tacit conspiracy not to exist: those who play the role of oversight on one board are, in another company, under the oversight of the very people they control in the first one. How can we possibly think that there is no exchange of favors even if it’s just unconscious? Those who sit on all sorts of board and eventually cover for one another. Just take a look at the Board of Citicorp, Fortis or Goldman Sachs and check out how many people are actually execs or former execs of other companies able to exert influence in ways that may not necessarily be transparent or acceptable


4. 
   
   there’s an unacceptable degree of collusion between senior decision makers and board members of major corporations and people who are supposed to be running government by the people and for the people. Was Cheney ever in trouble for his ties to the oil industry and Halliburton? Did anyone react when Halliburton opened its second headquarters to the United Arab Emirates under the pretense of developing is business in the “Eastern hemisphere”, but in fact in order to avoid corporate income taxes in America? How many former Goldman Sachs senior execs ended up managing public money in the US, Henri Paulson being the least competent IMHO?


5. 
   
   corporate governance need to be fundamentally reviewed to become more inclusive of all categories of people who work for companies. It’s also absolutely essential to force a degree of transparency on the decisions being made, their implications and their rationale, using the information provided openly to key constituencies and communities within a company to allow the companies’ people (after all they all claim it’s their most precious asset) to express a view and provide feedback on what is being done. From that perspective the governance model of German companies is a good first step.

Roubini confirms deep crisis: how will you shield your business?

Nouriel Roubini’s (RGE – Wikipedia –  Page at NYU Stern) interview on Bloomberg is something you ought to listen carefully (podcast at the end of this post) if you’re a business founder, a manager or an asset owner. It’s not exactly the sort of content that will boost your morale, but I don’t believe the Coué method is the right way to go because it’s much more than a mere crisis of confidence. On the other hand neither denial, nor pessimism are going to take us anywhere.

Rather a pragmatic take on the situation is an essential first step if you’re serious about adapting and being in a position to fully benefit from an eventually recovering economy. This is only one of the reasons why it’s worth getting down to some of the implications of this analysis for business. Today helping business people deal with anxiety and make sense of this chaos is part of my work in different industries, from commodities to tech-innovative sectors, in different areas of Europe. So what does a pragmatic analysis of the situation mean for business? Read on and listen to the podcast.

Economics have seldom been as crucial to business as today. That’s a fact across the board, from young industries enjoying the fat marging allowed by rapid innovation to older highly commoditized sectors. So it only makes sense to be listening to scholars and thought leaders – at least those who have been issuing alerts for the past decade or so: Roubini, Stiglitz, Krugman, Taleb, Bernstein, Bookstaber, Tobin, Thoma…  

Roubini’s assertions – well documented, no doubt – that the top US banks are probably insolvent and that China is probably in recession, not merely “just” growing slowly, are causes for concern. His analysis during the interview with Bloomberg suggests the following:

1. 
   
   the massive amounts of money already committed by governments and central banks may not be enough to take the world economy out of the crisis within an acceptable number of quarters. In fact we may be looking at a period of several years of slow and painful economic growth


2. it’s probably going to take more than government stimulus measures to clean-up the mess created by years of recklessness in government, greed and lack of integrity in financial services and shameful collusion between those who were supposed to control and assess (audit firms, rating agencies, regulators) and those who should have been controlled


3. 
   
   there is a need to completely review the international financial system and its governance, which was (re)shaped by followers of the infernal Bush-Greenspan duo during the past decade in a way that makes key institutions like the World Bank, the IMF, the Bank for International Settlements and even a number of programs of the United Nations (UNDP, International Conference on financing for development…), useless or powerless. This adds to the concerns of those of us who doubt the viability of a global economic and financial system working in a wicked way as "poor" nations in effect lend to "rich" nations. At the end of the day, globalization can be extremely beneficial, but should be reviewed, in particular when it comes to global trade liberalization, which has been artificially disconnected from labor, social and other human development issues: if international trade is based on markets playing freely, then how can the lower cost of producing in countries without any form of welfare state not lower global standards of human development?
   Yet another ill effect of failing to build multilateral support and a clear indication that the world governance cannot remain unchanged if peace, progress and prosperity are goals we want to pursue.

The picture Roubini paints is pretty grim and scary, but factually speaking he’s probably right and we need to acknowledge and take stock of the situation as it is right not, not by discovering ugly bits and nasty pieces of the big picture in a seemingly unending stream of randomly chosen snapshots. Nothing is more damaging to business confidence than the constantly disproval of previously accepted opinions as to the scope and depth of the crisis.

With most economies in a state of frozen shock,  difficult access to cash and several assets fast becoming almost illiquid, the degree of anxiety is high in business, for owners, managers and employees alike. The principal cause is not the crisis itself, but the uncertainty about its real nature, its consequences and its true extent as well as the often unspoken lack of confidence that governments know how to solve this one.

So considering the work I do with customers in Europe, the most important implications for business are as follows:

For established businesses

Despite government’s efforts to pump cash into the economy, banks seem completely upset, fearful and paralyzed to the point of actually failing to making funds available even to established and fundamentally healthy businesses. So, if you’re managing an established business, perhaps a family owned business that cannot rely on access to global money markets, you need to consider the following:

1. 
   
   make sure you reduce the amount of cash you business needs to operate by pulling all levers from operational efficiency to customer relationships and supplier relationships management. In one of the businesses I’m advising negotating with supplliers to reduce the volume of raw materials purchased and kept in inventory, made a measurable impact on net working capital


2. 
   
   secure the stability and reliability of any short-term funding and credit lines you’ve arranged to get from your banks. Banks are always willing to lend you an umbrella when it’s not raining and when it’s raining on them things can get pretty shaky. To achieve this goal you need to communicate on a regular basis in as open a manner as you can with your bank. At another company we’ve gone the extra mile to discuss the business plan with the bank, especially as it contained a forecast for the cash situation of end 2008


3. 
   
   consider reviewing core processes that can be improved to use less cash. Now, that’s a great area in which to consider better use of information technology whether to achieve a more efficient link between inputs and outputs, getting closer to demand-driven production or to improve logistics and customer service. Being a user of some of the latest stuff I’m utterly amazed at how slow adoption is in most established businesses. This is a great time to adopt, especially when you adopt tools and methods that make you more efficient, more effective and faster. Just a hint: consider Salesforce, the Zoho suite of applications and Basecamp…


4. 
   
   adopt cheaper means for communicating and spending time with customers: voice over IP exists, so you don’t need to pay these outrageous roaming charges (hint: take a look at Jajah, a company I covered 3 years ago on this blog, and your phone will never look the same again…). Another little something you might want to consider is Cisco’s Webex or telepresence (here’s a video by an employee of the company), to interact with your customers without having to spend precious time and money travelling.


5. 
   
   train, train, train and train your people for better expertise on your business, on your industry, on their functional areas. Also, train for better customer service. It’s amazing how few customer facing professionals know how to actively listen to customers and get down to what they really need, cutting through what they say.

For more recent going concerns

For more recent going concerns, the issues highlighted above for older and more established companies
are valid and should be considered although one may assume that in many
cases younger going concerns have better patterns of adoption of new
tools and methods. In your case, you need to be concerned with your
customer portfolio because unlike older more established companies you
are likelier to be more exposed to commercial and customer credit risk.
One of my customers is in this situation and we know full well that it
is crucial to keep close contact with all key customers and to go the
extra mile to share a bit of the burden of going through this storm.
Something that’s been possible in this case was to agree on a
schedule for payments such that the immediate pressure on key
customers’ cash situation is reduced by 10% to 15% and those customers
commit to a longer term supplier relationship with my client. Factors to be considered with special care include

1. 
   
   the concentration of business with a smaller set of customers that increases the business and financial risk if those customers require less of what you’re offering


2. the nature of these customers and where tey are in terms of life-cycle: startups, growth stage, recent going-concern or established company. Beware this parameter though because many business pros tend to have a bias for it in their decision making: if there’s something we should learn from the collapse of “blue chips” like Enron, Bear Sterns and Fortis, that’s the fact that one cannot assume a large and old company to be better, safer or more reliable than a younger and smaller player


3. the industry in which your customers operate because you’re likely to see some domino effect if you’re working a lot with financial institutions or car companies for example. Same thing if you’re serving companies that sell products and services that are not essential, “must have” items.

For start-ups and companies at growth stage

For startups and companies looking to finance growth, I know for a fact that there are good businesses out there with healthy commercial situations and well-performing operations that nevertheless find themselves under financial pressure. As long as there will be such situations investors who have cash to invest are likelier to acquire distressed assets than new businesses or growing businesses without long track records or whose industry is too unstable. So, if you own or manage an early-stage or growth-stage business, especially if you are considering to raise money, you need to consider the following:

1. consider what happens if your don’t raise a dime and identify where your pragmatic opportunities actually are


2. get back to the drawing board and drop every
   single activity, service, offering that does not give you paying
   customers or financiallly quantifiable results within 3–6 months


3. reconsider funding strategy to use all the tips and ticks of bootstrapping (here’s a great resource from Inc magazine and here are inspirations
   from companies that started on less than 1,000 euros) in order to be
   able to provide service to customers even if your product is not
   complete
   the time when you could say you had a company
   without having a business model are over for some time at least. I’ve
   always been extremely skeptical about how adequate it is for people to
   venture without a business model (see post of 2006 here)

Enjoy Roubini’s interview and visit his RGE site.

Going to Twestival

Twestival seems like a terrific idea to make a brilliant case about how social media (Twitter in this case), new technologies and the international connected community of geeks, tech enthusiasts, creators, media types, marketers, home mums, retired pros...etc can actually make an impact. The event takes place on February 12th in over 100 cities around the world and the proceeds will go to Charity Water, whose mission I find outstanding. If you want to join, here's where to register if you can make a donation of 5, 10, 25  or 50 Euros. Looking forward to meeting the fun online crowd on February 12th in Brussels!

Click fraud on the rise: a threat to measurability of ads?

Interesting and worrying figures from a recent study on click fraud showing deterioration of the situation on the front of click fraud. I wonder whether fraud can be curtailed and if not whether it can derail the project of genuinely measurable advertising and marketing communications...

clipped from www.marketingcharts.com

Botnets, Click Farms Propel Click Fraud to Record High 17%

The internet click fraud rate hit a record level of 17.1% in Q408 and click fraud traffic from botnets surged to an all-time high of 31.4%, according to Click Forensics, Inc., which today released its quarterly pay-per-click (PPC) Click Fraud Index figures, writes MarketingVOX.

Specifically, click fraud traffic from botnets was responsible for 31.4% of all click fraud traffic in Q408. This is up from 27.6% in Q308 and 22.0% in Q407.

The average click fraud rate of PPC ads appearing on search engine content networks, including Google AdSense and the Yahoo Publisher Network, was 28.2%. This is an increase from the 27.1% rate reported for Q308 and down slightly from the 28.3% rate for Q407.

In Q408, the greatest percentage of click fraud originating from countries outside the US came from Canada (7.4%), Germany (3.0%) and China (2.3%).

Social media gaining more traction than expected

A very interesting conclusion of recent study by Pew shows that social media is on track for faster adoption than previously believed. And this means that the media landscape is on the brink of yet another radical change in the way owners of content relate to their audience and communities. Exciting stuff.

clipped from www.poynter.org

"The share of adult Internet users who have a profile on an online social network site has more than quadrupled in the past four years -- from eight percent in 2005 to 35 percent now."

"It appears that American adults are moving into social networks more quickly than top 100 news organizations."

McLellan cited recent Bivings Group research, which found that only one in 10 major news organization sites offer social networking features

It's not the site, it's the links, the connections and the network.

I think McLellan is on to a couple of interesting ideas here. First, that mindset and culture -- not resources and technology -- are the key barriers to news organizations benefiting from social media.

the willingness to continuously experiment is the most likely path to success in media. This includes not just trying out new technologies, but learning how to value engagement other than page views on your site.

one of the more rewarding ways news orgs can connect more fully with their audiences

Quote of the day - source: Cisco's CTO

Padmasree Warrior, Cisco’s CTO, tweeted this very beautiful sentence quoting a poster she saw:

“Rosa sat so Martin could walk, Martin walked so Obama could run, Obama ran so our children can fly”

 

Beta Group evening in Brussels

This evening I attended the meeting of Beta Group in Brussels. The event took place in one of the classrooms of the University of Brussels, home of my business school… It felt like a big return to the past since it’s been at least 14 years since I last visited that part of the world and in fact it hasn’t changed on bit… There were five presentations of startups that I found refreshing, not particularly because of the quality of the demos (sometimes too technical, low energy and not that assertive), but because I saw people creating fun stuff and prusuing visions and dreams of their own. Here’s a couple of companies I think are before good market opportunities:

1. Oxynade, because aggregating the information about events in a way that is clever, usable and relevant irrespective of the user’s device is a growing need, especially if they decide to make the whole thing transactionnal and allow tickets to be purchased and sold over their platform.


2. Plot Point Prod, because there is a big opportunity in product placement in videos online and VOD, especially during a period of economic downturn when consumers are likelier to stay at home and therefore need to be reached through channels they will use for entertainment. To make their case they very cleverly opened their “Stratagémistes” channel on YouTube and I think the entire audience enjoyed watching their stuff.


3. Proxyclick aka Click ‘n Lunch, because it simply makes sense for a lunch ordering platform to act as an intermediairy to allow caterers to deliver food to people at work and beyond. Their idea to offer a “virtual canteen” is interesting even though the operational challenges must be quite daunting.

During the event I heard someone ask the presenters of the last presenting startup (Seetiz) about Seetiz’s scalability. An interesting question, even though growth is not an objective per se. I think companies are better off making sure they’re great, solid, disciplined, high-quality and fun places to work before they attempt to grow. Growth is a by-product, a consequence of something fundamental: the enthusiastic urge to profitably serve customers in a consistent manner such that they become eager to stick with a company as a supplier. So, the list of this post is not meant to identify potential “high-growth” companies, but merely to say why these three stand out in my opinion.

Definitely refreshing to be spending some time with people who innovate by pursuing their own quests in the wonderful and often mesmerizing world of business.

Widenoise just released by WideTag

Even the longest journey starts with the first step… As WideTag releases WideNoise I feel this is the best way to describe the event because WideTag’s stated destination is to be a leading player when the Internet of Things becomes reality.

As WideTag’s CTO often says, there is a still a hell of a lot of stuff missing from the real world for the Internet of Things to happen, but one ought to start with what we’ve got, include new stuff that is coming up and build whatever is missing.

WideNoise, designed by a beautiful team released yesterday as an iPhone application that allows you to socially share data about the noise level at a specific location, is very much the result of this very pragmatic approach: use an existing networked device that has at least one sensor embedded to offer a first application of a “spime”. What’s a spime? It’s a device capable of recording and transmitting location coordinates as well as information about its immediate surrounding, e.g. temperature, carbon dioxide concentration… Now, spimes are likely to play a prominent role in the Internet of Things. Although it’s quite geeky as a concept (if you’re interested read this), there are three reasons why it’s noteworthy:

1. spimes will be (already are) all over the place in a matter of a few years using technologies (RFID, GSM, GPRS, GPS, GoogleMaps…) that only need assembling


2. with the environmental crisis we need to measure our “physical” world in order to make smarter (micro-)decisions from whether to use a car to how to manage the powergrid dynamically


3. the flow of data that will be captured will in part BELONG TO YOU so you don’t want it taken from you without your consent or in a way that is so proprietary you can’t control it, which is one of the reasons why WideTag seeks to make things open, something it started doing with OpenSpime, an initiative aimed at offering open protocols and technologies to the world for building and operating the spimes of the future

In fact, Widenoise is also a bridge between the “pure vision” of the Internet of Things (where objects are supposed to exchange information and form self-configuring networks for relaying the data) and today’s reality of applied technology becoming increasingly “social” and hybrid in that it mixes hardware, software and people to create value for participants. So has WideTag managed to make noise social as a very nice post of this morning claims?

Congratulations Nimbuzz!

Almost a year and a half ago on I covered Nimbuzz on this blog because I felt they had a pretty cool and promising proposition. Since, their team has been able to progress even more and get to the point of receiving the prestigious Red Herring Global 100 award.
As always, I am thrilled to see entrepreneurial ventures find their way and reach new heights, so congrats to the team of Nimbuzz for beautifully pursuing an entrepreneurial quest that creates value.

A more artistic view of my Delicious cloud of tags and LinkedIn profile

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An interesting correlation

These past few days I came across an article published by CNET News listing the seemingly unending announcements of layoffs of these past months. One of the questions that occurred to me was whether there is a correlation between the importance of a company's layoffs and its stock's price-to-earnings ratio (P/E). I chose to use the P/E ratio before the beginning of the crisis, because that's when future expectations of growth where factored into the price of a stock and hence the layoffs reflect the fact that these very expectations were disproved.

My take is that our economies have been running into trouble since the second half of 2007 and hence I used the P/E of 2007 for a subset of tech companies of the CNET list. The companies included in the data set are: Adobe, Alcatel-Lucent, AMD, AT&T, Autodesk, BMC Software, Borland Software, Cymer, Dell, Electronic Arts, EMC, Ericsson, Lenovo, Level 3 Communications, Lexmark, Logitech, Microsoft, Midway Games, Motorola, Netflix, Oracle, Plantronics, RealNetworks, Seagate, SGI, Sony, Sun Microsystems, Unisys, Viacom, WebMD, Western Digital, Yahoo

I got the P/E ratios from Prof. Damodaran's web page that I got from Prof. Farber's page of resources at Solvay Business School, my Alma Mater. So I'm once again grateful to professors & academia for sharing knowledge, the only way for knowledge to grow.

While this is by no means enough to draw conclusions and the analysis is only very rough relying on many opinions, the indication is that the higher a company's P/E is in good times, the likelier it is to lay-off personnel when the economy sours . To illustrate this result, I used IBM's Many Eyes visualization resources, which I find prety cool, so thanks Big Blue for making great tools available freely to those who seek, for those who are on their quest, sometimes a business quest :) Here's the link to the chart. I'm also including a screenshot of ManyEyes below because the link doesn't always work properly:

I also used data visualisation software Tableau to verify the correlation: quite a powerful product. Below is the analysis of the model produced by Tableau:

 

And the Tableau visualization is below:

So what was Madoff investing in?

The name Madoff is now indelibly associated to the largest financial
scam of history. Nevertheless, it's interesting to see what types of
investments had Madoff's favors and that's what a columnist of the FT
did. Fairly interesting piece although I'm not certain you should immediately try to replicate Madoff's approach because this stuff smells like insider trading. Yet another indication of the degree of corruption that plagued parts of the financial system that is collapsing before our eyes and inflicting damage on many people who neither benefited, not supported it.

clipped from www.ft.com

It looks like Mr Madoff (or whoever chose the stocks in his fund) liked to get involved in various special arbitrage situations. Some of these still exist and make for interesting stock picks.

Mr Madoff played a lot of special-purpose acquisition company arbitrage: SPACs trading below cash.

Hicks has $540m in cash and a market capitalisation of $480m. Trading below cash makes this a very safe play.

Anheuser-Busch, which has since been acquired. When Mr Madoff bought the stock he had a potential 40 per cent annualised return implicit in it because of the arbitrage going on with Anheuser-Busch being acquired by InBev. The deal closed in November so Mr Madoff made his money.

Mr Madoff also liked “closed end fund arbitrage”: buying closed end funds trading at significant discounts to their net asset value

Finally, Mr Madoff was a big believer in financial media. One of his new positions in the third quarter of 2008 was a little stock called thestreet.com, founded by CNBC’s Jim Cramer.

Back to economic reality with Joseph Stiglitz

As we're trying to salvage more of the financial system than we really should, especially with taxpayers' money, it's worth getting back to understandable economics and to a financial system that is the tool, the slave, not the master of the "real" economy. By the way, isn't the term "real economy" ironically pointing to the fact that the rest of it wasn't that real? The way the economy is being financed needs to be completely reviewed and the responsibility lies with each one of us. This is not about "bad guys" in the financial world who got rich at the expense of the rest of us: almost everybody was happy getting credit beyond reasonable levels, almost everybody voted for the system through their patterns of consumption and investment. We've been living in a world where the poorer economies were in essence financing the richer ones which indulged in levels of consumption that were disproportionate relative to their actual creation of value, especially long term value. Time to listen a bit more to experts like Joseph Stiglitz, who was recently interviewed on French TV. As usual an uncompromising analysis of the situation (voice-over in French covers his voice at times):

Le monde des livres du 16 janvier 2009
Video
Envoyé par LCIWAT sur wat.tv

SaaS not a panacea

Over the past year or so, I came across a number of young and less young entrepreneurs who seemed completely infatuated with the concepts revolving around or arguing for a "software as a service" (SaaS) model, as though SaaS would solve all of their business challenges in a miraculous way.

So you thought all you had to do was offer software online and that's an easy way to remove all friction, increase your profitability by having customers do all or part of the work and never have to go visit users? Many people I meet seem to be under the charm of the SaaS fad. Many see it as an enabler for them to be a viable business. While there are merits to SaaS, its benefits are exagerated and in some cases the invocation of SaaS comes at the expense of rigorous business design.

So here's my take:

1. SaaS is not a panacea that will address all the issues revolving around your business model, your pricing, your distribution and your support to real customers


2. as a business buyer you'd better assess carefully how much of your stuff you actually want to entrust to online resources whose viability is yet to be demonstrated and which can be discontinued or frozen without notice (see Google's recent announcements, e.g. on Jaiku or their Notebook). Actually the consequence of this is that you do need trustworthy and financially sound partners who operate such tools like for example Salesforce with AppExchange


3. if you're going down the SaaS path as a business (which makes a lot of sense in many cases), you're likely to need a hybrid approach with at least some of the functionality residing on the user's machine, very much like Evernote does, and that has to be factored into your model because you're likely not going to get away with the assumption that you won't need any support or releases of updates to end users...etc.


4. irrespective of the form of implementation of your idea, you still need to put yourself in the shoes of your customers, to understand their needs, think as they think, feel as they feel, do as they do and be compassionnate about their current frustrations to be able to design a better experience. SaaS is not necessarily your answer and in any event, if you seriously design your customer experience, you'll have to take into account new kinds of needs such as online training, online support, remote sales...etc


5. legal issues are often disregarded in a very strange manifestation of carelessness: if you offer or use a SaaS solution, you do need to care about the jurisdiction and the legal constraints pertaining to data ownership, privacy, copyright, service level, authorised usage...etc. And in fact legal matters could be a serious friction in our sales efforts especially if you're targeting industries that have a tradition of discretion, secrecy and prudence like private banks, retail banks, investment banks, fiduciary and domiciliation companies, family offices, accounting firms, law firms...etc.

SaaS is all fine and good. Permanent beta is great. The network becoming the computer is brilliant. All the new stuff going on in the field of computing services is just very exciting. However none of it is panacea and it is by no means a license not to design, structure and manage your business in a careful and diligent manner. There's no free lunch.

As an aside, this latest wave makes me feel the passage of time given
that this is my first direct personal experience of an old concept
making a comeback under a different name: a few years ago the fad was
called Service Bureau, ASP (for application service provider), grid
computing and Software On-Demand (with Salesforce, Google Apps, Amazon
and and IBM leading the way). Interestingly, the big guys are still
around with relevant offerings irrespective of the way they're
presented (ASP, On-Demand, SaaS or the next fashionable acronym).

SaaS not a panacea

Over the past year or so, I came across a number of young and less young entrepreneurs who seemed completely infatuated with the concepts revolving around or arguing for a "software as a service" (SaaS) model, as though SaaS would solve all of their business challenges in a miraculous way.

So you thought all you had to do was offer software online and that's an easy way to remove all friction, increase your profitability by having customers do all or part of the work and never have to go visit users? Many people I meet seem to be under the charm of the SaaS fad. Many see it as an enabler for them to be a viable business. While there are merits to SaaS, its benefits are exagerated and in some cases the invocation of SaaS comes at the expense of rigorous business design.

So here's my take:

1. SaaS is not a panacea that will address all the issues revolving around your business model, your pricing, your distribution and your support to real customers


2. as a business buyer you'd better assess carefully how much of your stuff you actually want to entrust to online resources whose viability is yet to be demonstrated and which can be discontinued or frozen without notice (see Google's recent announcements, e.g. on Jaiku or their Notebook). Actually the consequence of this is that you do need trustworthy and financially sound partners who operate such tools like for example Salesforce with AppExchange


3. if you're going down the SaaS path as a business (which makes a lot of sense in many cases), you're likely to need a hybrid approach with at least some of the functionality residing on the user's machine, very much like Evernote does, and that has to be factored into your model because you're likely not going to get away with the assumption that you won't need any support or releases of updates to end users...etc.


4. irrespective of the form of implementation of your idea, you still need to put yourself in the shoes of your customers, to understand their needs, think as they think, feel as they feel, do as they do and be compassionnate about their current frustrations to be able to design a better experience. SaaS is not necessarily your answer and in any event, if you seriously design your customer experience, you'll have to take into account new kinds of needs such as online training, online support, remote sales...etc


5. legal issues are often disregarded in a very strange manifestation of carelessness: if you offer or use a SaaS solution, you do need to care about the jurisdiction and the legal constraints pertaining to data ownership, privacy, copyright, service level, authorised usage...etc. And in fact legal matters could be a serious friction in our sales efforts especially if you're targeting industries that have a tradition of discretion, secrecy and prudence like private banks, retail banks, investment banks, fiduciary and domiciliation companies, family offices, accounting firms, law firms...etc.

SaaS is all fine and good. Permanent beta is great. The network becoming the computer is brilliant. All the new stuff going on in the field of computing services is just very exciting. However none of it is panacea and it is by no means a license not to design, structure and manage your business in a careful and diligent manner. There's no free lunch.

As an aside, this latest wave makes me feel the passage of time given
that this is my first direct personal experience of an old concept
making a comeback under a different name: a few years ago the fad was
called Service Bureau, ASP (for application service provider), grid
computing and Software On-Demand (with Salesforce, Google Apps, Amazon
and and IBM leading the way). Interestingly, the big guys are still
around with relevant offerings irrespective of the way they're
presented (ASP, On-Demand, SaaS or the next fashionable acronym).

Mobile telephony in crisis

A day doesn't go by without further indication that the crisis is deepening and hitting sectors previously thought to be shielded to a some extent. This piece of news also shows that consumers and businesses alike are unlikely to resume investments and spending before they are certain that the worse of the crisis is behind us. In the field of mobile telephony a sharp drop in capacity used by subscribers is to be expected and in particular in those patterns of usage rightly considered to be most expensive (roaming, mobile multimedia Internet...) Not too good news for GSM operators and companies like MACH, whose prospects of getting listed on a stock market have all but disappeared for the foreseeable future.

This is all rather good news for Jajah, (which I covered on my blog more than two years ago) as well as for Skype, because as consumers and businesses become more price sensitive they'll be looking for VoIP solutions that do not require of them to be incurring major upfront investments and that can be used without too much impact on operating expenses. Furthermore, I expect broadband ISPs, IPTV operators, video on-demand and providers of infrastructure and services for remote collaboration to do well as consumers spend more time at home and businesses cut back on their travel spending.

clipped from www.businessweek.com

Mobile sales are slowing much faster than expected, and even Nokia, once a stock market favorite, is suffering the humiliation of downgrades

Only a few months ago, it looked like the mobile-phone industry might escape the worst of the global economic slowdown.

Those hopes are evaporating fast. Market watchers are now warning that sales are slowing faster than expected even in markets such as China, which had seen explosive growth for years. After a fourth quarter of 2008 that some analysts are calling disastrous, manufacturers could be stuck with millions of unsold handsets. Weaker players such as Motorola (MOT) and Sony Ericsson, which were struggling even before the downturn, could drastically scale back their ambitions or even leave the market.

Strategy Analytics, for example, officially predicts a 1% decline in global handset sales for the fourth quarter of 2008 as well as all of 2009.

growth has been slowing for years

Quote of the day

"Intel never had an exit strategy. These days people cobble something together. No capital. No technology. They measure eyeballs and sell advertising. Then they get rid of it." - Andy Grove in an interview to Business Week reporting on the trouble of the Valley's model of the last 20 years.

Awesome innovation at WideTag and sr labs

One thing is certain: my current trip to Milan is most interesting. That's mainly because I had working sessions and discussions with three exceptional persons, the founders of WideTag, Leandro Agrò (blog - profile - a conference he co-founded - idearium and leading designed at sr labs until a couple of years back), Roberto Ostinelli (profile - a multi-talented individual who's a beautiful artist as well as an accomplished technologist and business person) and David Orban (blog - profile). The achievements of that little bunch of determined persons have been very significant indeed over the course of the past 10 months and they create a foundation on which to create more.
As a coincidence of sorts I also got a great opportunity to learn about a fascinating Italian company called sr labs and to actually try their amazing i-able product which makes it possible to control and command a computer solely with one's eyes. It's quite an extraordinary experience because of the incredible precision of the device, its ease of use and the speed at which one gets acquainted with the way the product works. Aside from obvious applications to help disabled people access and control a computer, there is a range of other fields in which the eye tracking technology could be applied. Definitely worth a closer look...   

Labour's digital attack against the Tories

Below is Labour's mocking of the Tories, depicted as incompetent and unprepared. I found this piece produced by TangentOne, Labour's agency, nicely done and fun, which means that it has a good of virality. Furthermore this is an example of "viral with a purpose", or viral that produces value (see Godin's quote) for the "brand" making its case to the "consumer" / voter. Also, an additional indication that early elections may be called in Britain. Enjoy!

Questionning market logic for quelling carbon emissions

Interesting data on the cost estimates relating to various means of cutting carbon emissions. However, at the very moment when markets are proven not to be as effective as previously proclaimed, do we still want to rely solely on market mechanisms to quell carbon emissions? I mean, the current financial and credit crisis, which is relentlessly extending as a full-blown recession of the "real" economy, amply shows that markets are not that good at pricing assets and risk. So, why is it that we still seem to think that market mechanisms should be more or less exclusively involved in quelling carbon emissions?

clipped from www.technologyreview.com

The Cost of Cutting Carbon

Will putting a price on carbon increase the use of renewables?

If the goal is to increase the use of renewable energy, says Sergey Paltsev, principal research scientist at the MIT joint program, governments may have to mandate its use. Unfortunately, that would increase energy costs much more than market-based approaches to carbon regulation would.

¹Based on average 2007 prices ²For electrical utilities ³All blends
Source: Energy Information Administration/Gilbert Metcalf (prices); MIT Joint Program on the Science and Policy of Global Change (power sources)

Could Sorell's greater online engagement help push for WPP digital leadership?

Excerpts from a BusinessWeek article with some fairly interesting info about the goals and obstacles faced by WPP as it tries to transform itself into a next generation marketing agency. Interestingly Martin Sorell, its CEO is pushing employees and Board Directors alike to adopt new practices from video, to Facebook, to Twitter and other social tools. And that's the right way to go for this sort of transition from yesterday to tomorrow, an endeavor only very few companies managed to achieve in business history.

Now, since I believe that coherence, alignment and consistency are essential ingredients of success as the US presidential super-campaign amply demonstrated, I wanted to check whether Sorell, the staunch promoter of WPP's diitization, has done anything for himself to be more present, more digital, more of a "social networker" I looked for his profile on LinkedIn and the result was, I quote, "0 results

for


Martin Sorell". Same thing on Naymz and Plaxo, while on Facebook there's only one entry without pictures and with one friend called Mélanie Pineau. So let me get this: we're about to have the first awesomely digital US President in Barack Obama (present on all sorts of online platforms from Facebook to LinkedIn to Twitter to a YouTube channel and with fans forming Plaxo groups like this one), and the head of tomorrow's would-be leading agency is nowhere to be seen? When is Sorell going to assemble a small team of WPP wiz kids to build his own onine presence? That would go a long way to making his push with employees and close co-workers much more compelling IMHO.

clipped from www.businessweek.com

strategy to make the $15 billion agency a leader in the emerging world of digital communications

At an Oct. 20 board meeting in Palo Alto, Calif., Sorrell had all the directors—including himself—learn how to upload video and create their own Facebook pages

chairman of interactive marketing company OgilvyOne, figures he pays 15% to 30% more to hire young people with one-third less experience than those versed in traditional advertising channels

Sorrell also is pushing for greater cooperation among WPP companies to incorporate TV, video, print, mobile technology, and social networking into every campaign

WPP recently won a hefty portion of a Johnson & Johnson

widely reported to be worth more than $100 million

WPP staged a science fair-style presentation inside JWT's New York office, where representatives from 20 WPP units sat in different booths, showing off displays such as a WPP-designed social network promoting a prescription drug and an interactive Web site to inform doctors