Tony Greenberg

Building a Community In a Weekend

2012-03-27T14:00:02-04:00

The Summit Series Does it Right, But PLEASE Don't Go

Have you ever had a perfect weekend? A perfect experience? Have you ever been part of an intentional, if temporary, community built out of seemingly thin air that coalesced into a deeply meaningful and rewarding experience for the rest of its short existence? It seems Wired preempted my diatribe.

Recently, I had all of that. It was so intense and special that I was missing it about 0.42 seconds after I headed back home. Since then, I continue to think about what it was that made the communal experience so good, and what it takes to create such temporary but intensely engaging gatherings on a more regular basis, for a richer, more enjoyable life.

All that said, don't think I want you to try to go to this event the next time it's held. It would be a horrible experience for you, whoever you are. It's the absolute epitome of Groucho Marx's line about not wanting to be part of any club that would have him as a member. You shouldn't go. You definitely shouldn't even try to be part of it. If they ask you to come, you should refuse. It would be bad for you. Really. I just happened to have a really good time, that's all.

Am I talking about Burning Man, that annual confab of cool crazies on the scorching salt flats of northwest Nevada? Nah.

This was something that was simultaneously more exclusive and more inclusive (and thankfully, completely lacking caked-on alkali dust on any sensitive bits). And it was on the other side of the Nevada border, at Squaw Valley near Lake Tahoe. Rather, this was the Summit Basecamp weekend organized by The Collective in late January. Squaw Valley is really un-beautiful this time of year, and cold, cold, cold. You would have hated that.

It's hard to do justice to all the amazing people I met at the event, and trying to list them all merely ensures that I'll forget several incredible someones. There were astronauts and musicians, doctors and venture capitalists, social media mavens and authors, oceanographers and attorneys. None of them, however, were people you would want to know.

The attendees included a lot of people with boring, conventional, high-level titles, like CEO or founder or partner. And then there were those amusing attempts to define one's role, like Director of Corporate Espionage or Chief Troublemaking Officer or Chief DODO or Breathing Guru, Chief Humanist, Chief Love Officer or Chief Eternal Optimist. You get the idea. Lots of terrible people, with awful titles. You wouldn't have liked any of them.

Given its location near Tahoe, there were lots of people from the Bay Area and Los Angeles. But there were lots of others from Israel and Doha, Rio de Janeiro and Guatemala City, Paris and Sydney, Bogota and Montreal, Shanghai and Phnom Penh. You'd have felt uncomfortable with all those funny accents.

It even drew a few some actual celebrities, like the president of the Republic of Georgia, Mikhail (Misha) Saakashvili, rapper DJ Jazzy Jeff, Emanuelle Chrique of Entourage fame, comic Patton Oswalt and director Gus Van Sant. And there were a lot of people who are famous in the tech world, like Zappos.com founder Tony Hsieh and Webbies founder Tiffany Shlain, and more VCs than you could shake an IPO document at. But you wouldn't have liked to talk with any of them in a relaxed and stimulating atmosphere. Sekou Andrews' wrap up simply stunned the audience.
There were cool artsy sessions, like mentalist LIor Suchard divining the name of someone's first girlfriend, and Swedish and Argentinian superstar Jose Gonzalez performing his intensely quiet guitar-driven music. And lots of brain food on investing in NGOs, creating lean startups, understanding the Mayan calendar system, the history of Prohibition, memorization tricks and the meaning of money. You'd have been bored in those sessions.

All that said, I had several important takeaways from this gathering:

1) For once in my sometimes overly driven life, I didn't go to an event with intent driving my choices. I went to the event with no agenda, no long list of people I had to meet, no events I couldn't miss, no declamations I had to make. I went with an open mind and an open calendar, and just enjoyed all the experiences that serendipity brought me, like that lunch with Misha, his aide, and the beautiful woman friend who invited me to the lunch.

2) Life is made up of people who are givers or takers. I've never seen such a large group of givers. Hats off to the organizers who curated the wide-ranging mix of invited attendees. They worked hard to figure out the most challenging possible thing: waving in the right mix of people to create the most precious club I've ever been in. Everyone, it seemed, was there to connect and support each other. It simply wasn't possible to meet someone who didn't say, "How can I help?" I revisit a piece on Gratitude I wrote years back, truly showing these Summit creatures must feel the same.

3) As exclusionary as the gathering was (a pricey, invite-only gathering in an expensive, somewhat remote ski resort), the attendees were amazingly inclusionary. You didn't see cliques that turned their backs on strangers. With each passing minute, I would pinch myself being honored to attend. And I can't wait to figure out new ways I can give back to others as a result of the inspiration I came away with.

4) It didn't matter how wealthy or successful you were. No one was peacocking, boasting about their influence, trying to prove their power, showing off their expensive duds. Every attendee got a pair of TOMS sunglasses and Bogner boots, which ended up making sure everyone ended up dressing a bit alike. It became very egalitarian, flattening out differences something like how parochial school uniforms do. It was a crowd without ego or pretense, or at least with no need to express those to others.

5) I felt almost like an elder statesman in this Benetton ad of a diverse crowd. There was no hierarchy of beauty, brains, income, gender or race, the participants' warmth and smiles turning handshakes into hugs. The mix of attendees was split among those who already had wonderful achievements and the leaders of tomorrow. It was an unbelievable combination. As tech-oriented as many in the crowd were, though, it wasn't a typical frenetic, Type AAA dot-commer crowd. Instead, it was a dot-calmer crowd.

6) I still treasure the wonderful presences of Summit Basecamp organizers Elliot Bisnow and Jeff Rosenthal. They led an impeccably groomed team that managed the most demanding and humbled of crowds, placed somewhere between hippies and executives. People were all sharing rooms, spaces and parties and meals like there was no tomorrow, and truly meshing into beautiful collective experience. The organizers pulled together a remarkable set of materials, from building a bar that housed the Prohibition and cocktail talk, to a website, support materials, participant materials and more. It was a veritable eye and brain feast; like Burning Man meets TED meets Davos meets the Allen Media Conference meets Pop Tech.

I salute the organizers and the participants for the experience they allowed me to enjoy with them, and I thank them greatly. But remember, whatever you do, don't even bother trying to be part of this. You'd hate it.

Besides, I want to get invited back and actually have time to meet everyone who's there, because they're some of the coolest people in the world. If you came, it'd just be one more amazing person I might not have time to get to know. That would really suck.

Business at the Speed of Light: What Is a Millisecond Worth?

2012-03-02T15:02:36-05:00

In the low-latency world of high-frequency trading, some will lose, no matter how smart their systems and people. Can you catch up? Or should we slow them down?

Speed thrills, especially near the speed of light. For Wall Street traders, speed creates new fortunes on the world's fastest networks, for makers and users both.

But those technologies require lots of money and brainpower, creating questions about unfair advantages for privileged insiders with the fastest networks and best relationships, even as regulators ponder what to do.

Welcome to the future, where winners are determined by who arrives first with the most intelligence. Whether it's making a killing with a million-dollar trade, snagging choice concert tickets, or sniping an eBay auction, technology's next big leap is nearly here. Low-latency networks will reshape most industries, even if they never approach the speed of light.

Finding Alpha Between Each Tick of the Clock

Through my firm RampRate, I have watched companies pay big money to get even a mile closer to the trading floor. Trading speeds have accelerated to millionths of a second, with nanosecond reactions coming. Sophisticated financial traders are zipping in and out of positions in less than a heartbeat, generating billions of dollars in arbitrage profits.

"The people who are upset with the leaders of the pack (for being) like genetically altered Olympic hopefuls hopped up on performance-enhancing drugs are people who want to be big players," says Chuck Ocheret, formerly head of Deutsche Bank's platform solutions. "But they don't have good alpha-generation principles, and aren't smart enough to achieve ultra low latencies anyway."

But are the millions spent optimizing latency (some of which trickle down to my company, which advises companies on the right co-location centers and networks) truly creating market efficiency? Who really needs this speed?

How Low Is Low? Depends on Your Business

Low latency is heady stuff. But not all industries need to flirt with the speed of light t to create competitive opportunities now. What counts as low latency in your industry will be a crucial differentiator in your success.

"Latency matters a lot and means different things, depending on where you are in the value chain," says former BBC and CBS digital chief Mark Kortekaas. "On the one extreme are the high-frequency traders where physical distance is crucial. On the other is the time it takes for an end user to see your service. Google has said even half-a-second delays to search results significantly drop traffic."

So, speed is vital, but so is perception. Companies such as Gomez and Keynote prevent latency gaffes a user might notice that can affect brand image, customer satisfaction and employee productivity. Slow can be a blow, no matter the industry.

The most likely immediate low-latency candidates are industries with lots of bidding or trading and massive data analysis. Financial news outlets are obvious, the velocity of information creating arbitrage potential. Companies such as Activ Financial not only get the news to traders faster, but interpret it too.

Auction sites are ripe for adjustment, as seen with eBay "sniping attacks." So too is the legalized gambling of the penny auction. Second place in a penny auction is worse than not playing, because you've spent money on all those penny bids, yet bought nothing.

STATS LLC provides sports fans (bettors) rich, fast data on 234 sports, including pitch-by-pitch and play-by-play updates, using the same analytic concepts used in financial markets. Betfair.com, the UK gambling giant, uses high-frequency data to respond to news that causes rapid adjustments of prices and odds.

Who Profits? The Infrastructure Play

In my work, I've seen buyer approaches range from bashful to brazen. Some clients strongly prefer specific geographic and network topology locations that we know are close to trading floors. Others say money is (almost) no object if it speeds their London-Singapore link by 10 milliseconds.

"It can be difficult to imagine how milliseconds or nanoseconds of latency make a significant difference," says Internet technologist and RampRate CTO Steve Hotz, "but from the viewpoint of a data transaction making the trip hundreds or thousands of times, that incremental advantage can add up."

Hibernia Atlantic is building a $300 million trans-Atlantic cable to cut data transmission 6 milliseconds compared to Global Crossing. Spread Networks just linked Chicago to New Jersey with a high-speed connection. And if anyone figures out how to bore straight through the Earth, you can be sure they'll have customers.

Eyebrows are raised particularly when exchanges themselves sell low-latency links. Nasdaq's co-location business has been under regulatory scrutiny since 2009, and the NYSE is seeking special permission from the SEC to sell more co-lo.

Others can't help wondering if this game is rigged. Are some competitors being kept away from fast links? And do some others get a cross-connect a few feet shorter, and few slices of a second faster in even the best locations?

Many of these complaints are spurious, but can't be totally dismissed. Markets thrive on confidence and transparency, and when people suspect cheating, they stop playing.

The blame game is not reserved to unsuccessful players. Complaints erupted after 2010's "Flash Crash," when the Dow Jones Industrial Average plunged more than 600 points in 5 minutes, and then magically bounced back 20 minutes later.

High-frequency traders did have a role in the crash, but analysts have said they were not at fault, there or in similar events.

Some believe high-frequency trading unfairly advantages a privileged few. Others complain that it disrupts conventional trading. And though it creates undeniable efficiencies, it also creates undeniable perceptions of impropriety, which may outweigh benefits.

What Now?

Despite calls for more regulation, these networks are moving forward, evolving quickly. Already, more than 60 percent of U.S. financial trading (and a third of European trading) filters through an HFT platform. With physical laws doing what man's laws cannot in limiting speeds, some believe current concerns will soon go away.

"Unless we change the laws of physics, the high-frequency/low-latency game has played out," writes Larry Tabb of the Tabb Group research firm. Tabb says we ask the wrong question in wondering whether high-frequency trading is bad for the market. It's already been transformed, with more to come.

"We have seen a 2,000-fold drop in average core-trading latency in the last three years, and I think the move to measure trading latency in picoseconds is nearing," says Christian Sommer, Intel's director of capital markets.

It may be that the need for speed will simply hit a wall. Even measuring latency in picoseconds requires such sophisticated tools that it practically requires a CERN physicist. After all, a picosecond is to one second as one second is to 31,700 years.

"Light travels 30 centimeters in one nanosecond," says Neil McGovern, Sybase's senior director of strategy and financial services. "So if light can go only a few centimeters in a picosecond, how much faster are you going to get?"

In which case, markets will have to look elsewhere for competitive advantages, like being smarter. High-frequency, low-latency architectures will just be tools for executing a strong alpha-seeking strategy.

"The truth is that if you really have the talent on board smart enough to achieve true ultra low latency," says Ocheret, "then you are probably smart enough to make money without it."

This post was originally published in Business Insider.

My Other Car Is a Bentley...Not (I Want My Car to Leaf Me Alone)

2012-01-18T15:51:07-05:00

"Electricity is really just organized lightning." - George Carlin

Let me start by saying that I love new technologies especially when I can try them before anyone, even if I'm sometimes out on the "bleeding edge." I don't mind the cuts for the cool that comes with them. Who would have thought my Nissan Leaf is a status symbol.

And let me say that I love treading more lightly on our battered planet, as evidenced by my conscious diet and walkable commute. I particularly love not delivering more wads of cash to problematic places to buy their petroleum.

It even extends to my business, which drives down data-center costs and emissions and measures dirty and clean power for eco-/cost-conscious clients, and to my related efforts with the Clinton Global Initiative (watch for new government initiatives we are driving.)

At the end of the day, watching out for corporate social responsibility (CSR) saves my clients millions.

And finally, may I say that, at this point in my personal evolution, it was time to move on from my standard-issue, bachelor-dude Mercedes convertible.

All of which is to say that, when my friend Henry Unger offered me the Nissan Leaf electric car that he had ordered back in April 2010 and that had just arrived, I was ready. Boy, was I ready.

When I tell people I bought a plug-in car, they say, "Howz da Tesla?" But Tesla ain't the ride for this mountain man, Patagonia Tony. I needed to slow down, and Nissan helped me turn over a new, ahem, Leaf. Simply put, this car is wonderful.

"And God said, 'Let there be light' and there was light, but the Electricity Board said He would have to wait until Thursday to be connected." - Spike Milligan

Let's start with the bottom line. The Leaf retails for $37,250, fully loaded with the best Bluetooth, audio and other goodies. There's even an iPhone app that checks the car's charging status and remotely starts the climate control.

Even sweeter, the Leaf qualified for a $7,500 federal rebate and a $5,000 state break (basically a third off), to get Americans off oil and onto electric. There are even subsidies to retrofit my garage to a Level 2 charging system that "refuels" the car quicker.

And there are lots of other perks: free parking at LAX, Santa Monica, and other cities, and (legal) carpool-lane use without a companion. And my Handy-Dandy Wonder Nav* (*Not Its Official Name) helps me find the nearest charging stations. I blinged my LEAF for 5 bucks.

This all sounded great. Except...

Except that there's one other thing I must say: I really value customer service. In my business, I kill myself to take care of my clients. And when I'm the customer, I expect companies to do the same. When they don't, well, I make a lot of noise.

I'm about to make a lot of noise.

Remember that retrofit subsidy? This, it turns out, isn't so simple. My 25-year-old townhouse would seem modern enough that it should be easy to upgrade. Except, it's not. Getting my garage rewired actually requires getting my whole building rewired.

That process ping-ponged me endlessly between Southern California Edison and several vendors who would retrofit my garage/the building/western Santa Monica/the western United States, for $5,000 to $65,000 (does not include full retrofit cost for western United States).

Ultimately, I couldn't persuade my neighbors, even in the People's Republic of Santa Monica, to rewire the building because some residents inexplicably still don't have electric vehicles.

"Benjamin Franklin may have discovered electricity, but it was the man who invented the meter who made the money." - Earl Wilson

The only pleasant part of this rough process was meeting Paul Scott, the environmental activist turned auto impresario who founded Plug In America. Paul knows this space cold, even telling me where to park, plug in for free,

Paul plugged me in to the nuances of going electric, and he wasn't even selling me anything. He's the Real Deal.

"Electric-drive transportation is here to stay," Paul says. "The efficiency gains going from internal combustion to electricity spinning a motor shaft are significant. Furthermore, the energy source is 100 percent domestic, so we (would) eliminate sending $400 billion out of the country every year for foreign oil."

Through Paul, I came to understand how important adequate access to charging sites is. Gas stations are everywhere. Electric charging stations... not so much.

A Level 1 charging facility uses your standard house 110-volt system. It's really slow, taking almost a day (20 hours) to recharge a Leaf. As the Supreme Court justice once put it, "Juice delayed is juice denied." (A very rough paraphrase)

A Level 2 system uses the same kind of juice that most electric ovens use, 220 Volts at 40 Amps, and charges the Leaf in about 7 hours. My ESVE Update will charge my daily use in less than an hour.

By contrast, a Level 3 charging facility is really fast, though not as fast as gas stations. It will charge a Leaf to 80 percent in about 30 minutes. But the Level 3's real problem is they aren't very common. Even green-savvy Los Angeles has only a handful of Level 3s, mostly for big government or commercial fleets.

The real secret, although Ecotality and Aerovironment who are simply wasting government funded programs, are forcing misinformation into the market. Fraud and misrepresentation prevail.

As an alternate, try the handy dandy conversion kit from the geniuses at EVSE Upgrade, which will double charge through a dryer connection. They are a wonderful solution to bypassing the complicated crap being pawned off at Eco and Aero. Tell them Tony sent ya.

"Electricity can be dangerous. My nephew tried to stick a penny into a plug. Whoever said a penny doesn't go far didn't see him shoot across that floor. I told him he was grounded." - Tim Allen

Electric cars also have, ahem, modest range. When my Nissan dealer told me the Leaf has a 110-mile range, I thought, "Great! That's enough to get around LA."

A friend's take was different: "Great! That means you can only drive 55 miles before you turn around!"

That's because I still need to get home. Combine short range with scarce recharge stations and new electric-car owners invariably suffer from RangeAnxiety, though it eases after 90 days.

"It ain't easy being an early adopter," acknowledges Chris Paine, who with Paul helped make the seminal 2006 documentary "Who Killed the Electric Car?" "But then I'd add that it sure is worth it. The stakes couldn't be higher and only if people like you make the effort, do we have any chance of getting the car companies to start making more and more of these."

Despite the cheerleading and guidance from Chris and Paul, this whole learning curve was driving me nuts. I was a grumpy "Gran Torino" grandpa, muttering under my breath as the complicated realities of electric-car ownership settled more firmly on my slumping shoulders.

"They were nothing like the French people I had imagined. If anything, they were too kind, too generous and too knowledgeable in the fields of plumbing and electricity." - David Sedaris

But my real devil was Miller Nissan, whose customer service rating speaks louder than I could. They took weeks to allow Henry to transfer his reservation to me, costing me that $5,000 state rebate. It took another month of "encouragement," and repeated broken commitments, for Miller to pay for that lost rebate.

I'm glad my dealer finally did the right thing. I just wish they did it without turning me into Angry Gran Torino Man. I vowed to do everything I could to force Miller to learn how to deliver a Leaf the right way or short of that, get every Leaf left in town allocated to Paul at Nissan at Downtown LA. Paul loves to hook people up.

I still haven't seen the process changes that will correct where they went awry with Terrible Tony (formerly known as Patagonia Tony). But perhaps Miller Nissan will get a clue, eventually.

"We believe that electricity exists, because the electric company keeps sending us bills for it, but we cannot figure out how it travels inside wires." - Dave Barry

So, has this electrified ride down Bleeding Edge Drive been worth it? I do feel better about reducing my impacts on the planet, and doing it with what is simply the best car I've ever owned.

And the process has forced me, again, to think more carefully about how I live my life. What's my part in all this? Am I an influencer or just a lunatic? (Don't answer that.) Sometimes I think the response depends on my Klout score.

And I've had some novel experiences. When I posted to see who might temporarily trade cars when I have a long drive, just about every Tom, Dick, Mary and even Gran Torino Guy was game.

And I once again thought about what is essential. My life's greatest pleasures are Dr. Bronners and Pressure cookers. My early adopter agonies probably are worth it if I'm helping humanity's future, which I think I am, however modestly.

And here's the funny part: I also may have found a new status symbol.

My yoga teacher friend told her father to stop shopping for a Bentley: "If you really want hot chicks, Dad, ditch the ego car and pick up a Leaf."

Yeah, Dad. So, life is good. And it's getting better.

"There are two great unknown forces today, electricity and woman, but men can reckon much better on electricity than they can on woman" - Josephine K. Henry

The 2011 Cynic Measures His Predictions

2012-01-18T09:41:32-05:00

A friend of mine in the research industry used to give out little post-it-notes to trainee analysts that said "be wrong boldly." Her reasoning -- if you are bold and right, you will be hailed as a prophet. If you're wrong, most likely the crowd will have moved on by the time your prediction fizzles. But accountability for our past advice is a core value here at RampRate, so we have to see how we did on our 2011 predictions -- and see just how well our crystal ball was working. By our count, we have four hits, two partial hits, one miss, and three TBDs that won't be known until later. What do you think?

Everything that's old will be new again -- we predicted that the main technology splashes 2011 will be retreads. The year was a bit short on new fads compared to 2010, with most of the top tech gifts like new tablet PCs and phones being evolutionary rather than revolutionary developments. The one true innovation that we got to participate in -- the purely electric car -- is, however, a classic reprise. The first electric cars held speed records and went head to head with internal combustion (and steam) in early days of the industry only to be trounced by cheap gas. With several major manufacturers mass-producing all electric cars, the old electric car new again, making this prediction a hit

Markets will stay irrational longer than companies stay solvent -- although the year was a busy one for data center and telecom M&A activity, most of the acquisitions were hardly fire sales. And while there were nine telecom bankruptcies for the year, the only ones that made it into the top 20 were in satellite communications. That said, bets on rapidly rising data center prices have continued to not pay off as RampRate customers typically saw material per-kilowatt cost decreases in their renewals and greenfield projects, leaving the prospect of further shakeout down the road and a partial hit for the prediction.

A large firm will overpay to jump on a bandwagon -- while most of this prediction covers 2012-2013, there are several examples of cloud/data center acquisitions that start off on the hype path, such as Verizon's purchase of Terremark at 5.4x annual revenue and a 35 percent premium vs. market and CenturyLink's Savvis purchase at 3.2x revenue and an 11 percent premium vs. market prices (which would have been a 53 percent premium had it been bought at the same time as Terremark). Time Warner's purchase of NaviSite (albeit at a smaller 1.9x revenue multiplier) completes the trio. We wish these folks all the best, but the prediction still stands as TBD.

More CDNs will be built and fail -- Dan Rayburn's list of current and former CDNs keeps growing. However, two of the main exits of 2011 and the first week of 2012 -- Cotendo and Voxel -- could be considered successes, and Tata's pickup of BitGravity at least a salvaging of a mediocre situation. So this one will be a miss... for now. Some catastrophes like Amazon web Services failed it customers, but not financially for Amazon..

More peering disputes will be recast as net neutrality - As predicted, Netflix CEO Reed Hastings elevated this issue to headline levels by publicly lobbying Congress for a better deal for its provider. Others such as Global Crossing and Voxel followed suit, leaving a harried AT&T and a cable providers' industry group pleading with the FCC to decide on the issue. Regardless of the outcome, the prediction is a hit.

The media industry will step into another content rights PR nightmare -- Ah, where to start? Should it be the inability to sell Hulu - the one digital property that the media industry nurtured to prominence due to content rights issues? My favorite suitor was Amazon. Or with getting half the Internet to mobilize against the SOPA and PIPA legislation? Or yet another single-player game rendered inoperable by remote server failure -- but only for legitimate users? A clear hit.

A top exec or politician will demonstrate technology cluelessness matched only by his/her influence on the industry. This year's Ted Stevens memorial award goes to the many sponsors of SOPA and PIPA, with special mention for Mel Watt (D-NC) and Maxine Waters (D-CA).

Security restrictions will cripple productivity without actually improving security. Without another scandal to stir the pot, the pace of silly security measure adoption has been slow. With the UK government actually moving to more, rather than less sanity on allowing open source software, we were about to label the prediction a big miss. But between proposals to build a whole separate secure internet and contributing to LA's inability to migrate to Google apps, the FBI salvaged a partial hit for us on crippling government productivity for the sake of security aspirations destined to fail due to simple social engineering.

Analysts will invent a new acronym destined to melt away by 2013. It's altogether too easy to say that an acronym or buzzword will fade away. A bit harder to say which one will. Will "gamification" join "protail" (forecast to be a $1.5 billion industry by 2012 as of 2008 and nonexistent by 2011) in the dustbin? Or will it be underperformance of a hyped segment like PaaS joining data loss prevention's failure to deliver ($2 billion in 2012 as forecast in 2008; $832 million in 2015 as forecast more recently)? We'll rate this one as incomplete for now. I certainly hope this stupid world cloud gets contained or it will be the greenwash term of the decade.

Something big will be lost in waves of hype. This one won't be final until 2018, but Gartner has some guesses. Then again, most of their guesses from 2009 either stayed in the same place on the curve or disappeared, as predicted by number 9. Incomplete.

So, all told, we didn't do badly, certainly not compared with other prognosticators of more wobbly consistency and clarity. Only one outright miss, and three others that will take a while more to fully determine. That leaves us batting, more or less, .600 with prospects for further improvement. That's enough to get into the Pundit Hall of Fame, presuming of course than any other pundit actually bothered to look back at what they used to predict would happen before things actually did happen.

Up next, predictions for 2012.

When Valuations Don't Mean Valuable

2011-11-18T14:45:00-05:00

It's Time For A New Wave Of Investing

"You're walking around blind without a cane, pal. A fool and his money are lucky enough to get together in the first place." - Gordon Gekko in "Wall Street"

A week before Groupon's initial public offering, Henry Blodget at Business Insider was telling readers he wouldn't touch it with a 50-foot pole for reasons that amounted to, "It's an insider's game."

As Blodget expected, insiders were indeed the big winners. Investors who bought at the peak that opening day are now down about 20 percent since then. The only good news for investors: at least they're not in the territory of Demand Media, which now trades about 70 percent below its first day of trading back in January.

Investing in IPOs today screams "caveat emptor." But do we listen? The prospect of investing in something that all our friends are using seems to be as irresistible as super-sizing a fast-food meal -- and can be equally bad for our (fiscal) health.

There's also the view that if people are buying things they don't understand, they should lose their money. It's called capitalism, redeploying money to smarter people so it can be invested more intelligently.

Better Ways To Invest?

I agree that capitalism should not reward stupidity, but we also should make it a little safer for non-insiders to invest. Why not increase transparency and let outsiders see what's really going on in a company?

Perhaps it's time for the equivalent of nutritional content labels on investments that outline, in plain language, just how much risk we're taking. And maybe it's time we also start asking if there are better ways to invest, not just for us but the health of our planet. That's happening now with a growing trend called "impact investing," defined as for-profit investment made to solve social and environment problems.

"Impact investing will need to scale to an enormous level for these solutions to be achievable," said Eric Kessler, founder and principal at Arabella Philanthropic Investment Advisors, which advises philanthropies like Gates Foundation and Rockefeller Foundation, and touches nearly $1 billion in grant and impact investment portfolios a year. "Profitable, socially-driven businesses are the only sustainable solution. Philanthropists are awakening to that now and transforming themselves into impact investors."

As things currently stand, it's turned into a bit of the Wild West for investors. In an era of Occupy Wall Street and too many investing scandals, the impulse is to blame fraud or at least insiders who take liberties at the expense of the rest of us.

True, neither Groupon nor its underwriters held a gun to anyone's head to buy a single share. Key information, from insiders taking money out to decelerating revenue growth, was thoroughly and publicly documented, as per all SEC regulations and rules.

But months before Groupon went public, breathless news stories were estimating a $25 billion valuation for the site. By the time the IPO put real numbers on those estimates, Groupon was valued at $13 billion instead, but even that seems optimistic for an unprofitable company founded three years ago.

Sky-High Valuations

Groupon is not the only example of misplaced "IPO-ptimism." Zynga, the online game company, was reportedly seeking a $20 billion valuation. It now expects to go public with an estimated value of about $14 billion, though some seasoned analysts think $5 billion is more realistic. Facebook valuations currently range from $60 billion to $80 billion, up from $500 million just four years ago, though the social media behemoth has yet to announce when in 2012 it may actually go public.

Ask a venture capitalist about these sky-high valuations and their response ranges from a shrug of their shoulders to a gleam in their eye. The bottom line, though, is they don't know what to think. This is uncharted territory, with companies only a few years old riding huge valuations to ridiculous riches, at least for a few.

"The biggest risk I see in today's extraordinary Internet company valuations is the short length of time these companies have been in business," said William Edward Quigley, co-founder and managing director of Clearstone Venture Partners. "The longer a company has been operating, the more secure its competitive position in the market and the more predictable its revenues. Predictability is a core ingredient in successful public companies."

Quigley points to LinkedIn, which went public after a full decade of operations, with a seasoned executive team, strong internal and financial systems and a proven business model. Groupon, by contrast, has had none of those advantages.

"A pubic investor should be more cautious when investing in companies that are still figuring out their business," Quigley says.

IPOs Hit The Skids

This brings us back to what we are investing in and whether those investments are wise. One recent report looked at the dismal performance of new companies in the IPO market. During the past 15 years, the number of young companies entering capital markets through IPOs has plummeted relative to historic patterns, hobbling job creation.

The report, "Rebuilding the IPO On-Ramp," also had a number of recommendations, including the need "to improve the availability and flow of information for investors."

Regulations have driven up costs for young companies looking to go public, the report says. At the same time, institutional investors are leery of buying stock in startups because their risk levels are much higher.

"Right now, there is very little capital available to these emerging companies," said Wall Street investor Terren Peizer, chairman of Socius Capital Group. Peizer said more than 4,000 publicly traded companies have market capitalizations of less than $300 million each. Companies that small just aren't attractive to choosy institutional investors.

"These companies are unable to attract capital on viable terms, if at all," said Peizer. "Increased regulatory pressure has had the unintended consequence of choking off capital access for the small companies."

"In today's regulatory environment, it's virtually impossible to violate rules ... and this is something that the public really doesn't understand. It's impossible for a violation to go undetected." - Bernard Madoff

All of this leads me to hope there will be a greater emphasis on impact investing, which may help resolve these problems.

The Rockefeller Foundation started looking at these issues in 2008 when it developed a set of guidelines for "Impact Investing and Investment Standards," or IRIS. As part of the process, the foundation developed a common reporting language for impact-related terms and metrics.

Out of IRIS came the Global Impact Investing Network Investors' Council. GIIN was set up to identify how investor funds define, track, and report the social and environmental performance of their capital, in a way that's transparent and credible.

In my company, RampRate Sourcing Advisors, which deals with similar issues of managing risk in an opaque environment, I've learned that it's not about making a single right decision. Instead, it's about hedging, diversifying, and understanding your risk vs. reward. It's also about doing what's right.

So much of what's wrong with the investing picture today stems from the basic human impulses of fear and greed. People are afraid they will miss out on something big, which is the attitude that helped puff up the housing bubble. And that fear leads to greed, as people pay big bucks now, hoping to reap huge returns later.

Perhaps it's time we put fear and greed back into the bottle and focus on how to invest for a better tomorrow that makes all of us winners.

Amazon to Beat All Suitors For Hulu?

2011-09-20T18:06:56-04:00

By Tony Greenberg (view more)

The battle for Hulu has come down to a few prime fighters hustling for victory. I'm placing my vote that Amazon should be the winner. Well, that is, for a consumer win.

There's been a lot of courting to acquire Hulu from News Corp., Walt Disney, and NBC Universal's Comcast. And while these Hollywood honchos rarely run a profitable business online, they do love the smell of early cash.

Of the many trying to grab Hulu, including Google, Yahoo, Dish Network, and DirecTV, I think Amazon should get the ring for the many gifts it can present. Amazon has more ways to monetize film and TV brands, thus putting more money in the pockets of Hollywood. Amazon does a better job of marketing than anyone else. It is also best positioned to cross-market the video properties with affiliate commissioned sales of music, merchandise and books.

"Advanced merchandizing will be a key ingredient for success," said Phil Wiser, former CTO of Sony and founder of Sezmi, a global cloud-based TV platform and a veteran of marketing content online. "We are at the brink of a seismic transformation for the TV industry," he said. "Online video technology has evolved to a point where it can truly replace a traditional pay TV platform in the home."

Media executives are reluctant to admit this is the case, but they know there is a sea change occurring. Indeed, Hulu was created largely as an experiment to see how the process works. But Hollywood has a shameful history of turning their golden video properties into online sawdust. For them to get it right they know it's time to set Hulu free.

How they will handle the sale is a tough one to call. As I pondered in my previous story on Hulu, will its partners sell to the weakest competitor or to whoever is willing to strike the richest deal? At least they have the hindsight to have seen first hand how the music industry mismanaged their digital properties.

"Looking back at the music industry, the digital business only really scaled when the content companies stopped trying to do it themselves," said Wiser. Steve Jobs came to the rescue with iTunes, though it contained a few sour notes. "They effectively created a monopolistic retailer," said Wiser.

Amazon is best positioned to offer Hollywood a win-win proposal. It has the best business model to weave the video content into multiple revenue strings, thus being able to hand over a golden cloth that Hollywood mavens will be hard pressed to resist.

"Of all the suitors, Amazon is the least objectionable to the TV networks' traditional cable distribution partners," said Jack Meyers, media economist and publisher of Jack Myers Media Business Report. "Hulu has the established infrastructure, financial leverage and consumer relationships to justify the inflated investment."

Amazon blows away the others starting with the basic economics of how online businesses are valued. It has the lowest client acquisition cost and the highest lifetime customer revenue. The other suitors are not really prepped for prime time.

Consider that Yahoo is foundering and has pretty much destroyed all the properties it has acquired in the past. If the Hulu owners simply want their baby to wither and die, than Yahoo may be the right choice.

Google has been working on its online video strategy for years but has yet to show how to market TV and movies profitably. Yes, Google's YouTube is the 800-pound gorilla in video content, if skateboarding dogs, curious cats, celebrities by accident, and music videos are what lights your fire. Google's job is to sell ads, not content. This counts against Google as Hulu's acquirer as another losing proposition for the consumer. The other potential suitors have problems that may also lead to a lousy ending for Hulu.

Amazon is not going to let the eggs of the Golden Goose that is Hulu rot. It's obsessed with customer service and satisfaction. Amazon was rated No. 1 among online retailers in customer satisfaction in a Top 100 lists compiled by Foresee Results, displacing Netflix from the top perch. Customer satisfaction drives customer retention. That drives customer loyalty and revenue growth. I am confident Amazon buys content licenses for less than similar licenses sold to Netflix, who is spending its public coffers kitty in a mere land grab, rather than Amazon, which is disciplined in their process and valuation.

But wait, there's more.

Customer loyalty is a huge management challenge and Amazon has mastered it. It has achieved that partly by building the best online recommendation engine in the world, much better than Netflix, the assumed champion. Amazon's recommendation engine puts their customers at the center first by homing in on their interests and proclivities. Amazon invested a lot of money and brainpower figuring out who you are and what you like and they back up your vote with your purchases every day. Amazon also has low cost and highest-scale delivery infrastructure and encoding facilities through Amazon Web Services. These are essential keys that put it in position to offer Hulu owners the best value proposition.

The Seattle-based merchant also had the foresight to buy IMDb, the Internet movie database that gets more than 100 million unique visitors monthly who can watch film and TV content, including that from Hulu. Combine that with Amazon's unique click-and-buy features and soon you'll be able to buy the proverbial Jennifer Aniston's sweater on a whim! Or buy the book the movie was based on through your Kindle. That's cross marketing, baby, with proceeds to be shared by all. Then there is Amazon Prime, where subscribers pay $79 per year for preferred shipping and access to digital movies and TV shows. That's about $6.50 a month, less than what Netflix charges and it's pure margin.

More than 100,000 videos are available through Amazon Prime service. Combine that with Hulu's huge library and Amazon trounces its competitors. It could merge in Hulu Plus, currently available for $7.99 a month, for free. Current Hulu subscribers could be given instant access to Amazon's massive library, making it a win-win situation. It's still early days for Amazon Prime, but customers love it, even if they may overpay on locally-available items. In this case, does the 80/20 rule hold, where Amazon Prime is a heavily subscribed, under-utilized service?

As noted here, while Prime may seem to be simply about shipping, it is really about bolstering customer loyalty and encouraging consumers to buy more products than they might otherwise purchase. There are some other ideas why Amazon and Hulu make a good fit here. Put it altogether and Amazon has more resources than Netflix, Google, Yahoo, and all the rest. Amazon has other incentives. It's ready to unveil a full-fledged tablet computer, which could very well be tightly integrated with Amazon Prime and Hulu video services.

Wrap it all up and Amazon is a favorite suitor, with a special connection. Hulu CEO Jason Kilar has had a close relationship with Amazon CEO Jeff Bezos. Kilar had a 10-year career at Amazon, ending up as senior vice president for application software before joining Hulu as CEO.

Lights. Camera. Action! ~~~Buy!

As CEO of RampRate Sourcing Advisors and DeepStrat, Tony Greenberg has been an idea generator transforming perceptions and industries since he was 17.

Under Greenberg's leadership for more than a decade, RampRate has radically changed how IT services are purchased, creating actionable, data-driven, sourcing information that has saved tens of millions of dollars and thousands of hours of headaches for major clients in entertainment, Internet services, finance, media and video games.

DeepStrat, a spinoff from RampRate's strategic research arm, focuses on growth-advisory services for companies in the digital media value chain, particularly in mergers & acquisitions, ramp-ups and funding plans.

Jumping Through Hoops With Hulu: Will Hollywood Studios Kill Their Offspring Again?

2011-09-20T11:07:07-04:00

By Tony Greenberg (view more)

Congratulations should go to News Corp., Disney, and NBC Universal for finally creating an online company so big and successful that tech industry giants may stumble over each other to acquire it. Does Hulu or its buyer get the short stick?

Amazon, Google, Yahoo, Dish Network, and DirecTV appear willing to pay big bucks for Hulu, reportedly up to $2 billion or more, for the privilege of owning it.

Given the painful history of Hollywood creating a salable online unit, this is a major accomplishment. It's a more positive variant of what I like to call "Suck-Cess." The more "successful" a business unit becomes, the more it sucks. In this case the Hulu owners create real value but can't stand to hold onto their baby because it might grow large enough to eat their existing business

Hollywood's unhappy dance with online video typically starts with overheated expectations and results in shattered ventures. Here's hoping they don't screw the pooch again.

"Hulu has long been treated as the unloved bastard offspring of a doomed tryst among three aging TV giants," said Robert Tercek, former digital head of Oprah.com and a veteran of several Los Angeles startup ventures. "Joint ventures are born to fail. When the partners disagree, management is powerless to take decisive action. Ultimately no TV network has had the courage to commit 100% to a new venture that could cannibalize its legacy business."

Hulu is a decent and popular service that attracted more than 24 million unique views in July, according to comScore, which is roughly 10% less than the subscribers of decades-old HBO. Hmm. I wonder how consumption rates differ between the two. Hulu generates material revenue from ads as well as subscription fees for its premium service, Hulu Plus. But which analyst or media firm has counted how much value has been applied in free broadcast time pushing Hulu to its owners' constituencies?

But Hulu also represents much of what's messy about quality video content on the Web. Shelly Palmer, host of Fox Television's Shelly Palmer Digital Living, quips, "Hulu is a business model, not a business. Take away its quality network content and it ceases to have value."

Assuming Hulu gets acquired, it might end up like other ballyhooed Hollywood ventures, a limping zombie with few compelling shows and an operation suspended in perpetual animation in a bid to recover acquisition costs. That's because Hollywood, like the music industry, is so busy protecting its old business models that it hasn't figured out how to profitably nurture new ones in the online ecosystem. The inherent conflicts with a site like Hulu have not been resolved, even though it has blossomed beautifully. Such problems have in the past scuttled video sites such as Movielink, Screenblast, and the UK's Kangaroo.

The big question about Hulu is what will be included with the sale and what's left out. Given all the challenges Hulu has had getting full content licenses even from its owners, what will happen when Hollywood no longer has a stake in Hulu's success? Les Moonves even said, "Are they buying two years of programs for $2 billion? I don't know."

Will a newly acquired Hulu come with rights to all the content it currently has? Will the partners sell it to the weakest competitor or to whoever is willing to strike the richest deal?

One analyst put it just right: "What matters is how long the content is locked up, what the rules around it are, and if they can change in the future," said Rich Greenfield of BTIG Research. "Nobody is going to buy Hulu without answers to those questions."

Hulu reportedly has annual revenue trending to $300 million, but a raft of competitors like Netflix now seeking similar content deals will challenge it. And don't rule out Walmart with its online video service Vudu. It recently surged into third place in the movie-download business. A court ruling this month gave Wal-Mart a major boost in its effort to muscle in on Netflix's streaming subscribers.

One possible hitch to the Hulu sale could be the insistence that viewers who are not cable or satellite TV customers would have to wait eight days to access a show after its initial broadcast. If that's part of the deal, Hulu will sell for a handful of pennies on the dollar compared to what it is worth without that restriction.

There is a lot of risk and uncertainty involved here. If Hulu is freed from restraints studios have so far imposed, it could present other problems for Hollywood. A freed Hulu might really give cable and satellite competitors a run for customers and their fees. Does that create a new golden goose for Hollywood, or just pluck the old one?

All of this is going on against a backdrop of complicated issues affecting video delivery. As online video explodes, pipeline providers like AT&T are choking unlimited bandwidth with metered pricing. They are creating an artificial bandwidth scarcity with new metered pricing plans, even though the cost of delivery has plummeted. These plans risk making Hulu, Netflix, YouTube and other online video services far less attractive, right when consumers are embracing them heartily. The fact that Comcast is leading the push to metered data services is an example of the conflict that exists between its cable and media assets.

Throw in the festering fight over Net Neutrality, where pipelines owners, including Google, will charge premium prices for preferential treatment of video delivery, and you have increased the mess, as I previously wrote. And this doesn't include the potential problems with mobile platforms and the booming popularity of smart phones and tablets for video use.

All this feels like a re-run of the fate of online movie-download service Movielink, which five Hollywood studios owned long ago. Its executives were flustered by interference from studio board members, who repeatedly fought over pricing and special offers.

Is bundling licensed content and distributing it to consumers the wrong business model? Larry Gerbrandt of Media Valuation Partners, long-time media and advertising analyst, asserts, "Over the top television is perfect for an explosion of long tail content, niche content, and foreign language content. Netflix on steroids. I recently spent some time with the folks at Google TV and they are starting with what is NOT available ANYWHERE, such as all of the college sports that don't get on broadcast or cable TV + high school sports in major markets. But it will take a Google, Amazon, or Yahoo to combine enough eyeballs across all the niche content to make it of interest to advertisers. They still pay a premium for reach and you can't change the fundamentals of TV advertising overnight."

The result was a hamstrung service that eventually faded out. Movielink was acquired by Blockbuster in 2007. The chances of Hulu having a similar fate may not be quite the same, or maybe it will be. Despite creating a significant business that could project them toward a dominant position in the online video market, will Hulu's backers jump through hoops to keep it from being too successful? That would be another tragic comedy. You have to love Hollywood.

So who will be the best group to own Hulu and how will consumers benefit? I will tell you in my upcoming paper. What do you think?

As CEO of RampRate Sourcing Advisors and DeepStrat, Tony Greenberg has been an idea generator transforming perceptions and industries since he was 17.

Under Greenberg's leadership for more than a decade, RampRate has radically changed how IT services are purchased, creating actionable, data-driven, sourcing information that has saved tens of millions of dollars and thousands of hours of headaches for major clients in entertainment, Internet services, finance, media and video games.

DeepStrat, a spinoff from RampRate's strategic research arm, focuses on growth-advisory services for companies in the digital media value chain, particularly in mergers & acquisitions, ramp-ups and funding plans.

Key Cloud Migration Decisions

2011-08-25T17:21:16-04:00

Most legacy applications have implicit assumptions about operating systems, hardware, geography, latency, throughput, scalability, governance, access rights, monitoring and other aspects that must be carefully addressed before deploying to the public cloud.

When faced with the many opportunities afforded by a cloud infrastructure -- on-demand scale, potential cost reductions, elimination of complex maintenance processes, etc. -- the decision to build a new application in a public cloud is often a no-brainer, especially for the buyer with the mindset of prioritizing agility and speed-to-market over customization and the perceived security/reliability advantages of internal infrastructure.

Migrating an existing application, however, is a different beast. Most legacy applications have implicit assumptions about operating systems, hardware, geography, latency, throughput, scalability, governance, access rights, monitoring and other aspects that must be carefully addressed before deploying to the public cloud. Some of these have been addressed through the experiences of adapting these applications to function correctly in a private cloud, but the provisioning of shared resources in a public cloud remains a more difficult leap.

Migration Decisions
When deciding whether or not to migrate existing functionality to the cloud, the decision criteria are more complex than for new builds. Key questions in "cloud planning" include:

Should I migrate to a public cloud (and if so, which one), or a private cloud within my existing data center?

How can I tell if my application can be moved to the public cloud at all? Should I engage in an application remediation strategy to accommodate such a move or rebuild from scratch?

Should I hybridize my application to move some part of functionality to the public cloud while keeping other components on an internal private cloud?

When should I consider public cloud SaaS solutions for my end-users, and how should I approach the build? If so, is portability across multiple heterogeneous clouds important for my application and how can it be achieved?

For those enterprises that are just beginning their journey and not yet ready to tackle the full depth of analysis needed for migration, we offer a few rules of thumb for the first few questions above. However, it should be noted that this is only the first step. For organizations with large application portfolios, it is important to go beyond these rough guidelines and establish a consistent scoring and evaluation across disciplines and departments, so that they can effectively prioritize those best suited for cloud migration. More thorny issues of formalizing these rules as well as dealing with governance issues of regulatory constraints, security restrictions, access rights, and SLA commitments often wind up being solved with another technology layer of planning and governance software.

Public Cloud vs. Private Cloud
Many of the advantages of the public cloud can be achieved with a private cloud capability as well -- by deploying similar mechanisms used in a public cloud, but within the existing data center and implementing an on-demand, API-driven orchestration layer. Key criteria that would lead buyers to choose this approach instead of public cloud include:

Predictable Demand -- if you know what amount of compute capacity and storage you will need a year from now, you can provision virtual or even dedicated servers to meet the demand. If every month brings new surprises, private cloud deployments can prevent overprovisioning waste or under-provisioning congestion, not to mention the stress of hitting tight deployment windows.

Consistent Demand -- for services that have the same amount of volume each hour, day of the week, and each month, a private cloud deployment may make sense. The same goes for those whose divisions have that peaks are asynchronous enough to benefit from optimizing utilization among disparate user groups. When considering projects in industries like retail (with a Black Friday spike and a broader December plateau) or online games, where winter weekends spike demand, the public cloud becomes more attractive.

Tight Coupling Between Apps and Devices -- if an application is tightly integrated with other applications or hardware (such as network attached storage devices) that you are not yet ready to move to the cloud, it may encounter latency issues or other problems when moved by itself. A private cloud deployment will help mitigate this issue.

Specific Network Access -- if applications are required to access specific networks for connection to clients, offices, or other network dependent entities, private cloud may be the only choice due to the ability to deploy hardware on a specific network or mix of networks.

How to Diagnose Moving Difficulty
In our experience, the customers that could benefit the most from moving to the public cloud were often the ones least able to do it due to core assumptions in the design of their applications. Some of the ones we have seen in the past include:

Hard-coded Geography and Network Topology -- applications may have implicit assumptions as to where they are on the network and in the world. Hard-coded IP addresses are the easiest example, but other decisions may assume geographic or network hop proximity to resources that the cloud instance will no longer have nearby.

Tight / Undocumented Latency Needs -- in designing data center deployments, we have worked with buyers whose SAN needed to be no further than 20 feet away from their servers because their applications would time out otherwise. In a cloud environment, even if your storage is in the same location (not always guaranteed), it may be a mile away in the same data center campus.

Extreme Throughput -- many cloud storage providers shy away from high performance database storage altogether because of an inability to hit IOPS targets. Even services ostensibly designed to support databases don't always offer the consistent high throughput of dedicated hardware.[1] Applications built on high-performance throughput assumptions may not be able to adapt to the more variable - if not outright lower - performance of their cloud instance.

If your application faces multiple constraints such as the one above, it may be worth it to look to the next generation and build for the cloud in the next major release rather than try and adapt existing functionality built on the assumptions of certain latency, throughput, and location.

Hybridizing Apps
Another interim step is "hybridizing" an application to run some instances or functionality in the public cloud while retaining the core on an internal private cloud. Key decision criteria that would make this approach desirable include:

Limitations in Existing Infrastructure -- a hybrid approach is often useful to overcome specific gaps in the original design. For example, if a company has a single data center on the West Coast of the U.S., a public cloud extension or instance can better serve customers on the East Coast or in Europe while retaining centralization / synchronization to the master database.

Low Cost Added Availability -- a Tier IV data center can cost up to 50% more than a Tier III data center while offering only 1.2 more hours of uptime annually. So when your app must be available 24x7x365, a light version of an app hosted in a public cloud that can hold down the fort during datacenter outages or maintenance can be a life saver at a fraction of the cost of extra redundancy.

Event-Based Demand Spikes -- if your spike demand (say due to a promotion or media coverage) is different from your regular demand profile, it may be possible to build functionality just for that extraordinary bulge in the public cloud, trading in some performance for extra flexibility. The interface or functionality or response time might be a bit off, but your one-time spike users will never notice.

The Final Step: Migrating Apps to SaaS
The last key migration question is when to make a more wholesale change from a client application to software as a service (SaaS), and if so, how much to rely on pre-built functionality of a PaaS or SaaS vendor rather than developing in house. Rather than a classic migration dilemma, this is more of an architectural decision, and is made at a more strategic level based on the following questions:

What's Less Predictable: Configuration or Access? -- the bane of the desktop application is the plurality of desktop hardware and software configurations and the possible conflicts this engenders. If the desktop is not locked down, client-side apps are harder to build and support than browser-based apps. Conversely, if access to the internet is more inconsistent, then SaaS often runs into problems absent client-side workarounds, while local apps work better.

Can I Support Constant Releases? -- a major advantage of SaaS approaches is the constant addition of incremental functionality. If developing significant functionality in-house but without tight QA controls, this advantage can turn into a liability quickly, as bugs are introduced along with new features on a weekly or monthly basis. The discipline of the development process becomes key.

How Much Lock-In Is Acceptable? -- IaaS approaches, while not perfectly interchangeable, can be switched with relatively little pain. PaaS and SaaS platforms are much easier to get started on but may be much harder to leave. If Microsoft or salesforce.com is a strategic vendor that you trust implicitly, the tradeoff is worth it. If you envision changing platforms down the road, a more generic approach may be better.

Conclusion
The decision to choose public or private cloud-based solution is not trivial even for new builds -- a stigma of risk still hovers over the industry given outages at some public cloud vendors. When migrating existing applications, the risk threshold is even higher and buyers still often choose to only dip their toes by virtualizing within existing data centers or building extensions in the cloud while keeping the core as it was.

As public cloud technology matures, the aspect of risk will start to fade away. What will remain is the tradeoff between easy / rapid scale on one hand and customization / control to accommodate application-specific environments on the other. And as connectivity becomes more ubiquitous, and development discipline reduces the need for fine-tuning hardware, all three flavors of public cloud: IaaS, PaaS, and SaaS, will become increasingly viable targets, not just for new apps, but for migration of legacy functionality.

Profiling the Public Cloud Buyer's Danger

2011-08-20T13:12:34-04:00

The key question: is cloud service is the right fit for your specific jobs, whether today or in a few years, and what you should do to prepare.

In the 10+ years I have advised buyers of IT infrastructure services, few technology options have been as polarizing as cloud computing. In some organizations, a public cloud deployment is viewed as an immature technology if not a passing fad, with any cloud outage eliciting a chorus of "I told you so." In others, it is a panacea that appears at the end of every strategic roadmap for every application.

The true position is at neither extreme. Public cloud computing is a tool for a job, which fits some buyers and projects today, and will fit more of them as both cloud technologies and application development practices continue to mature. It is the heir to many technologies that were initially viewed with an equal measure of skepticism and enthusiasm in the past - from co-location to content delivery networks to virtualization technologies rebranded by some vendors as "private clouds".

The key question is not whether it is a great technology or a flawed one - it's both, particularly flawed when misapplied - but what cloud service is the right fit for your specific jobs, whether today or in a few years, and what you should do to prepare.

Public Cloud in the Big Picture
Public cloud infrastructure is a trendy label that has been applied (and misapplied) to many services along the spectrum of managed hosting. For the purposes of this article, the cloud services we are addressing are:

Infrastructure as a Service (IaaS) - open architecture public cloud platforms such as Amazon EC2

Platform as a Service (PaaS) - development platforms such as Microsoft Azure

Software as a Service (SaaS) - application delivery such as salesforce.com

At a minimum, the Public Cloud solution must exhibit the following features:

Most key design decisions belong to the vendor

Automatic provisioning

On-demand scaling or elasticity, often with charge-back reflecting per-hour rather than per-month charges

Public Cloud Buyer Profile
As part of getting buyers towards an optimal decision, we use a scorecard mechanism to weight priorities vs. solution strengths. Historically, public cloud buyers -- whether starting new projects or attempting to migrate legacy applications -- have shown the following attributes compared to their colleagues that opt for other forms of managed hosting:

Higher risk tolerance. Moving into the cloud does entail some early adopter operational risk. It is a market where several of the top providers have a history of outages, and customer service standards are not always enterprise class. public cloud buyers are all too aware of the risk and seek to hedge it in other ways - whether through application resiliency or provider diversity.

More emphasis on price. The TCO on a public cloud platform may not always be lower, but the sticker price usually is, and it does attract the cost-conscious buyer.

More emphasis on scale up than out. Buyers of public cloud services want one thing -- on-demand compute capacity/storage -- done at scale, rather than a broad portfolio of infrastructure and telecommunications offerings.

Heir to Multiple Legacies
The profile of the cloud infrastructure buyer bears many similarities to early adopters of other infrastructure approaches as well. However, crucial differences remain, based largely on alternatives to each technology available at the time of its initial uptake:

Co-location
Similar to public cloud, early fears with regards to outsourced shared data centers often focused on security concerns that were largely, though not always, overblown. However, unlike public cloud, the adoption of early data centers was less about scale and price than about operational health (i.e. uptime) - to be precise, a specific mix of resiliency and cost that found a sweet spot in the market. Yet it was still not a solution for all buyers. A closet with an air conditioner served for the buyer with minimal uptime concerns, while true Tier IV data centers for the maximalist were (and remain) rare and expensive, and are still built as often as rented.

Content Delivery Network (CDN)
CDN adoption was similar to today's public cloud infrastructure in the role of scale. Steep and unexpected demand on the infrastructure is a key driver for both services. CDN was also similar in offering usage-based billing in place of capacity-based charges of alternatives - supplanting the traditional per-Mbps charge model with a cost per gigabyte transferred.

However, unlike public cloud, CDN adoption during its early days was less often a price driven decision, and more often a question of technical fit and performance. Questions like "Does the CDN support a specific streaming media format?" "Does the increased price for bandwidth increase my revenue from my website?" "Can it generate unique URLs to keep my content secure?" "Is it faster than my own servers?", and even more mundane concerns like "Will the caching mechanism blow up if my file size is too big?" were more top of mind than, say, support for a specific OS version is on a public cloud infrastructure.

Implications for the Public Cloud Buyer
For both co-location and CDN - now mainstream and mature services - the same growing pains of unexpected outages, indifferent customer service from market leaders, and the prospect of smaller providers winking out of existence kept the initial risk profile high. Yet, when the dust cleared, the key attributes of choosing each one -- operational health for data centers and technology fit/performance for CDNs -- remained as key guides to the core value.

Similarly, buyers who put scale and price first will eventually drift to the public cloud. Risk tolerance only determines where in the technology maturity cycle they will make the leap. If on-demand growth at a low cost is your primary goal, then the public cloud should be somewhere on your roadmap now. If your top of mind concern is ability to control and fine-tune the performance profile or retain backwards compatibility with retained legacy components, it may be best to proceed more cautiously, building private cloud competencies that can be extended to public cloud services in the future.

A Cynic Predicts IT and Media in 2011

2011-01-11T09:34:09-05:00

As pondered by Tony Greenberg and Alex Veytsel

Visit Tony Greenberg's blog at http://www.tonygreenberg.com

1. Everything that's old will be new again. Last year brought us the return of 3D from the 1950s, cloud (a.k.a. the new and improved mainframe), thin client (the dumb terminals for said mainframe), and iPad, the new and improved tablet PC. This year will bring us another batch of rebranded, repackaged technology sold as revolutionary. Which is ok because none of us are ready for true innovation (see #10)

2. Markets will stay irrational longer than companies stay solvent. For example, data center companies will continue to take losses, go out of business, or get acquired on unfavorable terms even as all indications point to extreme shortages in data center space by 2013.

3. A large firm will overpay to jump on a bandwagon that has long left reality. For example, a cloud computing company with no hope of success will get acquired for silly dot-com economics money by a provider with more money than R&D success. The new division will be trumpeted as the key to the company's future through most of 2011, with division heads appearing in every press release and photo op. It will lose separate branding by beginning of 2012, its management will depart shortly thereafter, and all operations will be dissolved by 2013. Everyone who furiously cheered on the acquisition in 2011 will say it was obvious in hindsight.

4. Someone will found another content delivery company citing the explosion of online video, with bonus points for becoming a specialist in 3D video streaming or some other hyped innovation affecting <1% of the market. This company will fail without garnering much notice.

5. More and more routine peering disputes will be recast as net neutrality debates. The word "peering" will not actually be mentioned or explained anywhere in mainstream press. Genuine net neutrality infractions will get lost in the din of network and content providers crying "wolf."

6. The media and entertainment industry will step in another PR morass related to content protection and hoarding, most likely by crippling a legitimate outlet for content like Hulu or iTunes. Rootkits, requirement of continuous Internet connections to access purchased content, and more lawsuits against widows and orphans also offer good odds. Renewed wringing of hands over mythical billions lost to piracy to ensue shortly thereafter.

7. A top media exec or senior government official will expose an understanding of technology on par with a cargo cult shaman on a Pacific island. This person will inevitably be put in charge of the committee on using or regulating the very technology he or she fails to grasp.

8. In the wake of WikiLeaks, bans on USB thumb drives and CD burners will be followed by bans on all peripherals with output across most governments, their contractors, and businesses that think security theater is reality. Thousands of hours will be lost on the most routine business and government tasks as highly qualified specialists transcribe info they cannot get digitally with a pen and paper. The volume of information leaked / lost to corporate espionage will remain unchanged or increase as workers have to override all security restrictions, including reasonable ones, just to do their job.

9. An analyst firm will publish a series of papers on a new market with a 3-5 letter acronym. Its competitors will follow suit creating their own acronymic or catchy name. Several hockey stick projections of billions of dollars in revenue will be created. None will be correct within an order of magnitude, and no papers will be written on this hot new market by 2013.

10. The pendulum will quietly begin swinging in some way that will change technology markets radically, but not until 2018. The first PR-fueled mainstream story on it (and a dozen other inventions) will hit by the end of the year and it will be the hot new trend for the next 5 years. No actual large-scale impact will occur during those 5 years, and by the time one of the 2010 vintage inventions does go mainstream, the media's attention will be on the next shiny bauble. Candidates include:

Storage densities that make local replication cheaper/faster/better than on-demand streaming for non time-sensitive content. In other words, "all media that ever was" in a box. Thus continues the pendulum swing that started with mainframe (centralized), client-server (decentralized), peer-to-peer (very decentralized), and cloud (centralized again).

Fundamental physical limitations in one of the innumerable "progress laws" (Moore's law being the founding and best-known of the bunch) that make some computing component the new weak link, and associated workaround. As a past precedent, caching in memory and processor is the best-known workaround discipline for the I/O bottleneck that has been the weak link for the last few decades.

Practical prototypes of some technology that was impracticably ahead of its time during a previous wave of enthusiasm (e.g. quantum computing or holographic storage).

Visit Tony Greenberg's blog at http://www.tonygreenberg.com

The Act of Gratitude: Show, Don't Tell

2010-12-04T13:27:00-05:00

Be careful and poignant in how you offer or accept gratitude. Make a visit, make a call, write a hand written note. Do something extraordinary!

I started expressing my words in writing here about this time last year. It's been an amazing journey of gifts, mostly to myself (how selfish) and for a few others I may have cajoled or motivated, or for whom I may have changed a course of action or corrected a wrongdoing. From trust to ecology to vegan prose, customer service and exploring how capital markets reward poor customer service, my gift has been you. Serving up a few business and personal issues to the world has been so fulfilling to me. To fall on my sword or lay it down makes me whole.

What viscerally resonated with me during this writing process is the power people give themselves to express as they need, when they feel, and how they show their best face. I have gotten the honor to embrace and be embraced by thousands of nameless faceless and wonderful folk, who bless me with their rhyme and reason and thoughts about my assertions. To know Tony is to also know my alter ego and frequent nemesis, Super Tony. In this space, they become one. I am not grateful for that, yet thank you deeply for embracing my morph-oid.

Last year I found an audience with the words below, and am excited to share with my new friends again. The possibilities of today are not endless. Make everything you do count. I know I will.

***

Gratitude: The Smuggest Sentiment or the World's Second Most Selfish Act?

A great many men's gratitude is nothing but a secret desire to hook in more valuable kindnesses hereafter. (Francois de La Rochefoucauld)

We live in an era of compulsory gratefulness. Ministers scold us to thank God for all His blessings. New Age gurus demand an "attitude of gratitude." We're told we must give thanks for the slightest of gifts. It's all about being grateful, if we want to create a life lived humbly yet well.

Well, gratitude, shmatitude.

Really, you lazy person, what have you done to be so filled with all this grateful goo? More importantly, what exactly did you do to express your gratitude? Did you just talk about it? Well, shut up. Go do something useful for once. And don't talk about it.

A man's indebtedness is not virtue; his repayment is. Virtue begins when he dedicates himself actively to the job of gratitude. (Ruth Benedict)

Herded toward the corral of gratitude, most of us routinely mouth about how grateful we are. Then we show how deep our gratitude is in the most insubstantial, inadequate, even inane ways.

In fact, gratitude may be the smuggest of sentiments, the world's most selfish act this side of suicide. Its adherents are too often filled with an oozy glow devoid of any corresponding action. As we expand the grasp of our gratitude, we do little to show we actually mean it.

Thankfulness is the beginning of gratitude. Gratitude is the completion of thankfulness. Thankfulness may consist merely of words. Gratitude is shown in acts. (Henri F. Amiel)

The point? Words matter. We should give thanks, of course, but that's different. Those are words, hopefully heartfelt. We should practice acts of gratitude, not just hollow attitudes of gratitude. Attitude is nothing but show. Until you've earned it, don't use it. And don't gloat about how much of it you have, either, because that isn't the point.

As a small example, what happened the last time you were treated to a lovely dinner in someone's home, where they created a fabulous meal wrapped in lively conversation? They went to a lot of trouble. You had a wonderful time. Then you went home.

Did you a) begin planning how to create in turn a similarly wonderful experience; b) dash off a crappy little 20-word email and hit "send"; or c) uh, forget to do anything?

Chances are, you said "b" and counted yourself a well-bred yet technologically modern person. Or maybe you just said "c" and forgot to count at all. Could you at least have taken the time to write a thoughtful thank-you card in longhand, stamp and address and mail it?

There's little in the way of actual gratitude on display here. And it only gets worse the more we embrace the attitude without the action.

It's a sign of mediocrity when you demonstrate gratitude with moderation. (Roberto Benigni)

This imbalance occurs because we actively misread what many different spiritual teachers and practices have long said. And we do it because it's easier this way.

Taoists describe a circular, balanced life in their yin and yang. Each complements the other and completes the whole. Vajrayana (Tantric) Buddhism suggests a unity of opposites, words and action, in building to an Enlightened whole. Jews, Christians and Muslims routinely give thanks to their God for the blessings He has given them.

But it's not enough to give thanks. All these religions balance a call to recognize our blessings with something more substantive, to actively make the world better, to show, not tell.

***

You can read my complete thoughts in "The Act of Gratitude and Giving Back: Mean it When You're Grateful." Have a thankful day.

Break Out the Buggy Whips: Is This the Tipping Point for Streaming Video?

2010-11-17T11:35:47-05:00

Who's in the buggy whip business in technology these days? By that, I mean, what companies are about to become obsolete thanks to major shifts in media delivery and consumption caused by the rise, the serious rise, of streaming?

More than a dozen years after the launch of the Streaming Media conference, which is now filled with dozens of content-management systems and practically no CDNs (content distribution networks), the show is creeping back to success showing its best growth numbers in years. Meanwhile, the CDN business is still a rug-dealer's market, facing a death spiral toward $0 bandwidth, with individual vendors providing widely varying price, quality and value. "We've seen this all before," observes Steve Lerner, RampRate's Media Technology Specialist, "by 2003 there were over 25 dead CDNs all who followed the same pattern of selling 'cheaper' rather than selling 'better'. It is hard to make a living marking up bandwidth that has a continuously collapsing marginal cost." Thankfully, there's still a market, as my firm, RampRate, mediates deals in this space).

Somehow, the CDNs continue to develop new tech to stay in business, but I have to think they'll eventually bow to Google and Microsoft, the only firms with enough scale to survive in the long term. That said, there's more happening in streaming than in a long time, with more mainstream content and more kinds of devices that can access it.

My partner David Bloom has just published a piece in TheWrap.com listing some of his top candidates for Industries Soon To Be No Longer Needed. He writes: "What's it all mean? To start, I'd sell off that optical-disc duping factory if I were you. And you may want to get out of the hard-drive and home networked-storage businesses, too. They're on the way to buggy-whip status and fast."

Just to top it off, he throws in the makers of shelving for all the DVDs, CDs, books and more that we soon won't be collecting to show visitors how cool our tastes are. Now we'll have to do that by sharing our culture preferences online with friends through programs such as GetGlue and Apple's Ping (well, maybe).

Why are all these industries suddenly endangered? David rightly says it'll be a while before things completely shake out, of course, but a series of recent announcements and developments are accelerating the long-bubbling transition to streaming for much of content that we consume.

"The resulting shifts likely will change the kinds of entertainment we consume (it will be a while before that shakes out, I think), but those shifts definitely are already beginning to change the way we consume them."

Big companies such as Apple, Google and consumer electronics makers have made a series of recent announcements that will make it easier than ever to get brand-name content for a cheap price, stream it smoothly and at high quality on all kinds of devices and platforms, and not worry about keeping it on hand on some vast hard drive forever after.

Mark Suster of GRP Ventures smartly asserts Hulu is the OPEC of the online Industry (though I wonder if they soon become yesterday's fish wrapper as Skype becomes en vogue as their founders return to shake it up). Reversal of Fortune?

There are some caveats:

For instance, at least some people will need local hard drives and optical drives for the stuff they already have, like the CDs and DVDs they already own and the personal stuff they're now creating by the boatloads.

Will big content creators actually free up their good programming enough to avoid what I'll call Chronic Consumer Frustration, a condition that drives tech-savvy audiences back to the latest illegal tools to access all that locked-away content.

As an example: Look at the broadcast networks' ban of their content from the much-ballyhooed Google TV service. That uniform opposition means Google TV users will only see some basic cable networks among the online offerings of the service. It doesn't mean users won't get that programming somewhere else (and Google TV's Internet access and search capabilities may make it easy to find).

Over at iTunes, only Disney/ABC and Fox are selling their TV shows at 99 cents a pop. That doesn't mean people aren't watching shows from CBS and NBC, et al. They're just going to get it in other ways.

But I digress. For tech companies, the string of recent announcements and developments show that cloud computing is rapidly becoming mainstream, undergirding the business plans and major new offerings of some of the biggest companies in media and entertainment. As David says, "It's kinda already here":

We're seeing significant changes in distribution through mainstream devices, for mainstream audiences, involving low-cost content that people won't own, and won't store on their own machines, but can access nearly anywhere, on a wide variety of devices, from cell phones to TVs to computers.

The only question for you to consider is whether you're suddenly in the buggy whip business, or transforming your company to leverage the opportunities that are quickly presenting themselves. So are you moving forward? Or looking back?

Are You Going Green or Going for the Green?

2010-11-09T17:19:14-05:00

Part 2 in a series on the conflicts between the environmental and the economical impulses in all of us, and how we resolve them.

How to be green? Many people have asked us this important question. It's really very simple and requires no expert knowledge or complex skills. Here's the answer: Consume less. Share more. Enjoy life. – Derek Wall

I was at a friend's home recently when I noticed he had no paper napkins, towels or tissues, because, he said, he wanted to reduce impact on the planet. Meanwhile, his SubZero dishwasher was running full power. Tug of War: Economics or Ethics?

This perplexed me. I was sure he was taking a bigger whack out of the planet's resources with that honking big dishwasher than I would have if I needed to blow my nose with a Kleenex or to use a paper plate to eat some leftovers.

It got me thinking: In our pious zeal to feel better about the mess we're collectively making of the planet, many of us have settled on personal steps to green things up a bit. But are those steps really worthwhile, or just sops to make us feel less guilty? What's the real return on investment of these options compared to some alternative?

At CGI Clinton Global Initiative, RampRate and I studied how data center emissions could be chopped 60 percent, and cost would tumble too. But that often isn't enough to overcome the hurdles of corporate decisions. Green doesn't always pay. The grass isn't always greener on the other side of green.

We are trapped in a confusing, ever-changing sliding scale between what's environmentally correct on one end and what's financially and emotionally acceptable on the other. And where we fall on that scale in any one set of questions can vary wildly depending on what else is going on in our lives, and what's being asked of us. My friend Taylor Milsal, one of Silicon Valleys insiders extraordinaire -- forever TEDster, bikes everywhere, no car for years and helps grow businesses from fuel cells to Uptime Institute to simply living the legend. If lucky, you get to attend one of her exclusive amazing soirees.

"We won't have a society if we destroy the environment." - Margaret Mead

The results have led us into some messy and annoying compromises, or left us to look for easy, lazy solutions to complex questions. Take the question of paper versus permanent at my friend's place.

Long time buddy Richard Titus, co-producer of Who Killed the Electric Car? proclaims "Sustainability is not about asceticism, it does not require one to forgo life’s pleasures – instead it is about developing and living a lifestyle, which can endure, conceivably forever. The Opposite of sustainability is not consumerism, it’s Nihilism." and asserts “Sustainability is about moving the point of consumption to align with one of oversupply. Tesla, which converts excess evening electricity into scarce daytime automotive fuel is an excellent example of this.”

Fired by my paper pique, I went looking for self-important but ineffectual green "solutions." I was sure, for instance, that paper towels or plates don't create any more planetary problems than using all that water and energy on the dishwasher.

But nailing down the true cost/benefit on these "eco-pieties" proved a challenge, starting with the dishes vs. paper debate. Web research turned up highly ranked, and highly useless, sites like this one, where readers are asked what they thought was likely to be the best approach. No one bothered to actually figure it out, they just asked for opinions. Mush-headed stuff like this drives me crazy.

Definitive answers can be difficult to nail down, though. There are too many variables, and you really have to think hard about your situation, something not enough people like to do. They just want an easy dictum they can follow. But life is seldom so straightforward.

In this case, let's look at some basic questions. Are you washing those dishes by hand? If so, dishwasher is actually a lot more efficient, especially a new one, which can cut 37 percent from your water bill, the California Energy Commission says.

Here's why: As of last year, Energy Star-qualified dishwashers must use less than 5.8 gallons to clean a full load (you do run the dishwasher only when it's full, right? That's another important question). Hand washing a similar number of dishes would typically use 20 gallons.

Other factors make a big difference too. Do you pre-rinse dishes headed for the dishwasher? The new Energy Star-compliant devices supposedly don't require pre-rinsing. That can cut water use even more, but lots of people probably rinse (rather than scrape) before putting that dish in the machine.

"Ecology is rather like sex -- every new generation likes to think they were the first to discover it." – Michael Allaby

More tricks, even for older machines: Use the water-saver settings, if any, and save energy by opening the dishwasher before that last dry cycle. Do you do either?

There are other complications, too. Did the water come from some nearby, plentiful source, as is so common on the East Coast? Or, as most of it does in drought-vulnerable Los Angeles, through a few hundred miles of California Aqueduct, with all the environmental and energy issues surrounding that process?

Once the water got to your place, did an efficient on-demand water heater get that water hot, or was it an old-fashioned 40-gallon tank? And for that matter, where did the energy come from to do all the heating? Coal? Hydroelectric? Natural Gas?

On the flip side, are those paper plates made from trees that were cut down and trucked to a Georgia paper mill, where they were shredded, bleached and pressed into something you could use, once it was shipped thousands of miles to a store near you, and you drove over to pick it up?

Were those products made from recycled, previously shredded and bleached dead trees or from new ones? Weyerhaeuser, the big paper producer, says recycled paper uses 64 percent less energy and generates 74 percent less air pollution than the virgin stuff.

"It's a morbid observation, but if everyone on earth just stopped breathing for an hour, the greenhouse effect would no longer be a problem." - Jerry Adler

And for those worried about landfills topping out (a big concern in Los Angeles), there are new paper substitutes -- made from sugar cane, potatoes, bamboo or corn -- that break down more quickly when thrown away. Do you use the plate multiple times before tossing it? Will the plate be recycled again, or just dumped in that overstuffed landfill? How much water and energy did all that take?

Further confusing matters are smarmy vermin such as Richard Berman, who makes flesh the smiling devil of a protagonist from the brilliant satire "Thank You for Smoking."

Like that oily character, Berman is a high-level Washington lobbyist for what I'll call the "sin industries" -- alcohol, tobacco, and the more problematic corners of the food business. His job is to make people think that maybe it's okay to consume those things scientists say we really shouldn't.

Berman runs innocuous-sounding "grassroots" organizations such as The Center for Consumer Freedom, whose pronouncements cloud any science-based public health discussions (really, a Big Mac has just a few more grams of saturated fat in it than, say, a mango ,which has, uh, virtually none).

If you have a hard time figuring out many eco issues, it may be you need to thank, or blame, Berman and his ilk for a job well done.

"We abuse land because we regard it as a commodity belonging to us. When we see land as a community to which we belong, we my begin to use it with love and respect." - Aldo Leopold

So where do I come down on the paper versus dishwashing debate? A British government study looked at the related debate over cloth diapers versus disposable ones. They found it a, uh, wash.

I'm guessing you could similarly make a case for either side in the paper vs. dishwashing argument, depending on the variables. Me, I'm still leaning toward paper in the short term, depending on whether water or landfill space is scarce near you, and what you do with the plate. I can turn off the water, but a boycott of paper plates seems a mountain too high to climb. Today.

To help us figure this out, I asked my colleagues at RampRate to build a little calculator to do the math for this conversation. This and other tools will be posted over the coming weeks. They do this sort of thing all the time for our clients, but in a very different space, Trade offs between strategic and price conscious, price or performance and power versus availability are current Tugs of War that we live with daily. But it's the same process at heart: figuring out what matters to you, and then connecting to the solution that works best for your particular sliding scale between emotion, economy and environment.

It's a useful exercise in thinking through this particular eco-piety, and the ways it is affected by the many choices we make. That's the kind of conscious living we need more of, so we aren't blindly following anyone's lead on matters that matter.

"Green, how I want you green. Green wind. Green branches."- Federico Garcia Lorca

What do you think? Are there any ways, big or little, that you're trying to live a more green existence? Do they really pencil out? Have you heard of some that don't? Let me know and I'll put them through a calculator to see what's right.

The Tug of War - Ethical vs. Economic "Green" Decisions

2010-10-26T12:37:59-04:00

more located at www.onlytimebuystrust.com

Are your eco decisions for you or for others?

This is the first in a series of articles on connections between the environment and our personal life choices. As a twenty-five-year macrobiotic, my mind and heart are fused in beliefs. I will examine eco-lifestyles, the green washing phenom, the paper plate or dishwater dilemma, and the new evolution of triple bottom line for corporations. As the words "green/socially responsible/vegetarian" disappear and become redundant to "life," change will have charted the right course.

Eco/Health/Animal rights are just a few of the dialects and lifestyles people choose. You never know when you are sitting next to "one of those" crazy, left wing, sign-carrying, hippie beatniks of lore." NOT. That crazy may just become you. Or President Clinton in his recent disclosure on repairing his health.

Peoples,

I've spent a lot of time recently thinking about "eco-pieties," the perceived "wisdoms" accumulated by people who want to make the world better, but don't want to think too hard or put themselves out too much while doing it.

There's a constant push-pull between what is environmentally "best" and what is economically sensible. Sometimes, I've found, the "best" environmental solution isn't as obvious as some might think, or isn't best in all situations. On top of all that, money does matter for lots of folks, and affects the decisions they can or want to make. What decisions are hard-coded in your life? Ought there be at least one?

I am forever sick of sensationalist media outlets and brands touting propaganda and subsidy driven marketplaces intended to change our perception of healthy choice in food, drink and practice. Where's the beef Clara?

So, how to make the world better, and do it in a reasonable way? To start, you should gather information, real and scientifically defensible information, so you have a better idea what you should do given your personal circumstances. It's a lot like what my company does for its clients for data centers, gathering hard data about the market they're interested in, so they can make rational decisions based on evidence, not emotion and hearsay. But too often, people don't do the homework. They want the easy answer, not the right one.

"Unless someone like you cares a whole awful lot, nothing is going to get better. It's not". - Dr. Seuss

In thinking about all this, I talked with smart guys like Cyrus Pirasteh, a former Goldman Sachs trader turned eco-vegan activist and tech entrepreneur. When I asked Cyrus how we might fix the planet, his response was simple: Don't eat meat. Everything else is, so to speak, small potatoes.

The answer wasn't quite what I expected, but Cyrus has a point (and a musical way of telling his side). Cutting meat out of your diet has a huge impact on the health of the planet, your body and even your wallet (especially if you avoid highly processed non-meat substitutes).

I've been living a macrobiotic diet for decades now, though I'm no pure vegan (I have a bit of fish on occasion, yet no dairy or eggs forever). But that decision has kept me healthy and high energy while I do the million things stuffed onto my daily calendar. My next post discusses my path to macrobiotics, so stay tuned.

"If a group of beings from another planet were to land on Earth -- beings who considered themselves as superior to you as you feel yourself to be to other animals -- would you concede them the rights over you that you assume over other animals?"
- George Bernard Shaw

Moreover, cutting out or reducing your meat intake, especially of beef, can have massive practical impacts. One analysis, based on a 2000 report by Stockholm University and the Swiss Federal Institute of Technology, estimated the energy, water and other components of growing, feeding, slaughtering and freezing beef.

Combine those energy requirements (a somewhat impenetrable number ranging between 7 and 20 mega joules) and the impacts of cattle- (and sheep-) produced methane, and the analysis suggests that beef consumption generates roughly the equivalent carbon footprint of 6.5 million to 19.6 million Hummer SUVs.

The United Nations' Food & Agriculture Organization estimated that beef production accounts for a whopping 18 percent of all greenhouse gases each year. The cost of growing, preparing, transporting and eating vegetable equivalents generates a fraction of 1 percent. At a wine bloggers fest, I was sat next to the sponsor, Tyson Foods, currently touting their RealBeef campaign, got quite a mouthful from me.

"Non-violence leads to the highest ethics, which is the goal of all evolution. Until we stop harming all other living beings, we are still savages."
- Thomas Edison

Not surprisingly, the beef industry has vigorously contested the figures. American Cattleman magazine, for instance, says the industry has moved to more efficiently feed and process animals, reducing their greenhouse impacts. The argument is fine as far as it goes, but dodges the bigger issue: if you eat less beef, there will be fewer impacts on the planet, period.

In the Amazon River Basin, Brazilian ranchers have been practicing slash-and-burn agriculture to create grasslands, mostly for cattle ranching, because the resulting nutrient-poor soils can't sustain farming for more than a year or two. On top of everything else, whacking the rain forest further shrinks the world's single largest carbon absorber just when it might come in handy.

In the American West, ranchers have long enjoyed access to federal lands at subsidized prices for grazing rights, water and more. To protect their herds, they've wiped out most native predators while radically changing fragile ecospheres.

It goes on and on. Care to guess one of the biggest sources of climate-change gases? Yep, it's methane, from the wrong end of ruminants like cattle.

Every time you buy a burger, you're making your preferences known, in ways that affect both your own health and that of the planet around you, says Shaun Monson, creator of the influential vegan documentary Earthlings.

"Is this a we decision or is this a me decision," quipping Mohammad Ali, asks Shaun Monson. "When it's really we, it's both eco and vegan. There's no separation. When you're spending a dollar, you're casting a vote."

"The reason I'm a vegan is not because I love animals, but because I really hate plants." - Moby

Thomas Friedman, the New York Times columnist and author of such books as Hot, Flat and Crowded, has written regularly and passionately about the need for an aggressive new U.S. policy fostering green technologies and reducing our need for energy- and water-hungry industries. At a networking event with Thomas at a friends home, he threatens that policy mandated price targets are the only answer to change, which saddens me that out lives are in policy makers hands.

If we don't do it, he argues, the Chinese will, and we'll miss a chance to both revive our economy and be on the leading edge of the next tech revolution. So I asked him about whether a new food policy could be good tech/green policy?

"A herd of cattle belching can be worse than a highway full of Hummers," Friedman says in the book. He quotes a 2002 Science World report that methane (from cow belching and other sources) has 21 times the heat-trapping power of carbon dioxide.

With an estimated 1.3 billion cattle worldwide, that's a lot of trapped heat. Cutting beef consumption even 10 percent could have a massive impact.

"I don't care how much you know, until I know how much you care."
- Anonymous

And just because food is vegetarian, doesn't mean it won't taste good. I particularly love the wonderful and wildly varied vegetarian Indian cuisines that have been developed there over the past 5,000 years. Last night, a party of 1000 for Sea Sheppard, introduced by Nonprofit Consultant Debrorak Bassett, vegan was the fare.

Los Angeles has a huge number of these restaurants, especially in areas such as the stretch of Venice Boulevard between the 10 and 405 freeways (I think they're clustering there because of nearby Hare Krishna and Muslim houses of worship). Review a list of the best vegetarian eateries in the country. Best of all, it's often cheap -- or can be -- easing the eternal conflict of environmental purity and economic sanity.

So, if you really want to make the planet a greener, healthier place, and make yourself healthier too, take a page from the Catholic calendar and try out a meatless Friday. Or even a meatless Monday, Tuesday, Wednesday, Saturday and Sunday.

At the end of my day, it's about trust, finding your own beauty and making the right choices and living with them forever. Read more at www.OnlyTimeBuysTrust.com

What do you think? Are there any ways, big or little, that you're trying to live a more green existence? Do they really pencil out? Have you heard of some that don't? Post any links or ideas you have and we'll try to pull together the best stuff.

IT Services Markets Crumble - Driving Detroit's Rut, Is the Media Business Next?

2010-09-14T13:24:25-04:00

Tony can also be found here

Media firms have been my clients for years. Most IT firms complain the media firms prey on IT services firms by offering to "reference them" for larger enterprise deals. WRONG. Media firms, much like adult entertainment firms, are the spaghetti slingers and early adopters of new tech. You have to love them for taking the arrows in the back and mounting themselves on the fireplace alter as trophies.

Media firms are actually IT Heroes. While banks and automakers wax excel-poetic about risk and return on investment; Disney, ABC, News Corp., Viacom, CBS and Sony -- all past or current clients -- Media firms pave the yellow brick road. Hats off to you all for "boldly going where no man has gone before." For now, let's ponder what lessons we can learn from the carnage of auto and the future demise of IT.

A couple of months ago we posted a bold proposition -- that the U.S. IT services industry, while nominally healthy today, could find itself following the same ditch-bound trajectory as the U.S. auto industry. Such a bold claim requires significant evidence, so to start; we'd like to focus on four ways in which the parallels are beginning to emerge:

Consolidation - an early enabler rather than driver of failure, it creates an atmosphere where mistakes are magnified

Misalignment of incentives for quality and innovation tied to scale -- as companies get larger, they focus more on cost cutting than creative destruction and product innovation

A shielded class of workers - unions for Detroit, salespeople for IT services -- create a significant financial overhead and contribute internal pressure towards conservatism

Calculated failure - whereas early service issues ultimately come from an inability to effectively predict and remedy problems, later ones are deliberate tradeoffs of service quality for cost.

The next several posts will focus on specific tactical drivers of stagnation and ways it can be reversed. In speaking at Humanity + at Harvard in June, I overviewed how capital markets reward poor service: www.boilthehuman.com. As this article is focused on IT, I want you to start thinking of the media business and how this relates.

Is this the beginning of the demise of an industry so critical to our gross national product and evolving state?

Consolidation
When an industry is consolidated in the hands of a few decision makers, groupthink will prevail and collective mistakes will be made. They will initially use economies of scale to drive efficiency, but then stagnate under the weight of the same scale. Is this akin to the media business? Ought we think about the parallels of destruction?

The auto industry has consolidated early on, from hundreds of providers at the turn of the 20th century to the Big Three and a small number of hangers-on fifty years later. While the IT services industry as a whole has thousands of companies, it is also moving down the path of consolidation. To give some examples:

The data center industry has seen two large 2010 consolidation moves with Equinix buying Switch & Data on the Internet Exchange side, and Digital Realty Trust snapping up 365 Main's data centers in the wholesale segment.

Gartner's Eric Goodness could name only one Remote Infrastructure Management provider of note that hasn't been absorbed by a larger IT services firm.

Telecom has the early lead as the largest M&A industry in 2010.

Consolidation is not bad in itself. The car industry reached its heyday with an oligopoly. However, it sets the stage for future issues by creating risk aversion and reducing nimbleness, and that is what we are starting to see in IT services.

Misalignment of Incentives for Quality and Innovation
One of the long-standing controversies in economics is the Schumpeterian hypothesis that more concentrated industries promote product innovation (better quality to the end-customer) or process innovation (lower costs to the producer). Recent research from 2008 seems to show that there is some product innovation benefit to concentration in purely quality-driven industries. However, the researchers found that "product R&D expenditure decreases with market share when the perceived quality relative to price determines the market shares of firms."

IT services are indeed driven by price-quality tradeoffs. As the industry gets more consolidated, innovation in product/service quality is reduced, while the focus becomes process innovation which, for practical purposes, amounts to cost-cutting. Our experience in the market is starting to show anecdotal evidence of this. The largest providers are often the ones with low-density data centers and heavier users of labor arbitrage than automation in managed services. As with consolidation, it's not a full-blown, clear-cut, one-way trend. Upgrades to 10Gbps networks took hold in large IP transit providers faster than their smaller peers, and the largest providers build or buy significant portfolios of value-added services in markets like CDN. And to be fair, along with tail fins and tank-like SUVs, cars have gotten safer over the years -- a ten-fold reduction per mile driven since 1937.

But true "creative destruction" (Schumpeter's better known concept) rarely takes hold in companies with a lot to lose. That is why it takes a relative outsider (Amazon) or a smaller provider (Rackspace, Terremark), rather than a top-three data center or managed hosting firm to mass-market a big change like cloud computing. It's why we've seen larger data center companies walk away from deals based on an install timeline or density just outside their comfort zone when smaller vendors paid an electrician some overtime and came up with patchwork solution on the fly to meet client needs. And it may be the reason why we don't have a flying car -- when you have nothing to lose, you are more likely to support revolutions. When your investors expect a steady revenue stream, you invest in evolution.

A Shielded Class of Workers
Internal pressures from influential employee populations also lead to increased conservatism. While any discussion of UAW's role in Detroit's troubles is bound to provoke a storm of partisan controversy, the final calculus is that labor and management collectively reduced the size of the revenue pie. They did this in part through the way they divided it, both in the energy spent on fighting the battle and the limitations on flexibility that emerged from it. In the IT services world, there is no major union activity.

Nevertheless, there is a protected class of worker that holds the keys to the castle, and that class is the sales organization. Now it might be odd to compare sales, which has some of the highest turnover in the company, to the tenured positions of unionized workers. However, the sales organization has almost limitless power to make or break a company's quarterly results, and fights fiercely for the status quo and its commissions.

Even as costs are cut throughout IT services, sales commissions remain relatively unchanged at around 10 percent for a direct rep, with additional overlays for managers. Non-salaried and external referrers can get even more. More importantly, behind the scenes, compensation structures shape a large portion of deals, even when neither the buyer nor the seller's employer benefits. This constant struggle to hire, retain, and properly incent sales becomes as much a focus for IT services providers as union relations for GM or Ford.

The lack of ability or desire to effectively understand and promote new and innovative solutions within the IT services sales force is something that we and other industry insiders like Phil Fersht encounter every day. It rarely makes it into public view. Among other things, we've seen salespeople give short shrift to cloud solutions because they wouldn't be part of the transaction in the long term -- an echo of the UAW joining the Big Three in fighting improved gas mileage targets in 1990.

Calculated Failure
Deliberate compromising of car safety for other attributes, whether visual appeal or cost reduction, is the centerpiece of Unsafe at Any Speed, which launched Ralph Nader's rise to prominence. Against a backdrop of generally improving car safety, these tradeoffs were not necessarily statistically noticeable. But they were sure as heck noticeable to Corvair customers that were in just the right type of accident.

In the IT services industry, the situation is similarly complex. Overall customer satisfaction is rising, and buyers are planning to do more outsourcing, in large part because product innovation is improving uptime and removing accidental errors. However, process innovation, focused on cost cutting, is pushing service providers in the opposite direction and limiting the potential.

From a quantitative perspective, our recent private evaluations of help desk support in internal service organizations, as well as a 2008 MIT study, show how support migration to lower-cost external providers (not just offshore) reduced customer satisfaction.

Moreover, the savings achieved most frequently went into the organization's pocket rather than product improvements, failing to compensate the end user.

Anecdotally, the situation appears to extend to companies that did not migrate their support structure externally. Multiple providers that used to have a "make it right" fund for unhappy customers or adapted their policies as needed to sensibly handle a situation, are now becoming more rigid and cost-driven. For example, if a customer missed a deadline to cancel an auto-renewal even by one day, they would refuse to negotiate without a huge fight. So whereas the SPY Index used to have dings against providers for accidental failures before, it is now more and more full of cautionary notes for deliberate, calculated short-term profit seeking at the expense of long-term relationship health.

Starting the Path to Stagnation
The state of the IT services industry is nowhere near a full-scale decline. Technical innovation still proceeds apace, with virtualization becoming mainstream, data center densities in excess of 10x the conventional limits being deployed, and autonomic agents not just notifying users of faults, but going through resolution processes automatically and then reporting the results.

However, the fundamental structures supporting this evolution are starting to crack. Fewer, larger, more risk adverse companies are refocusing on cost cutting and using M&A instead of R&D to gain market share. In a world of automated provisioning and support, sales remain a human-scale process that at worst actively sabotages and at best fails to support change. And even as unintentional downtime is decreased by technical improvements, service level faults related to deliberate cost-control decisions are taking their place.

These are all macro trends, so what can we as buyers, sellers, and mediators of the IT services industry do? We will offer some of our suggestions in an upcoming series of posts on IT industry myths that are holding back each of the parties from taking tactical steps to improvement. But we'd like to hear your suggestions as well.

Do you agree that innovation and customer service are slowing down?

Have you found effective steps that you and your peers can take to mitigate the situation?

Let us know by sending your thoughts to tony@ramprate.com or posting a comment on this blog.