Hardware is cheap, people are not

Have you ever struggled with an IT-system that is operating at the limit of its capacity? I have. Have you ever noted that people instead of asking how to raise capacity, try to squeeze out everything they can from the current system? I have. I don't know exactly why we do so. Maybe people fear asking or making decision to invest into new equipment. Maybe people feel that enough is enough, that the system should work with the equipment it has. I don't know exactly what is the reason for us trying to save up, but what I know from my experience is that trying to squeeze up usually ends up costing more.

Let me give some examples. I was once working with an telecom system that was very database intensive. We tried to optimize the database, we fixed bugs that were causing reruns, we rewrote parts of the software, but at the end of the day after months of man power was used, the final fix was to replace systems hard drives with SSD drives, and like magic, our problems were over. Another time I was leading re-development of an retail system that was suffering of horrible slowness, while at the end of day the software had to be rewritten completely, we gave artificial breath to the system by just upgrading hardware, which made the system actually be usable again for users.

Of course not always problems can be solved by just investing into hardware. Many times especially with large scale systems it is very important to keep the code clean and optimized. However many enterprise systems that we rely our business are of limited use, in those cases people should not automatically go and try to save up, but they should approach the problem holistically and look on different ways to get to the point where they want to be.

Will Windows 8 enter the living room? - Part I

Lately one of the most talked new software projects in works has been the new Windows 8, and specifically its new Metro UI. Some people like it, some people hate it. However all the people I know think that it is mainly designed for tablets and other portable devices, aiming to compete with Apple of the hearts and minds of home users. This is certainly not a wrong view, but I myself think that Microsoft has even more ambitious goal: to take over the living room, to replace traditional television and peripheral devices connected to it with Windows. Even Steven Ballmer, the CEO of Microsoft, hinted about it in his CES 2012 keynote.

Before going further, let us remind our-self of the importance of the living room and the television. The television has been and is an inseparable part of the modern way of living, it is a centrepiece of home where individuals and families come to share time and experiences together. Such is an importance of the television and its place in our life that it annually generates nearly 50 billion dollars in advertising revenue alone in the US. That is the market where Microsoft is aiming at, and incidentally a market that Google is trying to erase.

Now many companies have tried to take over the living room from the television, however all of these attempts have more or less failed. The reason for their failure has been simple, offerings to replace or amend the television have been too complex, needing either set-up-boxes, peripherals or too complicated to use remotes. The only new technologies and services that have been successfully introduced and become ubiquitous have been those embedded into television itself like the EPG which came with the DVB standard. So how can Microsoft think that they can succeed where other have failed?!

The answer to why Microsoft can take the television is because they have the technology and vision to make using of Windows driven televisions as simple and easy and intuitive as using our current televisions. The two key things that Microsoft have are the Metro UI and Kinect motion capture technology. By combining these two and embedding them into an Internet enabled television, they can create a market proposition for consumers that offers more with simpler terms. What Windows driven television means is no more hassle with remotes, no more usage of  incoherent OEM UIs and added services, instead there will be one coherent and intuitive user experience that combines all services together.

However the television market is too big and established for Microsoft to take it alone, the change has to come and supported from industries tied to television, from device manufacturers to cable operators and from broadcaster to advertisers. Microsoft has to offer more than just renewed consumer proposition, they also have to create new value for all current stakeholders to succeed in their quest of conquering the living room. I will continue with this subject in my next blog post.

We are at the end of the road for home computer

During the last year, I have wanted to write about multitude of changes that are happening and are going to happen in the PC industry. Topics that I would have liked to discuss were the upcoming Windows 8, emergence of endless stream of Android tablets, wireless technologies, mobile optimized chips from Intel and AMD, etc.. However I had a writers block, I couldn't write about these topics because I had not made my mind on what the bigger picture was. Now I know. The bigger picture is that we are at the end of the road for home computer, and that is a major cause of change in the computer industry.

Why is it happening? There is basically two reasons for it, one being driven by technological development, and the second on being changing usage patterns of people. In the past home computers were used as productive tools, then as a way to access information and the Internet, and now they are used mainly for consuming media and engaging entertainment. Home computers, be it desktops or laptops, can fulfill these needs, but not optimally, and certainly not with ease of usage. Instead of a home computer, a better way to fulfill these needs is to use range of different devices like gaming consoles, Internet enabled TVs and tablets linked to each other and other peripherals via wireless connection.

One might ask why is the change coming now and not before, the reason is that technology is becoming ready, it is powerful enough and more importantly easy enough to use. For example you can stream music from your phone or tablet to your stereo system; you can print to wireless printer; etc... In short, your devices are talking to each other, thus you don't need one uber device to do everything.

When will it happen? This is a tricky question to answer, but essentially it is all about consumer perceptions on what is needed to fulfill their needs. The day when your average Joe says to himself that instead of getting a new computer to use Facebook and YouTube, he will instead buy a new tablet with a wireless keyboard and printer if needed. This change can happen very rapidly, maybe even a time frame of just few years. However to speak frankly, we are not there yet. The technology isn't powerful enough, when we have for example AMD Fusion or upcoming Intel Ivy Bridge processors with 4 gigabytes of memory packed inside a tablet or other media device, then the technology will be ready. This would more or less put the time frame from end of 2012 to 2014.

What does it mean? End of Windows monopoly in the home market if Microsoft doesn't successfully retake markets from Apple and Google Android with Windows 8. End of open access and free usability of various devices for the majority of users, in short everything will be locked, users download their software and content from their designated shops or use Internet delivered applications and services to fulfill their needs.

From a point of view of a professional working in the software industry, this upcoming change will create both opportunities to be taken and dangers that need to be counteracted. One pit fall that I see is that companies will be spending too much time and money on tailoring applications for different platforms, a dangerous trend that we are already seeing with smart phones. Instead companies should use this opportunity to get rid of all native applications and technologies, moving to pure web based technologies that can be offered to all platforms. It may not be optimal, but cost effective flexibility is something that will be needed in the coming years.

Creating business around of the next billion

One of the strategic goals of Nokia is to bring out mobile phones and devices to the next billion people in the developing world, namely in Africa, India and Asia Pacific. To this day reaching out this goal has only seemed to provide value and opportunities for phone vendors, network manufacturers and mobile operators. However this perception is going to change due to evolution of affordable mobile devices. Just few years ago an affordable handset in the developing world had only basic phone functions, now new devices like the Nokia Asha series handsets offer specifications that are enough to enable functioning of wide array of software applications and services in these phones. This creates an opportunity for third parties to reach out the next billion and create business around them.

Now many people are probably wondering what kind of business can be created. When answering this question it is important to remind us on how market in the developing world differs from the market in the developed world, and what consequences and opportunities it has...

Computers aren't ubiquitous, in fact they are very rare in the developing world. For example in the United States there were 762.152 computers per 1000 people in 2004, in India the figure was 15.531 per 1000, and in Niger the figure was as low as 0.716 per 1000. What this means is that people aren't using software and services that people in the developed world have accustomed to use with their computers, software like spreadsheet and word processing are virtually unknown for the most people in the developing world. This is a clear market opportunity to offer already invented and tested software products to new markets.

Information is expensive. In the developed world we have gotten used to buying books from the Internet or from our local bookshop without giving a notice on the price of the book. We also have gotten used to looking up information from the web or streaming it over the network. Things change much in the developing world: books are expensive even if you discount the cost of content, this is due to both people having much lower incomes, but also due to smaller scale of operations increasing costs such as logistics. The same is true with electronic distribution, electronic distribution that relies on data connectivity is out of question as the cost of connectivity if available is out of reach of regular consumers, and distribution based on tangible goods such as Compact Discs suffers from small scale of operations and everything that comes with it.

The opportunity here is in making the information and distribution of it inexpensive. This can actually be done by creating a peer-to-peer distribution framework where people can swap content between their phones with Bluetooth connectivity. With this method we can minimize costs by a large degree and as an added benefit marketing and advertising can take advantage from natural social networks of people. The challenge in this method is how to ensure digital rights management and compensating content authors. Other opportunity for content distribution is by binding affordable service offer like the Aircel Pocket Internet with a walled garden content delivery platform.

External entities can also be customers. In developing countries there are multitude of external entities ranging from non-governmental to governmental and intergovernmental organizations working in multitude of different projects. These organizations are potential customers with some having quite deep pockets, even better is that these organizations can be easily approached as their administrative functions are usually located in the developed world. Potential projects to offer can range from digitization of information into mobile form to different kind of educational applications that can either assist learning or help in some other way.

Overall I deeply believe that reaching the next billion can create business opportunities for a large number of parties. However to reach this goal, software companies need to be brave and open minded, things work differently in the developing world, but that doesn't mean that they work poorly, they work differently and one who masters taking advantage of this difference can create value if not in large scale then at least in adequate numbers.

Why my startup failed...

Today is the National Fail Day in Finland. It is celebrated because the Finnish culture is very risk averse and failure is seen as not being an option - if you fail, you are a failure. This part in our culture has to be changed as if we don't allow ourselves to fail, then we never get courage to try out anything new or risky, but we also don't make the best of our eventual fail. To advantage this cause, people are encouraged to share their failures to get the message through that failing is not a sin. That is why I now share the story of my startup and why it failed...

The startup
In March 2006, I and my friend started a software company specialized on survey research software. I had started the project at the end of 2004 when I wrote first lines of code to test out some ideas that I had. Fast forward the little software project matures and my friend joins the project as a business lead. More time goes on and finally as our software matures and starts to look as real enterprise software, we decide to try out and found a company.

The software itself that we planned to run and sell as a service was pretty impressive. It had a modern styled web UI with everything rounded and shaded as was the custom. It had more features and functionality than any other competing service had. And it was fast and lean piece of software. It was written completely with J2EE, used MySQL as its database, supported Active Directory and many enterprise features. But the best thing was that the database code that was hand written had built-in sharding implemented. Sharding is horizontal partitioning of the database. In our case every survey had its own shard, its own tables that insured that our database didn't wasn't slowed down by having too many surveys or too much data in it. The code was so good that when we started our company, we didn't buy our own server nor did we rent one, we rented a cheap Linux virtual server that did the deal. Everything looked good, we had our software in order, we had our service running in lower costs than our competitors, and we thought that nothing could go wrong...

Screen capture - Making a question

Screen capture - Reporting results

Time flies and soon it is 2008. Our company had signed customers. We had sold and delivered our software both as a product and as a service to number of customers. However the number of customers and the money we were making was abysmal. Our company and our software seemed to have failed in the market. We make the only rational decision that we can and put our company into end-of-life care - continuing delivering service to our paid customers, but not signing or seeking any new ones.

The failure
So what had happened? Why did our startup failed? Well there was large number of different reasons, but in the end the fatal mistake and failure that much contributed to our other failures was the failure of understanding how our customers experienced value.

We as a couple of university students had thought that what customers wanted was a versatile tool with multiple question types and options and various optimized schemes to enhance information gathering from surveys. We thought that the more features and advantaged features we would have the more value customers would experience. We were wrong! We were biased, we were power users, not irregular users of survey tools that most of our potential customers were!

Our potential customers did want a versatile tool, but their experience of value didn't follow our pattern. Instead they got most value from the single function of just having a simple form to gather answers. Of course additional features did add value, but in a diminishing manner. At the end we estimated that at some point more features in our software would actually lower customer experienced value than increase it. This was because more features essentially meant more complex user interface and software, making customers unable to use the tools power.

Experienced value / number of features

Of course one mistake doesn't mean a total failure, but it can help you to make other mistakes that will in time cause the eventual fail of the service and firm. In our case because we burned more time and money to build our product, and when we went to the market and failed to reach our potential customer base, we were already in a thigh financial position. We understood that we need to angle for professional users, but they were both hesitant to try a new product from a startup and wanted additional features, and because we were in too thigh spot to negotiate good enough deals, we took in deals that involved too much work for too little money. We were essentially living from month to month being unable to really break from that death spiral. It was too much and we had to just confess that our startup had failed.

Lessons learned
There were many lessons learned during our startup. I for one don't regret at all that we started the company. If I hadn't been there and done that, I still would be asking myself on if I could have done it, could I have started a company and what would have come from that. Now I know the answer to that and it brings me great satisfaction that I tried. I failed, but I tried and learned some lessons and that is what is important to me.

And when I look back our company, there were some innovations that came from our customers that were actually very good ideas and our implementations of them worked quite nicely. One could build a successful startup based on one of them, however the business model would be completely different than the one we had. I don't know what the future brings, but maybe I will try entrepreneurship someday, after all it was very fun and exciting time. :-)