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Sony, Matsushita Team Up on Linux for
Consumer Electronics
By Charles King
Sony and Matsushita Electric announced that they
will jointly develop a Linux-based embedded operating system for use in
consumer electronic products. The two companies plan to use the new software
mainly for audiovisual equipment, but envision future environments where
devices such as TVs, microwaves, refrigerators, and automobile navigation
systems will be connected through common networks. The companies aim to
complete development of the new OS by next spring, and said they will allow
free use of source code by other electronics vendors. Based on the success of
the joint development project, Sony and Matsushita are considering setting up
an industry forum for digital home appliance-use Linux, and said further
details will be discussed with companies that have voiced support for such a
project including Hitachi, Sharp, NEC Electronics, and IBM.
When reading the tea leaves of this announcement, we
believe that while some obvious details rate comment, other more subtle
considerations are also at play. The most notable issue, of course, is the
central position Linux holds in the announcement and what effect the
Sony/Matsushita deal might portend for Microsoft. Though Sony reportedly
downplayed such controversy, noting that the company uses a range of
operating systems in its products including various flavors of Windows, it is
reasonable to regard the joint development project as a blow to the progress
of Microsoft’s embedded version of Windows CE. Consumer electronics is a
sector Microsoft has obvious designs on, so even a partial defection by
partners of the size and influence of Sony and Matsushita will be rightly
seen as a blow. That the companies announced their intention to promote their
Linux solutions among other notable consumer electronic vendors at a time
when Microsoft is feeling increasing pain from open source options in other
sectors simply adds salt to Redmond’s wounds. Does that mean Microsoft’s
dreams of dominating consumer electronics as it does desktop PCs has been
effectively quashed by Sony/Matsushita? Hardly, but the deal exposes one of
Microsoft’s essential weaknesses: the company depends to a large degree on
the kindness of partners for its own success. In sectors where Microsoft has
a smaller profile and track record than many rivals, those partnerships are
particularly crucial.
The subtler and more important consideration in this
story is the apparent transmutation of Linux. The evolution of Linux among
businesses has largely been driven by the flexibility and cost effectiveness
of open source IT solutions, but the Sony/Matsushita partnership suggests it
also has a place in products and environments where style and simplified
functionality are the primary drivers. The fact is that consumers could care
less about techno-evangelism, be it Linux or Microsoft-based. Instead, most
are more concerned about affordability and ease of use. If the
Sony/Matsushita project works, we believe it should cast Linux in a new role
as a technology that allows engineering savvy companies to both escape
annoying licensing fees of proprietary operating systems and gain greater
autonomy in developing and taking to market a wide variety of technically
adept and consumer-friendly digital electronics products. Looking further
down the road, if Sony and Matsushita succeed in promoting this new OS, it
could provide a transparent means for interoperability between electronics
products from a host of vendors. Should that day come to pass, Linux literally
will become a household word.
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AOL: Will It Kill the Goose?
By Jim Balderston
The press reported this week that in September AOL
secured a patent originally filed in 1997 covering the basic functions of
instant messaging, i.e., monitoring a network to see who is on it, and
letting multiple users communicate on that network. The patent came as part
of AOL’s 1998 purchase of Mirabilis, which pioneered the ICQ instant
messaging technology. At the time, Mirabilis had some 11 million registered
users. Since gaining the patent, AOL has made no official announcement on the
subject, nor has the company filed any legal action against other companies
offering competing instant messaging services, like Microsoft or Yahoo!. By virtue of its acquisition of Netscape
Communications, AOL also holds patent to browser cookies and the Secure
Sockets Layer protocol, which is used widely for secure online consumer
commerce activity. AOL has not litigated its patents in either of these
technologies.
Essentially AOL has been granted a patent on what
was once known as the “chat” function, which was around before Mirabilis
filed for its patent. It’s not that new, it’s not that complex, and it’s
probably been used by the vast majority of Internet users at some point or
another. Kind of like email. Or a browser.
One can see where AOL might very seriously consider
enforcing this patent and maybe the one for cookies and SSL as well. After
all, the company that was supposed to be a source of near endless revenues
for future AOL Time Warner annual reports has fallen a little short of that
once lofty vision. In fact, AOL is dragging the mothership down. The idea of
testing the waters with some active litigation against some very deep pocket
defendants must be tantalizing to AOL — especially if they could get in front
of the right judge. But such a move, whether ultimately successful or not, would
likely cost AOL more in the long run than it would help in the short. In
fact, AOL could shoot itself in the foot rather grandly by trying to either force
consumers to come to AOL to be able to have chat sessions or force other
companies like Microsoft or Yahoo! to pay up. In the first case, AOL would
find consumers — and technology vendors — looking for an alternative which
they would eventually find. In the second case, suing Yahoo! or Microsoft in
an attempt to hinder their customers’ use of an extremely popular Internet
application would only firm up AOL’s already poor image as a
customer-unfriendly company. Before suing, AOL needs to remember that as the
largest online service, its customer growth is closely tied to the overall
adoption rates of Internet usage as a whole. If it removes or places a tax on
one of the most popular features online, it will only slow adoption rates or
reduce time spent online by present users. That means less revenue, less spending,
and less activity growth for everyone trying to run a business online. So AOL
can stand up for its own narrow interests, and perhaps hurt itself, or AOL
can best serve its own interests by allowing the Internet pie to grow ever
larger, and compete for its fair share. Which will it be? Decisions,
decisions, decisions.
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Is Web Services a Product or a Feature?
By Myles Suer
Cape Clear Software this week upgraded its Web
Services Software, Cape Clear 4. Cape Clear automates data sharing between
disparate enterprise applications. The company claims this version enhances
the product’s business application and information security systems
integration through a programming tool that helps present information from
several applications in a single window. This is intended to support
embedding content in enterprise information portals. Cape Clear 4 is priced
at $1,500 per developer, with typical enterprise installations ranging from
$50,000 to $100,000.
Web Services
is a key software trend with impact on both the enterprise and users of
enterprise systems. But, we are concerned when companies such as Cape Clear
hype themselves on the immediate ROI proffered by Web Services. We expect
that there will be a time when Web Services will lower application
integration costs; however, with the exception of products from vendors that
are pushing Web Services components within their existing applications, we
believe that realizing an integration cost reduction will take time. Given
this, we believe there is compelling and continuing need for middleware to
bridge legacy applications into Web Services compliant solutions — especially
for industries such as financial services. This in itself could be a
sustainable focus for a company in Cape Clear’s
position.
Both of the
major application server manufacturers (IBM and BEA) have announced
integration brokers for their Java server software. Moreover, Enterprise
Application Integration (EAI) companies including WebMethods must view Web
services as strategic and essential to their remaining in business. Given
this, we believe that firms such as Cape Clear need to seriously consider an
exit strategy since the value of a separate and distinct Web Services product
may be short lived. At this point, it is not clear who will be the ultimate
provider of Web Services. EAI and application server companies both have
strong cases. One can clearly imagine scenarios where both play and where EAI
players continue to add value by making proprietary systems capable of
speaking Web Services, but this hinges on a loosening of corporate IT budgets
to undertake what some may consider being busy work projects of dubious short
term ROI.
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Twenty Bucks a Month? That Was Your
Grandma’s Internet
By Jim Balderston
A market bifurcation in consumer access price points
seems to be at work, as low cost Internet service providers like United
Online continue to amass new subscribers and more traditionally priced ISPs
are beginning to offer packages at the $10 price point. United Online was
born out of a merger between Juno and NetZero —
which both offer dial-up access at sub ten dollar levels — and United Online
continues that with a $9.95 dial-up access package. United Online has seen
increased growth, with more than 600,000 new subscribers since last year, a
third of its total subscription base. Earthlink is now offering a $9.95
discount offering, competing directly with its standard $21.95 per month
dial-up access package. Meanwhile, the DSL Forum reports that DSL
subscriptions increased by five million worldwide between July 1 and
September 30, an increase of 20% over the previous three month period.
According to the DSL Forum, more than 30 million people are using DSL for
Internet access worldwide. The DSL Forum estimates there are
about 15 million high-speed cable modem connections in the US — about twice
as many as DSL connections — yet worldwide use of DSL as a high speed
connection is higher than cable connection.
Here it is; the defining line between those people
that use the Internet and those that need it. Aside from road warriors,
dial-up is for people sending and receiving small numbers of email, maybe surfing a bit, and
occasionally trying to purchase a little something online. File downloads,
even viewing complex Web pages and conducting transactions online, becomes an increasingly painful process with content-heavy
pages and a barrage of pop-up ads clogging up the throughput. Dial-up is for
people who only check the Internet.
When one considers the $21.95 price for a month of
dial-up access in its full context, it seems increasingly exorbitant, as one
adds on the price of a second phone line to allow the rest of the family to
contact the outside world while Mom, Pop, Bud, or Sis fetch their email or
check a few Web sites. That phone line puts that dial-up connection at about
$45, about what most cable connections and some DSL packages costs. Why not
switch? And one has to wonder just how many of those $22 dial-up accounts —
paid for monthly and automatically on credit cards— are
maintained simply to keep a consistent or long-term email address intact. For
those users, the switch to the bare bones product will make even more sense
today than it did a few years ago. As phone companies report net losses in wireline phone accounts due to a combination of
competitive pressures, the heavy adoption of cellular phones and the
migration to high-speed access through either cable or DSL, one really has to
wonder if the $22 a month dial-up access fee has a future. We’re betting it
doesn’t.
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Revenue not Customer: SAP to End
Support for Versions 4.6 and Earlier
By Myles Suer
SAP announced this week that it will not support its
enterprise resource planning (ERP) software versions 3.1i, 4.0b, 4.5b, and
4.6b under regular, full maintenance plans after December 2003. These versions
were introduced between 1998 and 2000. As important, SAP announced that half
of its 18,800 customers are currently using one of the versions to be rendered
obsolete.
In a time where enterprise software ROI is
increasingly difficult to justify, we find SAP’s
move curious. Although persuading customers to upgrade will potentially
significantly increase SAP’s bottom line (by
growing revenue and reducing support costs), it will also affect the ROI of
those who bought product as recently as two years ago. Let it be clear that
creating an end of life is common for enterprise software. However, with ERP
installations in particular taking several years to implement, the return
side of the ROI equation could for many be measured in a year or less. This
is for an investment often in the tens of millions of dollars. Making the
matter worse, upgrading to the new SAP software can take a year to complete
and cost additional millions for consulting, hardware, software, and
training.
We believe that enterprise software makers need to
rethink their software design practices — especially with the emergence of
Web Services. They need to make their software modular and move to smaller,
less expensive piece-at-a-time upgrades. This will extend the life of the
suite but also enable the software manufacturer to spread out their software
revenue opportunity. We know of new business models being tried by smaller
enterprise software makers that amortize software payment over two or three
years; this way upgrades come by continuation of the fee. This model
eliminates thorny revenue recognition issues and can turn software from a
capital line item to an expense. Steps like these will make the enterprise
software ROI more real for purchasers. Lastly, because the whole suite is not
flux, this approach makes testing simpler and reduces the number of bugs
reaching end users. The era of big design on a year or longer design window
is just too expensive and risky for all involved — especially customers.
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Sageza Closed for the Holidays
Today, December 20, will be
the last Sageza Market Roundup for the year. The Market Roundup will resume
publication on January 10, 2003. The Sageza Group will be closed Wednesday
December 25 through Wednesday January 1. With the thought of the holidays now
front and center in everyone’s minds, we at The Sageza Group would like to
take the opportunity to wish all of our clients, friends, and their families
the happiest and safest of holidays and a healthy and prosperous New Year.
On the cusp of 2003, the Internet is hardly new;
however, we are reminded of something we said five years ago:
“A search for holiday and religious Web sites
reveals a plethora of sites dedicated to the various observances in this
holiday season. Christmas, Chanukah, and Islamic Ramadan holiday sites are
available in religious, informational, and commercial variants throughout the
Web. While some sites focus directly on the religious elements of the holiday
season, others attempt to capture the commercial spirit of the season.
This time of year — for those of a wide variety of
faiths — brings forth a spirit that many wish would last the year ’round. We
believe these Web sites — especially those offering informational instead of
commercial material — offer a valuable resource for those looking to capture
more of the holiday spirit than simply a large credit card debt for the new
year. We do believe the Internet offers new ways for people to practice the
holiday spirit of giving. For example, a substantial number of firms sent out
electronic greeting cards to us this year, indicating that the savings over
hardcopy cards and postage allowed them to make significant contributions to
needy charities. While we have no illusions that the Internet alone will
resolve the world’s problems, we do believe that as a tool it can be used to
address these problems in new — and perhaps effective — ways.”
How prescient these words were. While the wealth and
prosperity envisioned by some in the “new economy” has largely evaporated,
the Internet has become an integral part of most businesses’ and many
people’s daily lives. Such thinking today may be a given, but it is easy to
forget that not all that long ago, the Internet was considered to be nothing
more than a Jetson-based scientific pipe
dream.
Peace.
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