Huibert Aalbers Portfolio

More on convergence

September 29, 2006

Microsoft’s move to release their new MP3 player, the Zune just in time for the busy holiday season is perceived by most analysts as a desperate move from the Redmond based company to regain relevance in the strategic digital entertainment market which they had planned to control with Media Center PCs. However, this strategy failed when Apple outflanked them with the highly successful iPod.

Today, the iPod is at the center of the digital media revolution. The world has realized that music is the mobile killer app, and everyone wants a piece of the pie. Mobile phone and PDA manufacturers believe that they can successfully compete in this market because they have two important competitive advantages. First, they produce literally hundreds of millions of devices each year and this translates in economies of scales that are hard to beat, even by a successful company like Apple. Second, an MP3 enabled phone provides more functionality in a single device. Convenience is important to users. As a result, mobile phone manufacturers expect to steal this lucrative market from Apple, and now Microsoft. It sounds like a great plan, but will it work? What if things went the other way round?

Everyone in the industry, including Apple, understands perfectly this convergence trend. In fact, it is widely expected that the Cupertino based company will release it’s own iPhone in early 2007. This means that the hunted is becoming a hunter, by entering the highly competitive cell phone market. How likely is Apple to succeed? It is clearly an uphill battle. Unless they become an MVNO (Mobile Virtual Network Operator), which is unlikely because this business model does not exit in many countries, they cannot simply start selling the device in their existing stores (although they are an important asset for Apple’s ambitions), they have to partner with Telcos. This is a difficult and relatively slow process. On the positive side, they have some strengths, most notably and unsurprisingly, on the software side.

Cell phone manufacturers do not usually provide good software to integrate their devices with the PC. This is a critical mistake as we do know that currently all digital media resides on computers. Carriers would like us to buy all our digital media from their online stores directly from our cell phone, but this is simply not happening, at least in the U.S. and Europe. One reason that explains this is the sheer volume of digital media that users are growing. Today, it is very
common for most users to store anywhere between 20 and 250GB of digital media. This valuable media needs to be backed up and simply does not fit on a cell phone. This situation is not likely to change anytime soon. Digital media needs to be stored, classified and managed and this can currently only be done on a PC. Besides, users make a heavy personal investment learning to use applications such as iTunes. They are not likely to change quickly to another
application specially if it means that they can lose their DRM protected songs as well as valuable information like tags, lyrics or album covers. So, it is clear that currently those who have a better software solution on the PC to manage digital content have the upper hand. This may change in the future if new online digital media storage solutions appear and devices can synchronize quickly and seamlessly with those services, but even with the rapid improvement in broadband bandwidth and availability we are still years away from such a solution becoming viable. This means that Apple and probably Microsoft are much better positioned than Nokia, Ericsson or BenQ to lead the market. Of course, digital media is not the only killer application for mobile phones. Online mail and chat are also very important for both teenagers and business users. In this category Microsoft has a clear advantage, but Apple is not far behind (at least technologically if not in raw user numbers). Once again, traditional cell phone manufacturers lack the chat application on PCs or mail solutions (excluding RIM, the manufacturer of the popular Blackberry device) to effectively compete in this market.

The fact is that mobile phone manufacturers are in a much more delicate position than most realize. They are not in control of their own destiny because they rely on third party software to synchronize data with the PCs where the master data resides. In some cases they even rely on Microsoft’s OS to drive their digital devices. After what we have seen in the game console and portable music player markets, where Microsoft has decided to enter alone, I think that some of their partners should feel very, very nervous. If rumors prove to be true and Apple launches a cell phone in early 2007, it will have taken them about one year and a half to produce their first product and enter the market, but Microsoft with its mature Windows Mobile OS could achieve the same result much faster, specially if we take into account that consumers are not very loyal to their cell phone manufacturer. After all, most consider these devices disposable and will easily switch to the newest trendiest models. Even worse, they cannot really count on carriers to help them defend their current position because these companies simply do not care.

Today, companies like LG with their new Chocolate phone and Sony-Ericsson with the Walkman phones seem stronger than ever, but it could be an illusion. The market could look dramatically different in just a couple of years. We certainly live interesting times.

The trouble with journalists in the HP case

September 28, 2006

I was recently listening to the HP press conference where CEO Mark Hurd announced that Chairman Partricia Dunn had resigned her position as a result of the scandal provoked by the spying of journalists in order to obtain the source of leaks within HPs board of Directors.

It is clear to me that Patricia Dunn had the obligation to investigate the leaks. In this particular case, the disclosed information was highly sensitive, the strategic plan that HP had designed for the next year or so. The information published by CNET and others effectively disrupted HP plans by giving valuable information to their competitors with enough time to counter their initiatives.

We now know that the information was delivered to the media by a board member. The journalists must have been aware of the damage they were causing to the company and that they were used as a tool to harm HP. I remember that someone one once said that he could not define pornography but that he could easily recognize it. Something similar happened in this case. As you probably know, I work for IBM, a direct HP competitor in many markets. I felt very uncomfortable when reading the original report published by CNET and the journalists that published this information must have felt that too. Unlike Apple which generates a lot of interest among the general public, HP products rarely generate a lot of buzz. The uncovered information was really only interesting to competitors. Analysts and Investors did not benefit from the report as many of the plans mentioned in the articles will have to be changed now that they are public knowledge.

The resignation of Patricia Dunn is clearly the result of journalists claiming for blood. It is true that the methods used by the security consultants hired by HP to undercover the source leak are very questionable. It is also true, however, that the journalists should have understood the clear difference between news and industrial espionage. I blame both sides and I would like to see a public apology from their part too, acknowledging that they helped a criminal commit his crime. This is not likely to happen. Some bad journalists like to hide themselves behind the freedom of the press to publish questionable information. We must not fool ourselves, this is not the case here. They were not protecting a whistle blower, they were protecting a criminal. Shame on them.

Now that we have seen what kind of damage the leak of confidential information can cause to a large corporation it may be the right time to talk again about the secrets that trickle from Apple headquarters. I know that many will claim that the situation is totally different. In this case, the general public is interested in knowing what new products Apple will release. Besides, Apple rumor sites usually disclose information just a few days in advance, effectively spoiling the Apple announcements but not really impacting their business. But is that really true? Recently a rumor site announced that new Apple laptops would be launched on September 25th. They were wrong, but I have a friend who delayed its Mac Book Pro purchase because of that. He still hasn’t bought it because now there is another rumor that the new laptops will be released any day now since stocks of existing products are very low. His behavior may not be common among mainstream Mac users but even if he represents five percent of Mac users, it becomes clear that such articles do impact sales.

The main difference between the HP as well as other corporate stories and the Apple stories published on the Internet is that Apple rumors are often false and everyone is well aware of that. We Mac users enjoy talking about unannounced products, and for many this is a sort of entertainment. However, we should not be surprised to see Apple act against these rumors because they really hurt their business.

New IT Insight episode posted

September 24, 2006

I just posted the slides for a new episode of IT Insight. This time I will be talking about the WWDC. The podcast (in Spanish only, for now) will be available tomorrow morning. I hope you all enjoy it. In the next episode we will go back to architectural topics and I will cover what is known as Event Driven Architecture.

Where is the FTC?

September 24, 2006

Since the launch of the new iTunes store, there have been stories published by major newspapers that Wall-Mart has been threatening the movie industry with retaliation if they signed a distribution deal with Apple. This story has some credibility as it is well known that Wall-Mart controls 40% of the DVD retail market and they are probably less than thrilled at the idea of losing it. The question here is where is the Federal Trade Commission, which is responsible to protect free trade in the U.S. A simple announcement that they would take a look into this matter would have been more than enough to scare Wall-Mart and have them back-down. Instead, it has been the reaction of the users of the Internet that has prompted Wall-Mart to issue a denial of the accusations. Meanwhile the FTC has continued ignoring the story. This proves that once again, big business is not really threatened by the FTC, but we already knew that. In the monopoly suit against Microsoft it was the States that carried the burden of the lawsuit, not the Federal Government. It is clear to me that the FTC is not working and that something needs to be done in order to fix it.

Convergence

September 19, 2006

Since the introduction of the Palm Pilot, back in 1996, most of us have carried at least two electronic devices attached to our belts. The iPod has only made things worse. Consumer electronics companies have seen a business opportunity consisting in developing a device that combines multiple functions previously only available in separate devices. This trend is called convergence.

Today most phones include a digital camera and most consumer level products also play songs. On the high-end, phones are more PDA like, with small keyboards that allow business users to access their e-mail and back-end systems.

From what we have heard so far, it seems that if Apple releases the long rumored iPhone, it will be a consumer phone, with emphasis on providing a good camera, decent games and a great music player. The scroll-wheel (which the device is likely to inherit from the iPod) is perfect for s music player but it is not a good input device for capturing long messages. So, while the rumored device should be a competitive phone in the consumer market, it is not likely to be the product that everyone is looking for. With the rumored feature set, and smaller production volumes than competitors that are better positioned globally, the iPhone is not likely to be the cheapest. It will have to compete at the high-end with PDA style devices and at the low end with cheaper phones that can be purchased almost everywhere and are backed by the telcos.

Even so, in the U.S. Apple should be able to leverage it’s retail stores to reach a large amount of customers. If Apple can grab even a small amount of customers from Motorola, Nokia and Sony Ericsson, it could translate into an incredible growth for Apple. This is a once in a lifetime opportunity.

What a treat, two brand new great cocoa apps released on the same day

September 19, 2006

Today two brand new applications were launched for the Mac. Yes I know, I should probably add Adobe Acrobat 8, but I can’t really get excited about that, even if it is now a Universal Binary.

The first one is XTorrent, a new BitTorrent client. What is so exciting about a product that will compete in a category where many free alternatives (Azureus and Tomato torrent come to mind) are already available. Well, for starters, the interface is gorgeous. It reminds me of Podcast Maker, another personal favorite. However, beyond great looks, XTorrent actually includes some interesting innovations. The most important one is the search system that allows to easily locate torrents without having to search torrent sites. While XTorrent is still in beta it shows a lot of potential. One caveat though. The application has been developed by David Watanabe, author of Acquisition X, Inquisitor and NewsFire). While nobody questions David’s programming talent, a quick look at MacUpdate forums shows that he has many unhappy customers. He may have been too busy working on his latest project, but to be successful he will have to offer better customer support for all his products. XTorrent is currently in beta and can be downloaded for free.

Fission is a new sound editor from Rogue Amoeba the makers Airfoil and Audio Hijack. I have found that editing podcasts and other MP3 files is more difficult than it really should and I hope that this product will help me streamline this common operation.

Hopefully this trend of great new original programs for the Mac platform will continue in the future. It is what we need to grow the Macintosh market.

The future of e-voting

September 18, 2006

Last week researchers from Princeton University demonstrated that Diebold voting machines could easily be hacked into in less than four minutes.

The Diebold voting machines were designed to avoid a repetition of the 2000 U.S. presidential election which demonstrated that current election results are an approximation, at best, with unacceptable error margins in a deeply polarized country. It is likely that the negative publicity surrounding these devices will delay the adoption of a technology that could have helped to rebuild the faith of the public in the vote counting process. This is too bad, but I am sure that everyone agrees that it is better to continue using manual counting than implement a notoriously flawed technology.

However, I am sure that many, including myself, would like to see more progress in the area of e-voting, not because we want better counting but because we want a deeper, richer democracy.

In most countries, voters go to the polls only once every couple of years. Between elections we trust our representatives to make the right choices. That is obviously a big mistake. During a term there are many decisions that are just too important to leave to the good judgement of politicians. In countries like Switzerland there are referendums almost once every two weeks, and the people can overturn a decision made by the government quite rapidly. That is what I would like to see happening in larger countries where it is currently quite difficult to implement such a direct democracy model because of cost and logistics issues.

The promise of the Internet has always been the elimination of middlemen. We have seen this happening in the travel, recording, and computer industry (Dell for instance pioneered the direct sales model). Why not in politics?

Getting rid of politicians may not be a good idea, after all we will probably need leaders with ideals to set the political agenda, but we need to reduce their power. This won’t be easy though. It is likely that hey will quickly point out that for an election to be fair, the vote must be both secret and free. How can we guarantee that if people vote at home? They could be compelled to vote in a certain way by their spouse, boss or a special interest group. It is a difficult problem but with the technology available to us (digital certificates and biometrics) we should start the debate.

Blogs are conversations

September 15, 2006

A couple of weeks ago I heard a comment on a podcast where someone defined blogs as conversations. At the time I didn’t really understand because my blog was mostly a monolog. At the time I didn’t really care because my blog was basically a way to get my ideas in order as well as a way to keep improving my English.

Things started to change when other blogs started to link to some of my entries as a result to registering my blog with technorati. The first one was MyAppleMenu that linked an entry I wrote on the future of learning, which surprised me since it wasn’t really Mac related. In that case, even though there was a spike in the number of readers, only one person cared enough to leave a comment, to which I responded quickly. That wasn’t much of a conversation, though.

Today I got an entry picked by MacDailyNews. Wow, the number of accesses went through the roof. However, at the time I am writing this entry, only two persons had left a message on my blog. On the other hand, on the MDM site, tens of users exchanged their point of view over my article. What does it mean? Well, from my point of view I do now agree that blogs are conversations, however, as with real conversations, people like to talk at places where they know that they will get answers from others who share their interests (the virtual cafe), in this case the MacDailyNews site.

This may be a problem for bloggers who may find that the conversation that they started is continued somewhere else, not because they are eager to get hits on their site but because they may lose track of what people say about their articles. I think that we need tools that allow us to understand better how ideas are propagated over the Net. This would be very interesting for political ideas as well as more general social issues. Don’t get me wrong, I do no t want to implement an electronic version of Big Brother watching us all that could eventually terminate our hard earned liberties, on the contrary. What I would like is to be able to discuss ideas and understand how people react to these ideas, no matter where they decide to react to them. This would be a great way to discuss the issues that are important to all of us, understand the concerns people may have as well as the reasoning of those who oppose the ideas altogether. There is much talk about social networking, but I think that we still aren’t there yet. We will probably have to wait for Web 3.0.

The most exciting feature of iTV may be its USB port

September 15, 2006

It has been three days since the September 12 Apple announcement and I am quite surprised that despite the interest generated by the iTV announcement, few are talking about it’s most mysterious feature, the USB port which can be found on the back of the device.

Some have speculated that it could be used to connect a keyboard to the iTV. That could be the case, if Apple decided to convert the product into a game console or an Internet device. It is possible, but I do not believe that Apple is going in that direction, for now. There are other kinds of USB devices that make much more sense, my personal bet is TV tuners.

Within the Macintosh world there are two companies who have developed TV tuners for some time now, namely elgato and http://www.miglia.com/. It makes a lot of sense for Apple to leave this market to third parties, since there are so many incompatible ways to receive TV content today. In the U.S. for example, CableCard 2.0 is competing with conventional Analog TV as well as the new Digital TV designed to replace it by 2009. Making a single device that supports all standards is difficult and expensive. Then there is the problem of user experience. While it may be relatively easy to offer program guides in the U.S. and most of Europe, the situation may be different in other regions/countries where Apple operates. By not including the DVR functionality itself it can market the iTV the same way globally while they partner with others to offer TV tuner products locally.

So, why is the iTV more expensive than the eyeHome? That isn’t totally clear to me, but it would seem much cheaper if it included a 802.11n base station. After all, it includes an Ethernet adapter that could be used to connect to your cable modem or equivalent. This possibility has been discussed by many as Steve Jobs failed to mention what version of the standard they would be using. We will have to see, but the fact is that if I am right and the USB connector will be used to add third party TV tuners, suddenly it all makes sense and we all get what we had been waiting for. I would be really surprised if Apple hadn’t planned that all along. Why not announce it now, then? Well, I guess that Steve Jobs is already preparing it’s One more thing… speech for MacWorld. After all, the iTV announcement was meant for analysts, who needed to understand that Apple’s Movie strategy was aimed at the living room, much more than at the iPod, unlike it’s competitors.

Underwhelmed? You shouldn’t be

September 13, 2006

As most rumor sites had predicted, Apple did not announce a true video iPod. This is quite a disappointment for most of us. After all, the iPod hadn’t been updated in a year so we were entitled to a significant upgrade, right? Wrong.

Everyone should understand that it is very difficult to transform a product that was designed to do a single task very well into a platform that is many things to many people. Remember Palm? They had designed this great PDA and people started to ask for more. It eventually became the Treo, which offers great hardware and crappy software. Why, because it was never designed to be more than a simple PDA. Adding more and more features just made the product more unstable. At the end, they recognized the problem and decided that it was better to create a new OS from scratch.

At this point we do not know if Apple is doing the same mistake. However, it is clear to me that the latest firmware release is significantly different from the previous ones. First, it is now possible to install new applications (games). This is a clear indication that the iPod is progressively getting a more complex OS to run on. This is good news for those waiting for an iPhone. Without a decent OS it is simply not possible to expect a powerful handset. I am not convinced however that this OS is yet powerful enough to compete with Symbian or Microsoft. We will have to wait and see.

The second difference is that the iPod has now an API programmers can write to. It is still not a public API which definitively means that some things are missing, but it proves that Apple is working hard to get a decent platform that should attract many developers.

In most cases, the hardware outpaces the software. Palm, for example, never got it’s synchronization software right and Sony will probably not be able to have it’s online gaming network completely ready by the time they launch the PSP. In Apple’s case this is quite different, iTunes 7 is a great platform to deliver digital media and Front Row has been ready for quite a while. It really seems like Apple is being delayed by the hardware.

This should not come as a surprise. As I mentioned in my previous post, a larger screen (with the same resolution used now by Apple to sell it’s movies, 640*480) requires much energy. Better software and improved batteries can help improve battery life but it is simply not enough. The design must change radically and it will most likely require to replace the HD with flash memory which is still expensive. My bet is that Apple is waiting for component prices to drop before they launch the new video iPod.

There may be other reasons to delay the new product. Most people today still want the original iPod design and changing it radically just before the busiest shopping season of the year may not be such a good idea. It may be wiser to introduce the new product in January, as rumor sites have predicted, when sales cool off. Early adopters will buy product and generate enough interest during the year to generate windfall sales by the end of next year. After all, with the new iTunes software, games, lower prices and improved hardware it is not like Apple will face serious competition this year.