Apple pulls out of Macworld! And floppy disks are gone too!

The blogosphere is aflutter with the news that this year will be Apple's last Macworld event and that Phil Schiller rather than Steve Jobs will be doing the keynote. What could have gone wrong? Is Steve ill? Does this mean the end of Apple?

Get a grip people. The real reasons behind this move are exactly what the press release says (gasp! can you do that in PR?). Macworld, like most other trade shows, wasn't really working as part of Apple's marketing strategy, so they gave notice that they aren't going to do it any more. The reasons? It's actually pretty simple. Apple's annual Macworld extravaganza was:

• Expensive. Macworld Conference and Expo may be a cultural icon to some, but it is actually just a trade show organized by IDG. While that is a great business for IDG, it's a multi-million dollar expense for Apple, all to reach around 50,000 attendees. While that may be nice, it's about the same number of people Apple reaches at its Fifth Avenue Store in New York in a few days. Not exactly the best return on investment.
• Inconvenient. Let's see, what's the best way to annoy employees? I know, we'll make them work through the holidays to prepare for a big trade show on the first week of the new year. While all of the consumer electronics industry seems to honor this tradition for the January Consumer Electronics Show, that doesn't mean it's a good practice. Apple and its employees don't need the hassle.
• Way too predictable. There's no better way to ruin surprise and excitement than to schedule it months in advance (proof point: Microsoft OS launches). Pundits everywhere (myself included) now plan stories and research around the first week in January knowing that Apple must have something new to talk about. That doesn't fit with the amazingly great marketing Apple likes to produce. And yet the downsides of this predictability are huge: if the unthinkable should happen -- some technology is late, there's a new product production glitch -- Apple has to jump through hoops to deliver regardless or be painted as having "failed" because they didn't deliver in time for Macworld.

Despite the end of Apple's participation in Macworld, no one should think that this is the end of the Apple, new Apple products, or even Steve Jobs' famed keynotes. Instead, these will now be surprises, undoubtedly announced using Apple's now famous special event invitations emailed to attendees. And while Apple won't have the throngs of every day fans at those events, special store events will offer venues to reach that audience. People often forget that Steve Jobs shows up occasionally at non-Macworld events such as the opening of the Regent Street store in London; not doing Macworld will undoubtedly create new opportunities for other appearances. And no matter where he goes or what he does, he will still draw a crowd. And those who need a structured schedule and their annual fix of Jobsian presentation mastery, they can always attend Apple's World Wide Developer's Conference in the summer, where he will undoubtedly be doing keynotes and cameos there for years to come.

The bottom line: Apple has again figured out yet another way to "think different" by leaving something out, just as it did with the floppy disk. And just as with floppies, the rest of the industry will go through denial, rejection, and finally acceptance that it was the obvious thing to do. 2009 is already shaping up to be a very interesting year.

The Anywhere Network powers a new era in political campaigns

[This post also appears under my byline on the Yankee Group blog ]

President-Elect Barack Obama's campaign over the past two years has been historic. But equally as historic has been the transformational force that today's Anywhere Network -- the near-ubiquitous Internet and mobile connectivity we enjoy today -- played in Obama's march to the White House. Consider just some of these contributions that the network made to his election victory:

• Online contributions. Barack Obama raised more than $600 million in total for his campaign via barackobama.com, the vast majority of which was from more than 3 million Internet contributors. With money the lifeblood of politics, this ability to raise money in small amounts from a large number of contributors will force everyone to rethink political campaign strategies for years to come.
• Socially-networked organizing. If you consider Obama's net-based fund-raising organization as a Silicon Valley social-networking startup, it went from zero to 700 people and raised more than $200 million in revenue in the 12 months prior to June 2008, according to The Atlantic. And unlike most social-networking companies, this organization is making money -- lots of it.
• Text message announcements. Remember Obama announcing his vice-presidential pick of Joe Biden by text message? Not only did this initiative mark the campaign as net-savvy, but it also collected hundreds of thousands of phone numbers that could be texted again as the campaign wore on.
• YouTube videos. The Obama campaign wasn't content to simply load a ton of content onto YouTube and promote it; it created its own branded YouTube Channel at http://www.youtube.com/user/BarackObamadotcom. And of course, that YouTube site features a very prominent "Contribute" button as well (see first bullet about money being the lifeblood of politics).
• Mobile social marketing. The Obama campaign created a compelling mobile web site, Obamamobile.mobi, for its volunteers, voters, and donors and carried on the Democratic tradition started by Howard Dean. But the campaign's commitment to its Anywhere constituents broke new ground with mobile applications. As an example, the campaign created an iPhone application distributed through the Apple App Store that encourages an iPhone owner to call people from their address book in battleground states. The application not only suggests calls and logs calls you've made, but it also sends anonymized log data back to campaign headquarters so they can measure their outreach on this channel. The result: the Obama campaign created a viral phone bank army without spending a single dollar on office space, volunteers, or phones.
• A networked army of Obama workers. The same Atlantic article linked above notes that by June, Obama's social networking provided him with more than 750,000 active volunteers, 8,000 affinity groups, and 30,000 events. To put that in perspective, the Obama campaign manages more employees using its network than the employees of Toyota, General Motors, and Honda put together.

President-Elect Obama's campaign discipline and inspirational messages were the foundation of this 2008 election. But those messages would have fallen flat if no one had heard them. Obama funded, created, and distributed that message to millions of voters using our growing connectivity and did it in ways not thought of just a decade ago. Just as President John F. Kennedy did with television, Obama has transformed both the message and the medium of political campaigning.

Yet, these campaign innovations that touched so many people are just a harbinger of changes we as consumers can expect in the coming five years. Today, the United States is a transforming nation in the $580 billion worldwide Anywhere Economy, with slightly more than one broadband line for every two people. But by the next presidential election in 2012, the connectivity revolution in the US will have passed a new watershed, what we call the Anywhere tipping point of one broadband line per person. Connectivity won't just be frequent then; it will be everywhere.

As Obama's first term of office draws to a close and he runs for re-election in 2012, he will have the opportunity to change the face of politics again. That year, as the networked strategies of this campaign promise, he can and likely will become our first Anywhere president. And that is a change all of us can believe in.

Impressive analysis of Apple's current earnings

Bullish Cross has a very nice analysis of Apple's current earnings if you don't do subscription accounting for iPhones. The bottom line: if you turn off subscription accounting, the company is making about $7.50 a share and has a P/E of about 12. As noted in the article, Apple has more net cash than RIMM, GOOG, AMZN, and IBM combined. If it were valued at their P/Es, Apple's stock would be trading around $200.... But in my humble opinion, the financial crisis has encourage a "throw the baby out with the bathwater" mentality, hence the stock's current pricing. It's a delightful analysis; Apple watchers should give it a read, if for no other reason than the eye-popping nuggets of financial information.

Activation problems don't stop iPhone from being largest CE launch in history

[This post also appears on blogs.yankeegroup.com]

Josh Martin beat me to the punch with his post on the Apple press release this morning (curse you!), but I thought I'd add a bit more context to the story.

Those one million iPhone 3Gs sold this weekend provide a pretty good clue for why Apple and AT&T's activation servers are slammed and barely able to keep up. This was a big deal. Why? Because not only was it about 4 times more phones than Apple had to deal with last year at this time, but because it is probably the largest consumer electronics launch in history.

I noted when I was analyzing Apple at my prior company, the original 2007 iPhone launch was the largest first weekend consumer electronics launch in history as measured in inflation-adjusted dollars, garnering somewhere around $150 million in its first weekend on sale. That eclipsed the Microsoft XBox 360 ($128 million in the first weekend), Microsoft Windows 95 ($122 million in the first four days), and the Sony Betamax (not even close at $58 million in the first 7 months). But Apple just broke its own record. Assuming an average price after carrier subsidy of $433 (2/3 8 GByte models, 1/3 16 GByte models), Apple just posted approximately $433 million in first weekend iPhone sales. Said another way, if this had been a movie, it would have broken all box office records for a first weekend opening -- by a factor of nearly 3.

And the AppStore? That's harder to get a handle on. My estimate is that most of those downloads were free programs, and that Apple pulled in somewhere around $3.5 million in AppStore revenue, of which it got to keep just about $1 million (the other $2.5 million went to the pay application developers). But again, for a first weekend launch, that isn't too shabby -- it took the original iTunes store a week to reach the $1 million mark in revenue in 2003.

Now some will ask why we're gushing about the iPhone -- after all, it's just a phone. But from my personal point of view, it's important for a very specific reason: it's an Anywhere phone. What's an Anywhere phone? One that provides first-class, two-way, broadband access to both the world-wide voice and Internet networks. Most phones have been first class phones and second-class Internet devices; the iPhone has changed that, and done it in such a way that even my technology-phobic mother could use one. We shouldn't be surprised when good technology gets a good reception.

Yes, there were a lot of server and activation problems this weekend, and both Apple and its carrier partners should get their acts together. But making history is never easy or smooth. And Apple's competitors should be happy about the problems they had. Imagine how many iPhone 3Gs Apple would have sold if the launch had been problem-free.

Big Data as Competitive Advantage

Today's New York Times nominates Google as the Zen Master of the Anywhere Internet era because it is using network effects like Microsoft did during the PC revolution. Personally, I like Google's chief economist's reason better: the company focuses on learning from experience:

Google, it seems, is the emerging dominant company in the Internet era, much as Microsoft was in the PC era. The study of networked businesses, market competition and antitrust law is being reconsidered in a new context, shaped by Google. Google’s explanation for its large share of the Internet search market — more than 60 percent — is simply that it is a finely honed learning machine. Its scientists constantly improve the relevance of search results for users and the efficiency of its advertising system for advertisers and publishers. “The source of Google’s competitive advantage is learning by doing,” said Hal R. Varian, Google’s chief economist.

But this isn't your father's learning by a few trials and errors. Google learns from what is rapidly becoming a new and powerful trend: organizing and learning from the petabytes of data it collects.

Call the Centers for Disease Control! iPhone epidemic expected!

sn't it amazing that some people can tell a week in advance when they are going to be sick? If you're one of those people who senses that the 24-hour iPhone flu is going to wrack your body starting next Thursday, you should be sure to read these iPhone 3G Sick Day Tips. Oh, and remember that if you call in sick and stand in line at the Boylston St. Apple store, we can see you. Meanwhile, Happy Fourth of July America; happy weekend to everyone else. And by the way, if you think the above is crazy, note that people are already camping out in line at the New York 5th Avenue Apple Store.

Apple's three considerations for iPhone location apps: liability, liability, and liability

[This post also appears at http://blogs.yankeegroup.com]

The Wall Street Journal yesterday raised a few Anywhere eyebrows with this paragraph at the end of an article titled Firms Hitch Wagons to iPhone. The paragraph that caused this fuss was as follows:

And those that have been sanctioned by Apple are finding out too late that they have guessed wrong about the depth to which Apple is willing to help them. Makers of location-based software expected to benefit from the new iPhone's global-positioning system. Yet they are finding out that Apple won't support "applications designed or marketed for real-time route guidance." The clause in the iPhone developer tool-kit agreement essentially voids months of work by TomTom NV and other navigation providers.

Could this be? Could Apple be an Anywhere spoilsport and refuse to allow location-based applications?

Now, being a registered developer, I have the software development kits (SDK) for both the Apple iPhone and Google Android [shameless research plug: Yankee Group clients should look for a Decision Note comparison of the two SDKs and how developers should choose between them to be published soon]. Unfortunately, the Apple SDK license terms are confidental so I can't quote chapter and verse here (software license restrictions and end user license agreements are a rant for another post). However, I can provide my personal interpretation of Apple's legaleze, which luckily isn't too tricky. Full disclosure: I am not a lawyer, and this opinion should not be construed as legal advice. Always consult your own attorney on legal matters.

Yes, the restriction noted by the Wall Street Journal exists, but the restriction isn't as severe as the WSJ implies. It's really all about the legal liability of location-based services, something too few companies or developers actually stop and think about.

The major points of the restrictions in clauses 3.3.7 through 3.3.9 of the license agreement are to prevent applications from:

• violating consumer privacy with location data (big privacy liability there)
• enabling stalkers (both bad karma and possible criminal accessory liability)
• routing people or vehicles incorrectly (encouraging people to pay attention to their iPhone distracts them when they should be looking out the windshield; ask anyone who has into a bridge or river based on GPS directions), or
• doing illegal things with location info (all the bad things that Apple legal didn't think of)

Personally, I find Apple's unwillingness to sign off on these types of applications without further scrutiny rather comforting. But does this leave GPS makers like TomTom out in the cold? Of course not, because any serious GPS manufacturer:

1. already has assessed and protected itself against this type of liability with liability insurance and other legal protections, and
2. could negotiate a different licensing agreement from Apple for its products provided it accepted legal liability for its application.

So rest easy: you'll see location-based applications on the 3G iPhone. But expect those to come from companies like TomTom and Garmin that actually know their Anywhere liabilities instead of from Joe's Homebrew GPS and Beer Company.

Apple's iPhone 3G: who needs carrier subsidies?

[This post also appears on the Yankee Group Blog at http://blogs.yankeegroup.com] With Apple's iPhone launching on July 11 for $199 in the US with a 2-year AT&T contract, everyone (including me) is assuming that there's a roughly $200 AT&T subsidy baked into that price. That assumption seems especially reasonable since AT&T is raising its unlimited data service subscription price by $10 per month and will no longer share subscription revenue with Apple. Those two factors means that AT&T is accruing about $480 more ($240 from the higher data service price and $240 from not sharing subscription revenue with Apple) per 3G subscriber over the two-year contract, leaving them plenty of room to pay Apple roughly $399 up front for 3G iPhones and still sell them to consumers for $199. But there's an intriguing twist to this story that may surprise people. According to Porteligent and as reported by EETimes, the parts cost of the 3G iPhone may be as low as $100. That means that even at $199, Apple's price includes a roughly 50% gross margin over its parts cost, which is in the ballpark of the gross margins on traditional iPods. If AT&T is adding in a $200 subsidy, then the iPhone 3G is anything but a a phone requiring a carrier subsidy. In fact, if these numbers are true and the carriers are subsidizing the phone, the iPhone 3G could end up being the most profitable product Apple makes. But more likely, this means that Apple has a lot more pricing flexibility than analysts have given them credit for. Now as one of those analysts, I have to apply a caveat here. It's highly unlikely that Portelligent actually has an iPhone 3G to tear down, so their parts cost analysis is probably just an educated guess informed by current cost data from parts suppliers. But that said, Apple has a history of aggressively buying parts to achieve a market advantage. For example, Apple paid $1.25 billion in 2005 to guarantee flash memory for iPods through 2008; that purchase made it nearly impossible for other flash music players to have competitive supplies and profit margins. Apple reportedly negotiated another similar deal in 2007. In my opinion, the Portelligent's cost is probably closer to right than wrong, simply because Apple never sells loss-leader products. And given Apple's intent to sell this phone in more than 70 countries this year, it undoubtedly worked hard to ensure low parts costs regardless of significant currency fluctuations too. So what's the takeaway here? It's simple: Apple's 3G phone isn't a loss-leader product needing subsidies to survivie. It's designed to be an Anywhere phone that puts your online life, media, and connections in your pocket, yet be simple enough for your grandma to use. But for Apple, it's a business platform designed to make money -- and the details of that business design may surprise more analysts than the product itself.

Seven Overlooked iPhone 3G Details

The blogging world is abuzz at Apple's new $199 iPhone 3G, with most writers (including Yankee Group) bemoaning the lack of surprises in Steve Jobs Keynote. But my analysis of the press releases that came out after the event actually produced more surprises than I would have expected, including:

1. More upfront payments to Apple in exchange for no subscription payments. Based on data released by ATT, Apple will no longer receive a cut in carrier subscription revenue for iPhone 3Gs. For first generation iPhones, that amounted to $10 per iPhone per month, or about $240 over the 2-year contract. Instead, ATT is subsidizing iPhone purchases, presumably paying Apple about the same amount on the day of purchase. So who cares? Well, Apple and ATT investors do: despite charging $10 more per month for the iPhone 3G data service, ATT will take a hit of about $600 million annually over the next two years, all of which presumably will show up on Apple's balance sheet due to subsidies. Note carefully: this does NOT mean that Apple is discontinuing its accounting for iPhone sales prices over 24 months -- it simply means that it isn't getting monthly payments from the carriers for iPhone 3Gs. By the way, the original iPhone subscription payments will continue for the full two years.
2. In-store activation required in the US. Apple pioneered do-it-yourself phone provisioning through iTunes last year. Sadly, ATT has forced Apple to drop this unique feature, now requiring in-store activation of the phone, presumably to ensure that it earns back its iPhone subsidies from subscriptions. This has two significant implications: 1) Apple can no longer sell its phone online through the Apple Store, and 2) anyone waiting in line on July 11 for a phone should expect to wait hours longer as people buying phones each wait 10-12 minutes for in-store activation. This is one of the rare circumstance where Apple has decided to degrade the customer experience to please its carrier partners.
3. Multiple carriers in some countries. As Apple pushes forward to deliver the iPhone is 72 countries, it seems to have gotten overly enthusiastic in countries like Portugal, Austria, Switzerland, Italy, and Australia, each of which has gotten not one, but two carriers offering the iPhone. So much for exclusive carrier deals.
4. iPod touch is poised for a price cut. With the iPhone cut to $199, iPod touches selling for $299, $399, and $499 seem out of place. While there's no similar carrier subsidy to reduce these prices, Apple's not dumb enough to leave them there. Expect a $100 price cut on these products before the back-to-school season.
5. Apple's toe dip into running an iPhone NOC. This was a real sleeper, but an important one for developers. Apple has refused to allow developers to run background applications on the iPhone (understandable given power and stability requirements). Instead, Apple is providing a centralized push application service that can present badges, sounds, and text alerts on any number of phones at the same time. What Apple has actually created here is a poor man's Blackberry Enterprise Server and Network Operations Center, complete with the associated single point of failure too. It's too early to know how much developers will embrace this service, but it in essence makes the iPhone a cloud computing client.
6. Multi-mode location-based services. Yes, Virginia, the iPhone does support both GPS and photo geotagging. But the dirty secret of GPS is that it doesn't work in the most common places you use your phone -- inside and in the shadows of buildings in cities. But just as the navigations systems built into cars do, the iPhone integrates multiple sources of location information -- cell tower triangulation, WiFi network triangulation, and GPS -- into its location service. The result: the iPhone's location services may actually be better and more reliable than those you get from your average Garmin or Tom-Tom personal navigation system, simply because it will work in more places.

The seventh and final observation I'll make is one that was hiding in plain site during the keynote. Steve Jobs dedicated nearly 40 minutes to third-party software demonstrations during the two-hour keynote. That's more time than any other topic received. If there's one thing we know about Jobs' keynotes is that he doesn't waste time on things that are unimportant to users. By dedicating nearly 1/3 of the keynote to third-party applications, Jobs served notice that the Apple iPhone is not just a consumer device, but is Apple's third big developer platform, following the Mac and the iPod. And while it isn't yet a third of Apple's revenue, just wait. It will be -- and sooner than you think.

Apple links higher prices with higher sales

Today's Note From Anywhere is inspired mostly by the Green Monster sign outside our office noting the opening of the world's largest Apple Store here in Boston next week.

Elementary economics says that you build volume by cutting prices on products. But Apple's latest 10-Q filing, where it provided details of its latest record-breaking sales quarter, has a nice counterexample to that so-called wisdom. You have to dig a bit to find it, but look for page 23 of the 10-Q, which has a table titled "Net Sales". But if you don't want to look at the original, here are the lines that are of interest:

	Three months ended 3/31/2008	Three months ended 3/31/2007	Change
Net Sales By Product
Desktops	$1,352	$914	48%
Portables	$2,142	$1,354	58%
Unit Sales By Product
Desktops	856	626	37%
Portables	1,433	891	61%
Net Sales Per Mac Sold
	$1,526	$1,495	2%

So let's walk through this line by line. Between 2007 and 2008, desktop Mac revenues increased 48% while portable Mac revenues increased 58%. At the same time, desktop units sold increased 37%, while portable unit sales went up 61%. And the average net sale per Mac? Despite the fact that Apple was selling many more desktops and notebooks, the average net dollar amount sold per Mac increased 2%. Said another way, despite the fact that consumers paid 2% more per unit, consumers bought nearly 50% more Macs year over year.

Now the sharp-witted readers will note that this increase in average selling price can be explained nicely by the fact that Apple sold more notebooks than desktops. Since notebook computers have slightly higher selling prices, that change in product mix almost entirely accounts for the increase. But even so, average selling prices for desktops went up year over year, not down. And if you look at the original 10-Q filing, you'll note that average net sales for iPods went up as well, almost certainly driven by iPod touch sales.

So what's the takeaway here? It's that innovation and marketing -- creating unique products that customers want -- trump price elasticity with consumers. The elementary economic wisdom that you increase volume by cutting prices assumes that you are selling a commodity. Apple isn't selling commodities; it is selling differentiated products that only it makes. And that means that Apple's economic model is one that is anything but elementary.

Apple posts another record quarter -- and it isn't even the holidays

Apple really has been on a tear lately, and I'm not just saying that because I got a new MacBook Pro for a great price. Apple just reported another record quarter of sales, including 2.3 million Macs, 1.7 million iPhones, and more than 10 million iPods. They reported more than $1 billion in profit for the quarter, but added nearly $4 billion in cash to its war chest.

Not everyone may be thinking this way, but to me, this all just shows how well a company can do when they go past selling hardware or software, and start selling Anywhere experiences.

Changing the world, one mobile phone at a time

The New York Times magazine this past Sunday took on a topic near and dear to Yankee Group's heart: "Can the Cellphone Help End Global Poverty?" And while it will take years before we know the answer, some of the data they cited was intriguing to say the least.

"Jan Chipchase and his user-research colleagues at Nokia can rattle off example upon example of the cellphone’s ability to increase people’s productivity and well-being, mostly because of the simple fact that they can be reached. There’s the live-in housekeeper in China who was more or less an indentured servant until she got a cellphone so that new customers could call and book her services. Or the porter who spent his days hanging around outside of department stores and construction sites hoping to be hired to carry other people’s loads but now, with a cellphone, can go only where the jobs are. Having a call-back number, Chipchase likes to say, is having a fixed identity point, which, inside of populations that are constantly on the move — displaced by war, floods, drought or faltering economies — can be immensely valuable both as a means of keeping in touch with home communities and as a business tool. Over several years, his research team has spoken to rickshaw drivers, prostitutes, shopkeepers, day laborers and farmers, and all of them say more or less the same thing: their income gets a big boost when they have access to a cellphone."

The mobile phone recession?

A Gizmodo author wrote a sobering analysis in Popular Mechanics of the CTIA conference on the wireless industry this week:

It's been nearly a year since the Apple fanboys first camped out to scoop up eBay-bound iPhones, and the biggest mobile players are still trying—and failing—to mount a serious challenge to its dominance of consumers' hearts and minds. While Apple was a trade show no-show for the annual wireless and telecom industry showcase here, I've been feeling their pulse pretty much everywhere while reporting live from the trenches at the Las Vegas Convention Center.

It's the trend that just won't die: Cellphone powerhouses are still forcing themselves to play catch-up to the new guy. In fact, it's become almost impossible to look at any of the major new handsets unveiled at CTIA or through our revolving gadget doors at Gizmodo without being reminded of the iPhone. While in some cases this is merely because Apple has cast such a long shadow, it's more often because other companies are intentionally mimicking the look and feel of Apple's year-old device.

My take of the slow CTIA show is actually much simpler: nine months is not long enough for competing vendors to reverse engineer and certify a true iPhone competitor. The result: we're still seeing phones that were designed based on the original descriptions of the iPhone from January 2007, not on actual iPhone experiences. And while I think the iPhone will actually be very challenging to imitate successfully, it's too early to claim competitors will completely fail.

The result: I don't expect a mobile phone recession. But Research In Motion's earnings results announced last night do reflect a trend we can expect: profit compression due to lower prices. With consumers struggling to pay mortgage and credit card bills, I think we will see many vendors cut their prices and margins on mobile phone handsets to entice those cash-strapped consumers. The only problem: price cutting almost never works as a long-term strategy.

At the end of the day, handset vendors will win and lose on innovation and brand value. Those that choose to compete on low prices will engage in a race to bankruptcy, not success. And if you need proof of that fact, just go ask Motorola how competing on mobile phone prices without innovation worked out for them.

Check the calendar to understand RIM/Microsoft and other deals

No, hell isn't freezing over, and Research In Motion isn't going Windows. Despite a posting at briefing.com claiming RIM is introducing a Windows Mobile-based Blackberry, CNBC did some fact checking and discovered it is an April Fool's joke. Joining this story are similar rumors on Microsoft adopting the iPhone OS (hah! No.), Apple adopting Windows Mobile (hah hah! No.), and Google and Richard Branson sponsoring a manned mission to Mars (hah hah hah..... maybe? No.)

Today is not a good day to be reading the news a skepticism deficit. You have been warned.

How many outages can a Blackberry user stand?

Boy, how many more Blackberry outages will it take before businesses start providing negative feedback to Research In Motion (RIM) in the form of cancellations? Your guess is as good as mine. But given that this weekend's outage makes three in the last year, RIM has some explaining to do to its customer base.

Fun drives iPhone inevitability?

I found that this article by Matt Asay on CNET.com that claims The inevitability of the iPhone struck a chord with me. Specifically:

The iPhone "just works," and then some. I thought I wouldn't be able to type on the iPhone without tactile feedback. I was wrong. I'm actually faster on the iPhone than I ever was on the Blackberry, and that's with only an hour of "training." I thought I would miss a host of things with my Blackberry, but I haven't. Instead, I've been blown away by the innovative use of gestures and the user interface. I resisted the iPhone for a year or so, but looking back it was inevitable that I'd end here. It is the best-designed phone that I've ever seen or used.

As someone who is carrying both a Blackberry and an iPhone with him nowadays, I'm struck by how different the two experiences are. Not surprisingly, when I use the Blackberry, it feels like work; when I use the iPhone, it's fun. We'll see if that persists when the iPhone grows enterprise email access, but I suspect it will. After all, what good is an Anywhere device if you avoid using it because it feels too much like work?

How the iPhone SDK is reshaping mobile application development

Eugene Signorini, Andrew Jaquith, and I wrote a Yankee Group Decision Note analyzing the Apple iPhone Software Development Kit (SDK) announcement last week; clients will probably see it in our published research sometime next week. But despite that note being more than 2,000 words, I'm still finding new insights from other writers on the topic. Today's harvest includes some commentary from Michael Mace, who declares that Apple gets it right. Michael's been on my mobile Web Sites interview list because he's an authority on many aspects of the mobile market and business strategy, and I think his comments on the intersection of mobile apps and the iPhone are particularly interesting:

I think it's likely that web apps will eventually displace most native mobile apps, because the addressable market will be so much larger. But eventually can take a long time, and if anyone can buck the trend it'll be Apple. They have created by far the best overall proposition for mobile developers on any platform in the US or Europe, and I hope they'll do very well for a long time.

Apple is challenging the rest of the mobile industry to compete on its terms. It will be very interesting to see how the other mobile vendors react, Nokia and Microsoft in particular. Nokia seems to be focused on a strategic positioning activity around seeing who can collect the most runtimes, while Apple is solving real developer and user problems. It's a striking contrast.

Blogging on the Yankee Group Web site

For those interested in my official Yankee Group comments, I've just started posting on the Yankee Group Blog site (http://blogs.yankeegroup.com). My first post is here. So given that I'll be writing in two places, I'll ask the question of readers: do you want me to cross post my articles here as well, or leave this blog for other topics that don't really fit into the Yankee mold? Leave a comment if you have an opinion on the matter.

Anywhere services need redundancy, not single points of failure

I've got to chime in with Jon Gruber of Daring Fireball on this: No matter how much Research in Motion promotes their NOC approach to running its Blackberry service, it's still a single point of failure for all Blackberry subscribers. And given that this weakness has been demonstrated to Blackberry subscribers with two multi-hour outages in the last 11 months, at some point, businesses are going to scream "Fix it!" I'm surprised someone from the high-availability computing world hasn't pilloried RIM already.

For those who don't think RIM's outages are any big deal, here's a fun fact. If RIM were trying to meet a 99.999% availability for its Blackberry service, the three-hour outage on February 12, 2008 would have used up its allowed downtime for the next 34 years. Oops.

It's easy to forget that until the Internet came along and demonstrated that distributed and decentralized networks really were more reliable, most of the major computer companies built networks with centralized command and control systems, yet those networks never achieved anything like the resilience of the Internet. It's a shame Anywhere business customers using Blackberrys are going to have to learn that lesson again the hard way. It's not a question of if that will happen; it's a question of when.

Meanwhile, everyone who wants to avoid the Anywhere school of hard knocks should repeat after me:

I will not accept single points of failure in my Anywhere service.

I will not accept single points of failure in my Anywhere service.

I will not accept single points of failure in my Anywhere service.

....

Did the iPhone SDK mean Apple will corner the Anywhere device market?

GottaBeMobile.com has an interesting claim that Apple's SDK announcement yesterday may have an unexpected result:

Apple opened a big door with the announcement and shut quite a few others in the process. Apple not only took the UMPC/MID market away, it will own mobile for some time to come, with everyone else playing catch up. The race to the top is over. Now everyone else can scramble to figure out who is number two.

[From GottaBeMobile.com]

So here's how I'm going to gauge whether this is happening or not: track the sales of Asus Eee PC at Amazon. If they fall off a cliff, Apple killed the segment. But given the incredible diversity of developers and users, some of whom have not interest in iPhones or Apple, I suspect they'll do just fine. The key to thinking about Anywhere products is that people have many different requirements for how they will use and buy mobile devices. No one company can meet all those needs, no matter how wonderful the device.

Of course, that doesn't mean that Apple won't make a whole lot of money trying.

Apple knows how to launch a platform

I'm in the midst of writing an analysis piece for Yankee about what Apple's announcement of its iPhone Software Development Kit means for enterprises. But here's the short version:

Apple just showed everyone how to grow a developer ecosystem.

Apple kicked off the announcement by giving enterprises features they had requested to approve iPhone uses in business, including:

• Microsoft ActiveSync built in for secure push email and remote wipe and Exchange integration,
• 802.1x and WPA2 WiFi security,
• Cisco VPN support for secure communication

But then Apple kicked things up a notch with the SDK details, which included:

• Complete integration with Apple's existing developer framework, Xcode,
• Performance analysis tools to make apps run fast on the iPhone
• Access to nearly every API on the device, including OpenGL, multi-touch, WiFi, accelerometers
• A full iPhone simulator to help with debugging.

Just to prove this wasn't hype, Apple gave the SDK to a group of companies for about two weeks to see what they could do with it. Each of those companies created versions of their applications in that time, including Electronic Arts' Spore, Salesforce's Salesforce Automation Epocrates's instant messenger, Epocrates' Drug Identifier, and Sega's Super Monkey Ball. Not bad for two weeks of work.

But the real surprise was Apple's efforts to market and develop an ecosystem for third-party iPhone development. Marketing and distribution terms were:

• All third-party applications will be distributed through a new iPhone AppStore. Developers wishing to do so pay a $99 fee, but can set their own prices for their apps, including free should they choose to do so.
• iTunes will have a part of its store dedicated to third-party apps and promoting the top downloads. Developers get 70% of revenues for paid apps.
• Kleiner Perkins is launching a $100 million iFund to fund iPhone developer companies. That means money shouldn't be a barrier to getting an great third-party iPhone software business off the ground.

Now I know that not everyone will agree with all the details, and I think everyone expected Apple to seed iPhone development with its SDK. But what Apple actually did is till the ground for development with enterprise features, seed it with the SDK, water it with marketing and distribution, and fertilize it with cash. If third-party apps don't grow with that kind of support, nothing will.

Working Anywhere: today it's the hospital

I'm try to take the title of this blog -- Notes From Anywhere -- seriously and blog from wherever I happen to be most days. Today, I'm in Emerson Hospital in Concord accompanying my son who is in for X-rays. The hospital accommodatingly provides guest WiFi, so I can work from the waiting area. I'm not sure this is necessarily a giant step forward, but it is handy for staying in touch.

I remember once advising a hospital client about WiFi wireless networks when they were new. Being an old radio and RF guy, I cautioned them not to introduce new wireless technologies into their environment without doing careful interference testing with life-support systems and other critical hospital gear. The guy looked at me with an amused look, and said, "You don't understand -- we already have the wireless networks; we just want to know how to manage them." Oops. So much for the all-knowing analyst.

Today, hospitals have nearly as many computers and networks as they do patients. Some patients even get WiFi in their rooms so they can stay in touch with family and friends. And visitors like me can work from waiting areas with guest WiFi. And why not? After all, you can be sick Anywhere.

Anywhere apps get a choice of development tools

Today, I'm thinking about two news items this week as I am researching mobile Web site development for my upcoming report:

• The Apple announcement that it will release its iPhone SDK and roadmap on March 6, and
• A blog post by Michael Mace writing the obituary of native mobile phone apps called Mobile applications, RIP

These two news items reflect the two camps I've talked to about Mobile Web sites. One camp believes that native mobile applications are the only way to get the responsiveness and integration needed for a great mobile experience. In the other camp, though, are a large group of people who believe that the mobile Web will evolve to capture the lion's share of mobile user attention, just as it has on the desktop.

Just like with desktop and laptop computers, I don't think mobile app development will ever be a completely "either-or" proposition; I think we'll see Web AND native app development. For example, if you want to edit photos you've loaded on our laptop, you can edit them either using a desktop app like iPhoto or Photoshop (assuming you have them installed), or you can edit them online using Snipshot.com, Picnik.com, fotoflexer.com and a host of others (assuming you have enough online access available). So why would we expect Anywhere mobile applications to be any different? Some applications will require dedicated native software, others will make more sense on the Web. Both approaches work.

Of course, Apple has already figured this out. Last year, it touted using Web technology to develop iPhone apps. This year, they're announcing the native iPhone SDK. Developers will get to choose which approach meets their customers' Anywhere needs best. The open question is which approach will generate the most excitement and enthusiasm for the platform. And while native apps have always held the edge in prior platforms like Palm and RIM devices, those platforms didn't boast browsers that were as a capable as the iPhone's. Only time will tell which tools developers will choose as their favorites, but at least developers will have the choice.

Apple's Anywhere iPhone

Apple's invitations to an event on March 6 to discuss the Apple Software Development Kit for the iPhone generated several Apple inquiries around here, and Apple COO Tim Cook's talk yesterday at the Goldman Sachs event added more fuel to the story. I thought I'd take a break from my usual "Anywhere all the time" writing, and just pass on some of the data and answers I've been providing to reporters.

• Has the iPhone wave peaked? No; in fact, I would argue that the iPhone phenomenon has just gotten started. The Apple iPhone is truly an Anywhere phone, putting communication, media, and Internet content in the palm of nearly anyone's hand anywhere in the world and on (mostly) any GSM network. Despite the iPhone only being available for sale in four countries, it's being used today in more than 100. This adoption is amazing because no official native third-party apps have been released and the device is a version 1.0 device, Apple's first effort in a market most pundits said it could never succeed in. Imagine what sales will look like when there are official distribution channels in more than four countries, when third party developers can create new iPhone applications, and when Apple has version 2.0 and 3.0 devices in the market.
• Are iPhone unlockers hurting Apple? I think this idea is way overblown. Apple receives full retail price and full retail profits for every phone it sells, locked or unlocked. The device is profitable by itself, regardless of whether it gets carrier revenue sharing or not. Further, the fact that Apple is doing carrier exclusive deals now doesn't mean it is wedded to that model, a point Tim Cook made in his presentation. So everyone who is claiming Apple is "losing" $1 billion due to unlocked phones is simply noting problems with their own models of Apple's business, not Apple's. Apple of course doesn't acknowledge or report any revenues from carriers associated with the iPhones, so any numbers or losses you hear about those are inferred speculation, not facts.
• Does Apple need to cut prices on its Iphone? Not in the least. Apple has no intent of chasing Motorola to see who can lose more money on phones in a futile attempt to gain market share. Market share isn't the name of Apple's game; consistent and growing profits are. Apple's brand says to nearly everyone in the world that its products are fashionable, easy-to-use, and a bit exclusive. Apple competing only on price would be like BMW cutting prices on its cars so they can be distributed through Wal-Mart; it would be marketing suicide.
  
  In my opinion, Apple's game plan on its Anywhere phone will likely mirror that of iPods. iPods started with one model and then gradually branched out to three or four of them (depending on whether you consider the iPod touch to be an iPod or a low-end iPhone). Even today, the 16 GByte iPod touch sells for the same price as the original iPod introduced in 2001. People should expect there to be both cheaper and more expensive iPhones over time, but that the target price points for the iPhone with touch screens and Internet capabilities will remain what they are today.
• Is Apple going to make its iPhone goal of 10 million phones by the end of 2008? Yes. Apple doesn't provide goals if it doesn't think it can both make and exceed them. While the economy and consumer spending are throwing up some roadblocks, I see Apple easily exceeding that goal by about 25% by the end of calendar 2008. And in case anyone was confused, that's the benchmark that Steve Jobs set: 10 million phones by the end of 2008, not 10 million phones in the first year of sales or the first fiscal year.

The bottom line: as the buzz at the Mobile World Congress proved, Apple changed the mobile phone market worldwide with its first and uncertain effort in a new market. Just as it did with computers, Apple isn't playing a market share game; it's building mind share. And while there only officially successful in a few countries today, imagine what will happen when they are Anywhere.

Anywhere mobility transformation in Afghanistan

On today's National Public Radio Morning Edition program, Steve Inskeep interviewed former British diplomat Rory Stuart, chief executive of the Turquoise Mountain Foundation, about the transformational nature of mobile phones in Afghanistan. While this Anywhere technology is a mixed blessing -- while mobile phones connect consumers to the rest of the world, the Taliban is using cell phones to plan attacks as well -- there is no question it is reshaping Afghan culture and its connection to the world. Where Afghanistan was once one of the most isolated countries on earth, it is now just one more place on the road to Anywhere.

How Not to Start a Briefing

I was on a vendor call today with two of my analyst colleagues. The vendor intended to update us on a revision to an existing e-mail security appliance. The product is simply known as the "8300 appliance." Of course, the product managers must have assumed that the product's functions would be somehow self-evident, because the product manager's first question to us, after introductions, was this: "Are you all familiar with the 8300 product?" Crickets started chirping on cue... Now, bear in mind that not too long ago I received a briefing from a different vendor about a product they called "the 8550." This was another gateway product -- but for SOA security. Too many briefings, plus too many arbitrary number-centric naming schemes, equals confusion. Considering how much flak Microsoft catches about their products, at least historically they haven take time to come up with names that tell you something about what their products do (e.g., Internet Security and Acceleration Server). They seem to have fallen off the sensible-naming wagon lately (Windows Live OneCare? Dynamics?), but still get it right more often than not. Mercedes and BMW can get away with numbers-only product names. Security vendors? Not so much.

Work/Life Schizophrenia, and the Calendars They Produce

Every Anywhere Consumer, myself included, do their best to balance their personal and professional lives. In my case, I've got multiple "personas":

• My day job persona (as a Yankee Group analyst)
• My "professional hobby" personas: securitymetrics.org editor, JSPWiki commiter,Identity Gang member, weekend programmer
• My "private life" personas: family man, friend, book club member, cook, bread-baker, condo association treasurer
• My consumer personas: buyer of books, music, clothing, gadget hound, political junkie

All of these personas, taken together in their totality, form the essence of who "I" am. Much of what composes my identity is offline, but plenty of it is online. Running through all of them, however, is the continuity of time. Each persona engages in activities, which need to be scheduled and time-sliced. 

Most people use a combination of analog techniques (date-book, to-do lists, scribbly notes, photographic memories) and digital tools (calendaring programs) to keep their priorities, and activities, straight. In the digital realm in particular, experienced PIM addicts use their calendaring programs. I got my first Palm in 1999, and I took to it like a duck to water. For me, my electronic calendar is my lifeline. If an event isn't in my calendar, it does not exist, and won't happen. The reason is simple: every day I receive dozens of requests for briefings, inquiries, follow-ups, social gatherings and the like. I have found that I cannot stay sane unless I stay on top of my calendar. I may not always be as prompt as I'd like with e-mail -- but I can guarantee you that my calendar is always up to date.

Over the years I have tried many techniques to keep my calendar straight. Up until last year, I used the One True Calendar approach: namely, use my work calendar (today, Lotus Notes) as the canonical source of all things calendar-related. In short, stick everything into it, regardless of the the persona they relate to: personal, professional, consumer, developer etc. The One True Calendar is, in essence, a centralized hub for everything time-related.

The centralized, One True Calendar technique worked well enough. It synced to my Treo, and life was good. But now, in 2008, I need more than what one calendar can give me. I have friends to keep track of, birthdays, travel plans and other activities that aren't always within the span of my control, and wouldn't be practical to spend time double-entering. Thus, last fall I abandoned the One True Calendar in favor of a more loosely-coupled system based on calendar subscriptions (iCalendar). iCalendar subscriptions have simplified my life considerably, and made aggregating time and event information from multiple sources easier. Apple's iCal application pulls everything together into a consolidated view.

Using calendar subscriptions means that instead of having a single calendar, I can stitch together multiple calendars, including those of other people. Subscriptions are superior because each event source continues to maintain its own schedule independently. But, through the magic of iCal aggregation, I can still see how everything relates. Best of all, because iCal syncs with my iPhone, I can take my tangled schitzophrenic schedule with me wherever I go.

Rather than traffic in abstractions, here's a screenshot of my current iCal calendar. I've turned on all of the calendars.

As you can see,  I subscribe to iCalendar feeds like US Holidays (in green), a list of security conferences (in brown) and a service called Dopplr that tells me when I'm going to be in the same cities as my friends (orange). And, to integrate my work-related events, I also wrote a little LotusScript hack that exports my work calendar (from Lotus Notes, shown in blue) as an iCalendar feed every 15 minutes. You can also see my Birthdays calendar (green, pulled from Address Book).

I have also become addicted to TripIt (shown, in orange), a service that creates nicely-formatted travel plans, based on itineraries you forward to it. At Yankee, we use a particular outside travel service for booking flights, hotels and cars. I used to enter all this stuff by hand into Notes. Now, I don't have to. When I book something, I forward the travel agency itinerary to TripIt, and it smartly parses everything and creates a virtual calendar entry with from/to information, flight numbers and times, confirmation numbers and the like. I can use TripIt with other travel agencies, too: so, if a customer arranges travel for me using their own agent, I can simply forward the details to TripIt, and all is well. Here's the best part: all of these details are available as an iCalendar subscription. That means that everything I send to these folks will magically appear in my calendar, because I'm using a calendar (iCal) that understands iCalendar subscriptions.

The point of all of the preceding isn't to show how much of a smarty-pants I am. Dork tendencies aside, I wanted to demonstrate, in concrete terms, three things: 

• All of the things I keep track of don't fit nicely into a single persona
• Calendar aggregation , not calendar centralization, holds the key to allowing all of multiple personas to time-slice
• Subscriptions hold the key to integrating outside services, and other people's calendars

All of these points speak directly to the needs of Anywhere Consumers, and of the limitations of insular calendaring programs like Lotus Notes. As workers seek to increasingly blend their work and personal lives, we will increasingly need software that is persona-aware, and that works seamlessly in a federated, interdependent world.

Epitaph to the high-definition disk war

I've been talking to a couple of reporters over at Wired lately about the aftermath of the HD-DVD/Blu-ray war (I'm waiting for a declaration that February 20 will forever be commemorated as HD armistice day). The upshot of my comments to date has been 1), that Blu-ray was crowned the winner by the studios and CE manufacturers in 2006, and 2) Apple's role in Blu-ray is more about creating Blu-ray content than playing it. But I thought Notes From Anywhere readers might be interested in some additional factors that haven't been getting as much press play.

Daniel Eran Dilger over at roughlydrafted.com made some good points I'd forgotten about the HD-DVD vs Blu-ray war, among them that HD-DVD carried with it the proprietary lead weights of Microsoft's Windows Media Player, WinCE, and VC-1 coders built into the standard. And while VC-1 was supported in Blu-ray, it relied more on H.264 which was a true international standard. It should come as no surprise that Hollywood, having seen the movie of Microsoft using proprietary standards to become the toll collector an an industry before, rebelled, and therefore ended up siding with Sony, who was at least, "one of them." It also didn't help that Microsoft, in its usual inimitable development style, was consistently late in delivering its technology software to HD-DVD partners, which caused Toshiba's early technology lead to evaporate.

One other data point I'd forgotten was that Michael Eisner at Disney was originally a Microsoft/HD-DVD fan and licensee of Windows DRM, but when he left in 2004, Disney became a Blu-ray supporter. That defection may have started the stampede away from HD-DVD, and Disney's purchase of Pixar and Steve Jobs sealed the deal.

One point I had made in articles I wrote about this technology war in 2005 was the two of the big supporters of HD-DVD were Microsoft and Intel, each of whom could account for exactly zero million HD-DVD drive sales. Whenever I see "Barney alliances" -- ones where no money changes hands, but all the partners agree to love each other and their technologies --- I always consider it a sign that the partnership is going to fail. As someone once said, anything worth doing in business is worth doing for money. And when there's no money at stake, there's no business. The death of HD-DVD proved that rule again.

One final Anywhere note to this obituary: as my colleague Andy Jaquith noted in a press interview recently, DRM is the mortal enemy of Anywhere media. The HD-DVD battle taught Toshiba that lesson, but Sony has yet to learn it, despite its ATRAC defeat at the hands of Apple's less heavy-handed DRM. Sony's Blu-ray may have won the high-def format war, but there are still many battles to come to win over Anywhere consumers, who will be inundated with on demand offerings, downloadable media, and innovative media-repurposing technologies like Slingbox. In our increasingly digital world, collections of ones and zeros will become increasingly more difficult to protect. Sony should learn from Toshiba's mistake and think beyond Hollywood's demands for more and more DRM. If it doesn't, Blu-ray's victory could be short-lived.

Update: One commenter notes that WinCE and Windows Media Player were never part of the HD-DVD spec. I personally haven't read the spec, so I can't prove or disprove the assertion, but Microsoft certainly claims these are key and essential parts of reference HD-DVD implementations. I apologize for any confusion.

Yahoo-Microsoft: the damage has been done

I'm not typically a fan of Motley Fool nowadays, but I think this article titled, "It's Too Late to Apologize, Microsoft" has the dynamics of this deal just about right: "...both Yahoo! and Microsoft's online division have been permanently damaged. Google won." And just to add irony to the mix, it's published on MSN.

Amazon's service failure provides cautionary Anywhere lessons

For those who started their long weekend early last week, Amazon's storage 'cloud' service goes was offline for about three hours on Friday. When I combine this with the similarly long Blackberry outage earlier in the week, I think there are some lessons worth noting:

• Outages that seem important to you aren't important to service providers. Too many people assume that by outsourcing their technology challenges, they'll be getting world class service and risk management in return. Based on the quotes of Amazon and Research In Motion executives, those assumptions are misplaced. RIM co-CEO Jim Balsillie dismissed the Blackberry outage as "an intermittent delay, a couple of hours. It's old news." Amazon at least admitted that the downtime was unacceptable, but only did that after customers spent hours searching for the cause of the problem.
• Cloud services don't guarantee anything. No matter how good those service level agreements sound when you sign them, when the service is down, you're down as well. And if you look very carefully at most of those service level agreements, the penalties for not providing the service are limited to what you are paying that month. That's cold comfort when your business's revenue goes to zero for an unknown period of time.
• Anywhere services need more than commodity service. Many Web 2.0 startups have staked their future on the hope that cloud computing is "good enough" to propel their business models. But as consumers get used to Anywhere services -- ones that anyone can use on any device on any network -- the more they will be disappointed by garden variety, commodity service. Those companies aspiring to be the next Google should remember that Google started out by building its own massively-redundant infrastructure in closets at Stanford University rather than just piggybacking on university resources. Anywhere reliability and scale will require more than formless cloud infrastructures to work 24 hours a day, seven days a week.

One final note: one of the companies I consider to be a great Anywhere company already is FedEx. While some may argue that it isn't in the Anywhere information business, many of their executives would disagree strenuously, noting that the information they collect on packages and deliveries is just as valuable as the packages themselves. I remember one of the CIOs of FedEx commenting, "Our data center is a lot like Noah's Ark: we have two of everything." And their circa 1996 thinking about contingency planning and reliability of service as documented by Wired Magazine is a great example for companies today to consider:

Behind one of these straitlaced corporate citadels, a low-slung building squats buried under a vine-covered earthworks, shielded by walls of thick concrete. Formally known as the Global Operations Center, it serves as a subterranean command facility for the entire FedEx distribution and delivery system. Employees call it "the Bunker."

The lighting in the Bunker is subdued, and a hushed intensity crackles through the climate-controlled air. On the walls, giant flat-panel projection screens display real-time weather maps of the continental United States, while workstations around the periphery stand equipped with banks of computer terminals and heavy black telephones. A team in the back of the room specializes in domestic operations, and another behind it focuses on surface transportation. Up front is the international unit; a bevy of flight crew dispatchers are positioned off to the left, and there's a handful of meteorologists tucked off in a dark corner.

"It's pretty quiet here now," explains Bunker manager Pete Gwaltney. "But come midnight, the place will be a whole lot busier. At peak periods, we operate in five-minute decision cycles.

"Gwaltney's job is to keep the FedEx distribution network running smoothly despite the inevitable grind of glitches and failures that plague any complex mechanical system. But as he nonchalantly puts it, "This company spends lots of money preparing for contingencies."

To demonstrate the point, he explains how FedEx launches an empty jet freighter each night from Portland, Oregon, bound for Memphis. The jet tracks a course that brings it close to several FedEx terminal airports so that if one of the jets parked on the ground suffers a sudden mechanical failure, the empty freighter can swoop down and pick up the stricken plane's cargo.

The image of that empty FedEx jet streaking through the night reminds me of the old "doomsday" bombers that were kept aloft and on alert during the Cold War. "Jeez," I remark. "It's like Strategic Air Command around here." Gwaltney smiles, as if the same thought crossed his mind a long, long time ago. "Actually," he says, "it's more like Strategic Freight Command."

That's what I think of as the gold standard for Anywhere services. And for those companies who think they can bet their futures and investors' money on cloud-based, best-effort services and compete with companies that think like FedEx, good luck with that. You'll need it.

The Post-Platform Security Era

Greetings everyone! This is Carl Howe’s Yankee Group colleague, Andrew Jaquith. I’m a security analyst at Yankee. Carl was kind enough to invite me to contribute to this blog. The attraction of posting to this blog was plain, because it is about what we at Yankee Group call Anywhere. At its core, our mission is to forecast how mobility, miniaturization, exploding numbers of form factors, plentiful bandwidth and networked applications will change our lives. We expect that carriers, corporations and consumers alike will benefit from a rising tide of innovation that will bring us new forms of entertainment, commerce and access to information. With that in mind, it is with a mix of resignation and bemusement that I was recently asked to respond to a study by security vendor Sophos about malware predictions for a particular platform, in this case the Mac. You can read the story (which includes my comments), but I’ll save you the time and cut to the chase. According to Sophos, “93 percent believed malware writers would increasingly target the Mac in the future.” I'm not really sure what to make of this study. While I recognize that not all of the security vendors speak with one voice, the narrative on the subject of Macs and viruses has gotten so twisted that it would make Ernö‘ Rubik gasp. First, the line was “Watch out! Mac users will, we are very very sure, be targets of malware in the very near future.” This was generally accompanied by, “Mac users need to stop living in a false paradise!” But now, according to Sophos, Mac users aren't living in a false paradise after all, because they “expect to see more malware.” So which is it? Are Mac users all beret-wearing, latté-sipping artistes that don’t have a clue about security, or are they world-weary realists warily awaiting their next attack? Of course, it doesn't really matter. Frankly, all of these things are just justifications to sell more OS X software. And Sophos’ study should be seen for what it is: a publicity event in service of that goal. More broadly speaking, though, all of this hot air about Mac versus PC security has nothing to do with the real problem: cyber criminals trying to trick end users so that they can take over their PCs, steal money or steal account credentials. That’s a platform-agnostic problem. For Anywhere Consumers — who use whatever operating system they want — the targeted device or platform is much less important than the goal of the attacker. The story really ought to be about whether end-users are safe, educated and aware, not what platform they use. It is high time for the dialogue to shift to the post-platform security era. Let’s stop the usual finger-pointing, schadenfreude and scare-mongering.

Now iPhone viewable

For those of you with Apple iPhones, Notes From Anywhere should now be a more enjoyable experience. Let me know what you like and don't like about the template.

iPhone simplicity drives Google searches and Anywhere revenue

The Financial Times observed an interesting phenomenon about iPhone usage from Google yesterday:

Google on Wednesday said it had seen 50 times more searches on Apple‘s iPhone than any other mobile handset, adding weight to the group’s confidence at being able to generate significant revenues from the mobile internet.

“We thought it was a mistake and made our engineers check the logs again,” Vic Gundotra, head of Google’s mobile operations told the Financial Times at the Mobile World Congress in Barcelona.

[From FT.com / In depth - Google homes in on revenues from phones]

I completely believe the 50 times number cited in the article. In fact, my own experience last night demonstrated how much much the elegant, yet simple iPhone user experience encourages Google searches.

I sing in my local church choir, and we are currently rehearsing Paul Winter and Jim Scott's Missa Gaia, a rather interesting contemporary jazz mass. As we were listening to a recording of a piece of the work, one of the tenors commented that he wondered how the guitarists were playing these jazz chords listed in the music, especially a D11 chord. I had my iPhone with me, so I popped "D11 chord" into a Google search, clicked the top link, and showed my tenor friend the fingering shown above, all in the course of about 10 seconds using ATT's EDGE network. His jaw literally dropped.

Despite being an ex-Compaq engineer, I don't think my tenor friend expected I could display a guitar fingering on a mobile phone at all or that I'd be able to do so quickly. Yet, for people who own iPhones, the experience is fairly routine, mostly because the iPhone delivers a simple, first-class Web browsing experience. And when things are simple, consumers use them more. It's the essence on what I think of as an Anywhere experience; in this case, it's an Anywhere Web experience.

Some carriers and handset vendors may just think that delivering a simple Anywhere experience is just a nice to have. But I think both Google and AT&T are starting to recognize that Anywhere is actually money in the bank, based on figures cited later in the same article:

If the trend continues and other handset manufacturers follow Apple’s lead in making web access easy, the number of mobile searches will overtake fixed internet searches “within the next several years”, Mr Gundotra said.

Google’s comments echo figures released recently by AT&T and O2, which carry the iPhone exclusively in the US and UK respectively.

In the US, AT&T said average revenue per user for iPhone users was nearly double the average, because iPhone users took large data packages on top of their voice calls.

Said another way, mobile phone companies have two choices: deliver great Anywhere experiences to mobile customers or see consumer dollars flow to competitors who do. It's really that simple.

Apple's iPhone raises the bar at Mobile World Congress

As reports from analysts and others attending the Mobile World Congress trickle in, one theme stands out: the iPhone is on the minds of nearly every company in the mobile phone ecosystem. The title of this article at EE Times really says it all: Users' love affair with iPhone stumps Mobile World panel.

That said, some of the panelists had what I thought were important insights on the fact that marketing, not technology, may be one of the factors standing in the way of consumers:

Panelists cautiously agreed that the current user experience — at least compared to the iPhone — is not very good. Predolin said that one problem is that many people are reluctant to tap the vast potential of mobile communications — especially the mobile Internet — because they fear the eventual cost. With so many telecom companies advertising heavily the cost of their services per minute, users hesitate to explore possibilities that might devour their precious minutes. Predolin said that this deadline consciousness is so strong among mobile users that they even constrained their consumption of minutes in a Buongiorno-sponsored trial in which participants were given mobile phones free for a week. "Operators are putting together cost plans that people can't understand," said Predolin. "It is not just cost but the way you market your cost."

But all this said, the iPhone appears to have set a new bar that carriers and handset makers alike are struggling to clear. Because mobile phone development typically takes anywhere from 18 to 36 months to get from concept to shipment, we'll only be seeing the first "iPhone-killer" hopefuls at next years Mobile World Congress. The only problem: by that time, Apple will have its second generation iPhone in the market. And knowing Apple, the bar will be even higher then.

Let zzzPhone.com build mobile phone for you

With the Mobile World Congress winding down, I'm sure some folks are now undergoing withdrawal from the endless procession of handset announcements form the likes of Nokia, Samsung, LG, and others. So while you are waiting for the big guys to build the ultimate mobile phone, why not spec out your own? For about one fifth the price of a Nokia N95, you can buy an equivalent ZZZPhone.com, and they'll be happy to enhance it with features like high resolution cameras, four stereo speakers, and TV/RM receivers. zzzPhone builds the phone for you in China and ships it to you directly. I'm skeptical these guys are going to dominate build-to-order mobile phones (after all, what's to prevent Nokia or Motorola from imitating the model), but it is a pretty cool idea. And $150 for a full-featured, touchscreen-capable phone will certainly attract attention. But buyer beware; the only mobile OS offered is Windows Mobile, so don't expect iPhone-like usability. Let's just hope they don't imitate Dell with a guy spouting, "Dude! You're getting a zzzPhone!"

Mobile ESPN browsers eclipse PC users and your favorite mobile Web sites

One of the pieces of research I'm just starting is a report on mobile Web sites. In the course of my research, I came up on this piece of news from January:

The biggest upset of this football season may have been Appalachian State University's victory over Michigan. But for the mobile-marketing industry, it came the day ESPN had more visits to the NFL content on its mobile Web site than it did to the same area on its PC site.

[From More football fans hit ESPN's mobile site than its PC pages - RCR Wireless News]

I think everyone now accepts that the number of global mobile phones now easily eclipse the number of Internet users in the world (2.7 billion phones versus 1.1 billion Internet users as of 2006). But many still think that's all about voice communication, not the Internet. But with the advent of first-class Internet Web browsers on platforms like the iPhone, Nokia's S60 series, and others, we're just beginning to see the impact of the mobile Web. My prediction: it's going to be even bigger than the PC Web. And the ESPN watershed moment noted above is just the start.

So here's a question for readers that would help me with my research: What's your favorite mobile Web site? Ideally, it would be a business site (I am, after all, director of Enterprise software, not consumer), but even if your favs are consumer sites, I'd love to hear about them. Leave a comment below, and in the process, tell me what mobile phone browser you are using to access that site. I'll start the ball rolling by saying my favorites on my Apple iPhone are Facebook (amazing functionality for a mobile site), Bank of America (bofa.com), and FedEx (fedex.com -- they always embrace new technologies quickly). What are yours?

BlackBerry Service down throughout North America -- again

According to the Huffington Post, BlackBerry service is out throughout most of North America. This is the second outage in the last 10 months and in my opinion, reflects a fundamental flaw in Research In Motion's (RIM's) service strategy. If you want a service to work reliably Anywhere, you can't run every single network connection through a single point of failure. Yet, RIM's network architecture routes every single Blackberry connection through its Network Operating Center in Waterloo. People may claim that Apple's iPhones aren't ready for enterprise use, but at least they don't all stop working when Cupertino has a problem. One big outage is an accident. Two is a design problem. And it's time RIM started fixing theirs.

Imagine if you didn't hate your mobile carrier

CNBC today kicked off its coverage of the World Mobile Congress today with an article titled, The Mobile Industry Has an Innovation Emergency.". I have to say, I agree with CNBC's point of view that many players in the mobile industry are stuck not knowing how to innovate. But after fighting with making mobile calls from my office in downtown Boston the last week or so, I have a dream that I think would challenge today's mobile carriers in their quest to become Anywhere providers:

Imagine if our mobile phone carriers actually tried to exceed our expectations?

Today, we tend to give mobile phone carriers accolades for just doing their jobs some of the time, like placing phone calls and delivering text messages. I've been trying to place and receive mobile phone calls from my office in downtown Boston over the past few weeks, and despite having a contract with the largest mobile phone company in the US, my success rate is about 75%. Said another way, my carrier doesn't deliver the service I pay for 25% of the time. Not exactly the poster child for world-class service, is it?

Imagine what would happen if they not only delivered service 100% of the time, but actually made it a fantastic experience?

Truth be told, dealing with any mobile carrier today is about as much fun as a root canal. Assuming you can actually make a call (see paragraph 2 above), calling to complain doesn't help. The carriers may claim that our phone call to complain is important to them, but that doesn't provide any salvation from their hell of automated phone trees. I'm happy to key in my phone number to allow them to access my records, but having to repeat that number verbally with the customer service rep after I've done it online just adds insult to injury. And the fact that I have to do that every time I get handed off to another representative just reinforces the impression that my business just doesn't matter to the people running these carriers.

Am I a dreamer to expect anything better? Perhaps. But there's data that suggests that if a new entrant delighted customers, the old guard of mobile phone companies could see serious trouble. The data I'm referring to comes from a study that Changewave released this week about the iPhone.

According to Changewave Research, Apple's iPhone has become the most popular choice for consumers planning to replace their mobile phone, which you can see below

Why? Here's a pretty good reason: 72% of iPhone customers are "very satisfied" with their phones, compared with only 55% for RIM customers, and even lower results for all the other manufacturers. Here's ChangeWave's chart for that result.

This data would be impressive for any manufacturer. But the really key point here is that the iPhone is made by a company that wasn't even in the mobile phone business a year ago. Further, Apple completely ignored the requirements of old-guard carriers; instead, it insisted that carriers do things that would help consumers, like instituting unlimited data plans and visual voice mail for the iPhone. It focused on delighting the customer, not perpetuating same old way of doing business.

Now I know that very high barriers such as spectrum rights and infrastructure costs block new carriers from entering the mobile phone business. Yet every successful new business overcomes some sort of obstacle that previously seemed insurmountable; after all, FedEx's overnight delivery business model was panned as impractical when the US Postal Service had a near monopoly on package delivery. And what better recipe exists for success than millions of unsatisfied customers willing to pay a monthly fee for a better service?

I don't know if there's a Steve Jobs, a Fred Smith, or a Herb Kellaher (Southwest Airlines) out there thinking about creating a great mobile phone business. But imagine if consumers were so excited about a mobile carrier that they'd line up for days to sign up for their service, like they do at the Apple Stores today. Imagine if that carrier guaranteed your satisfaction with their service or your money back. Imagine if that carrier had only a few, simple to understand services that took a few clicks to sign up for and another few clicks to get rid of if you didn't like them. And imagine if that carrier actually had customer service people who had both the power and authority to turn dissatisfied customers into satisfied ones.

I don't think Steve Jobs, Fred Smith, or Herb Kellaher have any plans to get into the carrier business. But I can dream, can't I?

Yahoo says it is not going down without a fight

As I had previously observed, price does matter to Yahoo!. According to the Wall Street Journal, the Yahoo Board has rejected Microsoft's bid. The article also notes that Yahoo has adopted poison pill provisions to prevent an unwanted takeover. Anyone who thought this was a done deal now has plenty of time to reconsider their position.

IBM: the Internet really should be a mainframe (NOT)

Nicholas Carr notes that IBM Research has published a paper hypothesizing we should collapse the entire Internet ecosystem into one big computer. Why? Because such a computer could be dramatically cheaper to create and operate than today's commodity clusters.

At present, almost all of the companies operating at web-scale are using clusters of commodity computers, an approach that we postulate is akin to building a power plant from a collection of portable generators. That is, commodity computers were never designed to be efficient at scale, so while each server seems like a low-price part in isolation, the cluster in aggregate is expensive to purchase, power and cool in addition to being failure-prone. Despite the inexpensive network interface cards in commodity computers, the cost to network them does not scale linearly with the number of computers. The switching infrastructure required to support large clusters of computers is not a commodity component, and the cost of high-end switches does not scale linearly with the number of ports. Because of the power and cooling properties of commodity computers many datacenter operators must leave significant floor space unused to fit within the datacenter power budget, which then requires the significant investment of building additional datacenters.

It's a terrifically thought-provoking vision. But its a vision we've heard from IBM in other contexts, when it pushed running Linux on Z-series mainframes as being more economical than buying its own Intel X-series servers. And last time I checked, IBM's X series servers were still selling just fine. Ultimately, customers, not research papers, will really determine the types of servers we use on tomorrow's Internet. But the factors that this paper leaves out are the very real and human issues of control, governance, and freedom. Yes, we need big iron clusters and servers to deliver services to consumers Anywhere. But we'll only see innovative Anywhere services emerge if the companies owning the the big iron doesn't have veto power over entrepreneurs wanting to build those services. And regardless of the economic benefits of a mainframe Internet, tomorrows Anywhere networks will need innovative services more than lower bandwidth and CPU costs.

The Microsoft-Yahoo deal: price matters Anywhere

MSFTextrememakeover has a nice financial analysis of the Microsoft-Yahoo deal suggesting that this hostile takeover bid is more ego than rational investment. Read the full analysis, but I think the conclusion is right on.

[From MSFTextrememakeover: Having Fun Yet?]

...there is no way that YHOO on paper is going to be worth this price. So at some future point, MSFT is going to have to take a huge charge to write down the "goodwill" difference between what they paid, versus what YHOO was actually worth. I guesstimate that that charge will be at least $1/share, and it could easily be $2 or more depending on what the final price is, how the integration goes, etc.. Needless to say, a $1-2 charge in some future fiscal will have the effect of wiping out a large part of MSFT's overall earnings for that entire year.

As I said in the last post, if you're a MSFT shareholder you should be hoping this deal gets kiboshed by either YHOO or regulators (however unlikely). Alternatively, you should hope that MSFT and YHOO come to some other accommodation. The best option there would be a standalone entity (either under the YHOO listing or a new one), into which both YHOO and MSFT contribute and MSFT shareholders get stock.

Putting on my Anywhere hat, I can understand Microsoft's need to buy a credible mobile content creator to be relevant to Anywhere consumers. But Microsoft's claiming that this deal makes sense is a bit like saying that I need to buy a $313,000 Lamborghini Murciélago to commute to work. I can understand the need, but the price really is over the top.

Nüvifone: Garmin's products are not just for navigation any more

I've been meaning to write for a while now about Garmin's new iPhone competitor, the nuvifone. Gizmodo reminded me about that today by posting the above Garmin marketing video.

The video tries to show how hip and cool is could be to combine navigation and communication in one device without the panache of the iPhone commercials. As concept ads go, it's really not bad. While they try to hit far too many points in a single video (tip to Garmin: next time try making a single point in each video. See the iPhone ads for examples), Garmin is actually emphasizing user benefits instead of just features in their marketing. Garmin gets it; consumers have to be excited about the device for it to succeed.

But I find myself agreeing with John Gruber who noted the sniff of vapor in Garmin's Web marketing materials. The screen shots in the nuviphone media gallery sport far more PhotoShop skill than anything real, since I find it unlikely the nuviphone is going to sport a 793x1400 pixel screen. And unlike the iPhone, no one has actually seen one of these devices in operation. I'm hoping some of my colleagues will see one at 3GSM in Barcelona next week, but I'm willing to bet Garmin will be showing mockups instead of operating phones behind glass as Apple did at its January 2007 launch.

But all that said, I have to agree with one of the commenters on Gizmodo: isn't it interesting that significant mobile device innovation is coming from manufacturers who aren't traditional cell phone makers?

Anywhere consumers comment on the US primary elections by mashup

Google has an amazingly cool mashup that geographically maps consumer Twitter comments on the US elections in real time. They also promise to present real-time election results tonight when the polls close. My biggest surprise watching this mashup was how many comments on the election are coming from other countries like Australia and France. People outside the US are quite interested in our primary results, but those voices get lost through the filter of the conventional media networks. Tools like this make them heard. When I was a kid, TV networks used computers to aggregate election results and predict winners. Now, we use computers to disaggregate results and to give individuals voices that can be seen all over the world. Technology marches on.