(R)Evolution is in the Clouds....

As I stated several weeks ago, there is a certainty for fin serv customers to move to the cloud for most of their mid and back-office operations data needs as well as move as much of their non-trading applications.  Mobility and cloud platforms/technologies are maturing at a rate that is much faster than incumbent application and information vendors can deliver new solutions on their closed, proprietary technologies.

Further, as exchanges and other information creators begin to realize the power of the cloud, it will become imperative for information vendors to react and stay ahead of the trend and differentiate themselves by something other than simply being an information 'aggregator'.  New paradigms are emerging that will apply pressure to entrenched companies and disrupt their businesses. 

Recently, NASDAQ has released a tick-on-demand service through Xignite, which offers simplified access to NASDAQ tick data through a standards-based API.  Xignite, for those who do not know them, are what I consider one of the 'next-gen' information service providers.  The addition of NASDAQ brings the total number up to 33 exchanges or exchange groups, covering Asia, North America and Europe.  In addition, they have connected to other data sources such as Morningstar, Dow Jones, Cantor, Tullett and others to offer a very robust list of information assets.

Unlike traditional vendors, Xignite specializes in 'plug-and-play' data access.  Whereas traditional vendors like Thomson Reuters or Bloomberg have built a desktop business and allowed data access through APIs to be an off-shoot of their core business, Xignite has come without the baggage of a desktop interface.  Preferring to be the plumbing for non-latency sensitive data, Xiginte (and their emerging competitor Flexisphere), have subversively gained traction where the incumbents aren't - data solutions for off-trade floor and corporate web solutions.

This model very much is in line with where the world is moving for non-latency sensitive applications.  Now, an application builder for an iPad has only to connect to the Xignite data cloud and deliver a wide range of content into a highly functional application.  Further, since the incumbents are directly focused on a ground war within the application space, Xignite, through continuing to build an extensive inventory of data assets, could easily become a data-arms dealer to the off-trade floor market, which is approximately a $10 billion business by my estimates.  This does not include other markets where financial data is important and widely used, such as the legal, business/corporate intelligence, etc. and other services such as public and private websites.

The lesson for the incumbents is this - your days are numbered unless you take a swift and painful change of strategy.

In the 80s and 90s you were the only games in town.  You had the technology advantage and you had the scalability to allow niche providers to plug into you and 'advertise' their content under your commercial terms and sometimes draconian restrictions which always favoured you.  Now, technology is cheap and those same, small, niche content owners, (like other industries such as advertising, music and a lesser degree televised programming), now have other means and channels to get to their customers and can interface more directly with them through things like social media.  Cloud-based technologies and services like Amazon or Xignite allow these firms to grant easier access to their information without an intermediary.

Now, to be fair, do I expect the incumbents to disappear overnight or at all - of course not.  They are all multi-billion dollar companies with some very viable businesses.  But there are cracks in each and some markets they serve are changing dramatically right out from under them.  But like Microsoft and Oracle when Salesforce.com finally proved the SaaS/Cloud model, the large vendors will need to pivot and alter their strategy to stay relevant. 

The key point is that for these desktop providers, they need to stop being the very thing they are - a product provider - and become a service provider.

While doable, it also is a great threat to their current economics and revenue.  The question for these providers is: do you have the right people to rebuild and revolutionize your business?  Microsoft had to re-think their very strategy and bring in several new people to redefine what Microsoft was for its customers and its future.  Some stayed, some left but they did change.

Next move is yours gentlemen.....

What I've learned over the last 6 months

With the news of the FCC ending net neutrality, I thought I'd republish something I wrote 4 years ago. 

Enjoy!


Its been a busy 6 months for Cloud computing and in the information business, most notably: Apple's  launch of their iPad and iPhone 4 (including 'Antenna-gate'; Google and Verizon's pitch on Net Neutrality rules; AT&T implementing 'usage-based' charges for data plans; major organizational changes at Thomson Reuters and their launch of Elektron and Eikon; Bloomberg pushing open systems and symbology; Microsoft launching Dallas and Azure; Clare Hart taking over at InfoGroup as they go private; and finally, IDC going private.  Normally, this would make a full year of news.  But what to make of it all?

Here is what I've learned from the first 6+ months of 2010:

1. Distribution Networks are the next battle ground.  While the platform wars are well underway, the more interesting (and possibly destructive battle) is upstream in the delivery of information.  With wireless providers looking to charge for usage over their networks, telcos divided on the Net Neutrality issue and cable providers looking outdated in their models, more and more the issue of bandwidth and guaranteed delivery will dominate the discussion. This means -
2. Google and Apple are becoming (or already are) media companies - and more.  Maybe not in the traditional sense but its happening.  With their approach to collection of content and push to own the distribution (and cut out infrastructure owners like cable, telcos and wireless firms), Google and Apple are by-passing traditional media companies like NBC and News Corp and leapfrogging Cablevision and AT&T.  As a result -
3. Content is (still) King.  Content providers can now selectively pick their distribution network like never before.  Freemium and Premium economic models are gaining prominence allowing the new media companies to garner revenue on both advertising and a toll for leveraging their distribution networks (Apple is the new model for this; cable and satellite, the old model).  Which translates to - 
4. Ecosystems are as or more important than the platform.  Whether its upstream information or downstream applications, the complete value chain offered by the platform mitigates the intrinsic value of the platform.  Why is RIM, the dominate player in the professional smart-phone, market worried?  They have a tenth of the ecosystem of Apple and a fifth of Google's.  As valuable the Blackberry has been for business, unless RIM can build a better ecosystem, they have a real long term issue.  In their favour is -
5. Apple doesn't care about businesses - or large ones anyway.  Apple refuses to go 'up-market' and address the real issues enterprise/large businesses have with Apple's security and 'openness'.  As a result, RIM (or maybe Microsoft or Google) can keep them out. Which is interesting since -
6. Open systems and platforms are in; closed ones are out.  News of Android-based smart-phones overtaking iOS based devices for number 3, (behind Blackberry and Symbian), helps close the deal here on the smart-phone market.  More generally, adoption of cloud platforms such as Salesforce.com, Azure and others are wide-spread among businesses of all sizes - and growing.  And finally - 
7. Social media and networks will be focal point of business for the next 5 years.  Firms are starting to realize nothing drives revenue like an engaged customer and yet few really have engaged customers themselves.  As firms realize these networks change the way they interact with customers from transactional to relationship-based, customers will become partners not dollar signs.

For information companies, the above present a problem.  Most have a closed, proprietary system; have poorly managed their distribution networks (outside of their closed networks); don't use social media/networks as a means to engage with customers; have put more focus on Apple platforms than others; and really haven't fostered the notion of an 'ecosystem' of partners, but a loose confederacy of frenemies.  Many will have to change their approach or will find further pressure on not only revenue growth but maintaining existing revenues.

Given the first part of 2010 and the changes, I can't wait for the rest of the decade to unfold.

As always, comments welcome.

The End of No Software?

The other day, I caught a story how Salesforce.com - the pioneers of No Software and Cloud Computing - are building an app for the iPad and Android devices both expected in 2011.

That's right: the leader of the cult of no software is developing - gasp - a software application.

Clearly I am missing something. Yes I understand how important mobile computing is and the rest of it, however, I am at a loss to understand why Salesforce.com would step out of the cloud and onto terra firma in the world of deployed software. I am wracking my brain to understand why they would do this. Their applications and platform work just as well on Safari and Chrome as they do on IE and Firefox so why divert valuable development resources into building a closed box application on the iPad.

Then it struck me - might some merger or the like happen between Apple and Salesforce.com some time in the very near future?

It makes perfect sense (to me anyway). Salesforce.com are completely complementary to Apple in so many ways and together they are devastating. I'll explain:

Apple has:
1) Great devices
2) Great application platform for mobile computing for consumer apps
3) Great ecosystem of firms building consumer apps
4) Great customer loyalty and numbers
5) Market cap of over $240 billion
6) Strong central leadership and a CEO who is a visionary and thought leader

Apple hasn't:
1) Trust of enterprises/large corporations around security or application development
2) Any real revenue from corporate businesses
3) A clear successor for Steve Jobs (sorry - they don't)

Salesforce.com has:
1) Great application platform trusted by large corporations
2) Great customer loyalty and growth
3) Market cap of just under $12 billion
4) Strong central leadership and a CEO who is a visionary and thought leader

Salesforce.com hasn't:
1) Any consumer-based revenue
2) No device business
3) A tough road to go from $1 billion in revenue to $5 billion as planned

So what if you put these two firms together, what do you have:
1) A firm that can deliver end to end applications - browser or device-based
2) A huge ecosystem of partners building apps for either businesses or consumers
3) A firm ready to merge consumer and corporate apps into one channel
4) Technology trusted by businesses and consumers
5) A firm to really compete with Microsoft and Google and win - big
6) A successor for Steve who is 10 years younger than he is

I might be enjoying the glorious Friday weather too much but this makes way more sense than those Google-Salesforce.com or Oracle-Salesforce.com rumours/stories we've all heard. Imagine - the power of the device leader with the cloud computing leader. Wow.

It would be an absolute game changer for the industry and complete the shift to cloud/mobile computing. Businesses would be able to buy in more heavily into the mobile cloud story with the combined entity. Parker Harris and his team would address any security concerns with the OS and take the Apple productivity tools into their cloud with relative ease (that's my guess). The ecosystem could tap into two channels - consumer and business - and start to develop huge revenues through each.

RIM would be done and really have no choice but to sell to Microsoft to give them a viable device business. Microsoft would need to double-down on Azure and hope their .NET developer community can win out over the Apple OS and Java developer community that the Apple-Salesforce.com entity would carry.

If there is something to this hypothesis, it would be a good year or so away (didn't Salesforce.com say they would have an iPad app by mid-2011) and does assume Mr. Jobs is ready to pull back a from running Apple much like Bill Gates has done with Microsoft. I think Mr. Jobs concern is he has a Steve Ballmer type ready not a Steve Jobs type. No offense to Mr. Ballmer but he isnt in the 'visioning thing'.

Marc Benioff is - big time. There are parallels between Mr. Jobs and Mr. Benioff in that Mr. Benioff worked for a time at Apple, has been the slayer of giants and mover of mountains in leading the cloud computing charge. Mr. Jobs we know has done similar in the mobile space. And both have a passion for getting Microsoft.

What if......

Poisoned Apple?

Sitting here in Times Square between meetings, gazing at the ad on the Nasdaq board for their new iPad app a thought occurred to me - if AT&T has introduced a new 2-tier data plan (which I predicted 6 months ago to my ex-colleagues at Thomson Reuters), won't this have an impact on the usage (and value) of this app?

In looking at the new AT&T models, it appears most users will stay under their $25/month plan - but those numbers are not with devices running multiple apps simultaneously, something only recently can mobile devices do on the AT&T network. The usage described in their press release is very single-threaded and does not factor streaming updates to devices (if it does I missed it) which begs the question I asked my ex-colleagues - if the wireless carriers govern last-mile delivery of information, who holds the power for mobile computing?

Add to it the proposed alliance of over 20 of the largest carriers to build an app platform themselves, have information firms offering apps on the Apple devices jumped the gun? Have they now boxed themselves and have those who have yet to move into mobile computing have an advantage?

Have, as I suggested to my ex-colleagues, info providers made a error in jumping on the Apple bandwagon, only to be hung out by carriers themselves?

I'm sure many will say, no, Apple rules, but Apple has a terrible habit of imploding at their height. I'd argue they are on the verge of doing it again. For example:

- they aggressively push a closed, proprietary platform which they offer at a premium over their competitors

- they aggressively sue competitors or competitor's partners to defend their near-monopoly position

- their strength rests on the harmony of hardware and software

- their products follow a linear path and are not significantly different then their flagship product

Looking at Apple today and Apple of 20+ yrs ago, I see a similar company behaving the same way. Will history repeat? We'll know in 5 years......

Castles Under Siege

As my first post, I have been struggling with where to start. Over the past few weeks, there have been some interesting events inside - and outside - the industry which I believe will change the way information providers operate to remain successful.

Inside the industry, the biggest move arguably is the announcement of Bloomberg to not only allow freer use of their proprietary symbology by industry participants but also their agreement with the NYSE/Euronext for the exchange group to use the BSYM, effectively replacing the exchange's own ticker symbol for datafeeds. These moves put Bloomberg at the forefront for the effort standardize symbology that the industry has been requesting for decades. Could BSYM be that industry standard?

Staying with the Bloomberg theme, Google has hired ex-Bloomberg FX head, Philip Brittan to run their Google Finance franchise. This would seem to indicate Google's desire to revamp their finance portal and 'professionalize' the experience. As well, Bloomberg lured a former senior Product Manager from Google to the Bloomberg multimedia team to drive Bloomberg's web, TV and mobile properties.

Could a 'trade' of sorts occurred between these two firms? Who knows, but it does seem to foretell of a possible deal between Bloomberg and Google for Bloomberg news through Google. Earlier this year, Dow Jones entered into a limited exclusivity arrangement with Microsoft's Bing search engine. In this action, Dow Jones also 'decoupled' themselves from Google's search engines. A deal by Google for the same level of exclusivity with Bloomberg news makes a lot of sense for obvious reasons - especially if Google is redoing their finance page.

Dow Jones has been busy lately, not only tying into the Bing search engine but also securing a deal with Factset to deliver its DJ Investment Banking product through the Factset terminal. This deal makes sense too given after tying to push its own desktop properties, it appears Dow Jones is focusing on its core assets - news and information - and start using channels to generate revenue.

For Factset, they have had some success in the Investment Banking segment but nowhere near the same success they had in the Investment Management market. This deal with Dow Jones strengthens them against both Capital IQ and Thomson Reuters and could lead to strong growth. My sense is neither Factset nor Dow Jones are done and they will be active in the coming months. What's driving these actions I believe is the current siege on their fortified walled gardens from the trends in mobile computing and users wanting freer access to information.

Apple's iPhone and iPad successes are based on one simple fact - people want simple and easy way to access and use information that is important to them right now. The Apple app ecosystem (outside of the games) is a list of information providers that have used Apple's platform, interface and customer network to generate millions for themselves and Apple. Everything from wine ratings, to restaurant guides, to movie listings, to books and newspapers are all applications driven by information. Dow Jones and Bloomberg I believe clearly understand that putting their information behind high walls cuts them off from the far larger and potentially lucrative handset/mobile market. They seem to understand that the rules have changed. The see smaller information aggregators making headway into these markets at their expense. Through innovative partnerships, clear commercial strategy around free and premium, these two firms are adapting to the changes in user behaviours and are seizing the opportunities mobile computing offers them.

It remains to be seen if this will pan out in the longer term for these firm since there is a catch - a trojan horse if you will - in mobile computing. More on that my next post....