At Last, the Last Act for BlackBerry?

Interim CEO John S. Chen
Interim CEO John S. Chen

This may be the exception that proves Betteridge’s Law. ((The law, named for Ian Betteridge, states that any headlong ending in a question mark can be answered no.)) It’s too soon to put a number on the days remaining to the once high flying BlackBerry, but the latest financial developments suggest that the sand is running out.

To recap: Back in September, a major shareholder, Fairfax Financial Holdings, offered to take BlackBerry private for $9 a share. That deal never got beyond a letter of intent and today it fell apart. Instead, BlackBerry is issuing $1 billion (U.S.) in convertible debt securities. Fairfax will take $250 million and plans to place the other $750 million privately. The securities have a 6% interest rate and a $10 conversion price, which becomes worth anything only if shares rise nearly 50% from their current price of $6.55. In addition, Thorsten Heins is out after a couple of miserable years as CEO. John S. Chen, former CEO of Sybase, will take over as executive chairman and interim CEO.

The big question is just what this deal does for BlackBerry. The company has been exploring “strategic options” for months, but doesn’t seem to have found any. BlackBerry doesn’t seem to need the cash urgently. It burned through $368 billion in cash in the quarter ended  Aug. 31 but still had $1.2 billion is cash and equivalents on hand. The company’s plan to reduce operating costs by 50% by February should slow the hemorrhage, though we won’t know until year-end whether it suffered a big drain on cash from massive layoffs in the current quarter.[pullquote]If management had come up with a compelling turnaround plan, firing the CEO would be a very strange way to begin implementing it.[/pullquote]

It seems unlikely that this new financing can do more than delay the inevitable. The company has been trying to sell itself for months with no takers, at least not at a price that the board would accept. If management had come up with a compelling turnaround plan, firing the CEO would be a very strange way to begin implementing it. BlackBerry’s relevance to the smartphone market is trickling away, day by day.

The remaining question is what’s in this deal for Fairfax. Maybe it’s CEO, Prem Watsa, is a true believer who thinks BlackBerry is on the verge of a comeback. The financing is structured in such a way that Fairfax and whomever else it gets to take the BlackBerry debt stand to make a lot of money out of even a modest recovery, especially if the stack price tops $10. But there are less happy possibilities. Writing in the New York Times DealBook blog, Steven M. Davidoff speculates it may have more to do with Fairfax’s standing in an eventual BlackBerry bankruptcy:

One way to look at this investment is that it positions Fairfax and the other investors for a BlackBerry bankruptcy. BlackBerry has no long-term debt on its balance sheet, so this investment would now jump Fairfax ahead of the equity line for controlling BlackBerry in any bankruptcy proceeding. And remember that BlackBerry is a Canadian company, so the bankruptcy would be there. Canadian rules are different than those of the United States, but they do allow the creditors to have a substantial say in any restructuring plan, including approving it.

It’s been a long, strange trip for BlackBerry. But the end of the line is getting close.

 

 

 

A Note To Commenters

At Tech.pinions we value and encourage spirited debate in our comments. You can argue with our writers and you can argue with other commenters, even vociferously. But we have a very low tolerance for personal insults.

The fastest way for your comment to end up in the bit bucket us to call someone, or even a company, “gay.” In addition to making you sound like Eric Cartman, it gets your comment bounced. Avoid the use of “fanboy” or “fanboi” as well. Even if you are using it without accusing someone of being one, or in jest, it is going to trigger a filter and, at the least, delay posting of your comment until one of the moderators gets around to approving it.

Above all, just be civil to one another and behave like adults.

 

 

 

 

J.D. Power Explains Its Inscrutable Tablet Rankings

jdpower-tabletJ.D. Power caused a bit of a stir today when it put out a new survey in which Samsung had displaced Apple as the leader in U.S. tablet satisfaction. While the headline of the McGraw-Hill Financial unit’s press release declared “Samsung Ranks Highest in Overall Tablet Customer  Satisfaction with Tablet Devices,” the featured table (above) seemed to tell a different story: Apple outscored Samsung in every category except cost.

It gets even stranger when you drill down a bit. J.D. Power weights each of the categories for importance: Performance 0.26, ease of use 0.22, physical design 0.19, features 0.17, and cost 0.16. The unweighted average of Apple’s scores was 4.4 to Samsung’s 3.6. Weighted, Apple outscored Samsung 4.52. to 3.52.

So how did Samsung come out on top? According to a J.D. Power spokesperson, the flashy “Power Circles” chart doesn’t really have much to do with the overall satisfaction. Rather than try to explain this, here’s the relevant section of the email I received in response to my inquiry:

Thank you for your interest in the  2013 U.S. Tablet Satisfaction Study–Volume 2. It’s important to note that award is given to the brand that has the highest overall index score, not the company with the most Power Circles.  In this study, the index score is comprised of customer’s ratings of five key dimensions or factors.

The Power Circles Rankings are something we provide to consumers to understand the relative rank of brands within each of these five dimensions. The Power Circle Rankings  denote the brand that has the highest score within each factor regardless of how much higher their score is.

In the case of Apple in the tablet study, although it did score higher on four out of five factors measured, its score was only marginally better than Samsung’s.  At the same time, however, Apple’s score on cost was significantly lower than that of all other brands.  In comparison Apple’s ratings on cost was more than 100 points lower than Samsung’s.  As such, even though its ratings on other factor was slightly higher than Samsung’s,  Apple’s performance on cost resulted in an overall lower score than Samsung.

In this cost-conscious environment, cost is a key factor in many products purchase and services they use.  Tablets are no exception, where cost is a key driver of the overall customer experience with their device. Although “cost” has the lowest weight among the five factors that drive satisfaction, the notable difference between Samsung’s and Apple’s score in the cost factor was enough for Samsung to rank highest in the study.

Mathematically, this does’t make much sense. Apple outscored Samsung by two “power circles” in each of two categories with a combined weight of 0.48 and by one circle in each of two categories with a combined weight of  0.36. Samsung outscored Apple in one category with a weight of 0.16. Unless the score difference between two circles and four is much, much bigger than the difference between three and five–in which case the whole circles chart is grievously misleading–there is no way Apple’s loss on cost could outweigh it winning in the four other, more heavily weighted, categories.

J.D. Power does not reveal the raw scores by category, but gives Samsung’s overall satisfaction score as 835 (out of 1000) and Apple’s as 833. Curiously, Amazon and Asus, which received only three circles for overall satisfaction, had scores of 826 and 821–only a 1.8% spread between first and fourth place. Asus–two circles–was a fairly distant fifth at 781.

I don’t put much stock in J.D. Power ratings, but they do get used heavily in advertising by whatever company comes out on top. If people pay attention to this sort of “data,” they should be getting more transparent methodology.

 

Why Motorola Won’t Offer a Modular Phone

Project Ara photo (Motorola Mobility)

Motorola created a lot of buzz this week with its announcement of Project Ara, a sort of Lego kit mobile phone that would allow users to pick and choose components. I know this is going to be a disappointment to the folks who build great things from Arduino boards and Raspberry Pi computers, but Project Ara is never going to happen, at least not as a commercial product.

The modular phone is an appealing idea, but there are so many things wrong with it in practice that it’s hard to know where to start. So I’ll just list a few:

Integration. When you are building a desktop PC, you can afford to be sloppy in the efficiency of the design and make of for its shortcomings with pure power, which makes the traditional open design of desktops possible. Laptops offer less leeway, and handhelds provide no tolerance at all. Today’s mobiles are masterpieces of integration. Hardware components are carefully selected and the software painstakingly optimized so that everything works together with maximum efficiency.[pullquote]Today’s mobiles are masterpieces of integration. Hardware components are carefully selected and the software painstakingly optimized so that everything works together with maximum efficiency.[/pullquote]

The iPhone is probably the extreme example of this. When Apple started making its own system-on-chip processors, it eliminated all the components from the ARM reference designs that it would not be using. No SD slot, so no need for an SD slot memory controller. Trimming components translates to a smaller die size and lower power consumption; every milliwatt counts.

Modular design flies in the face of this optimization. The software and SoC have to be designed to accept whatever hardware the user chooses. This means that the operating system cannot be optimized specifically for the hardware in use, a process that all good Android OEMs have to go through. And lack of optimization is going to carry a price in performance, battery life, or both.

Size. Modular systems are necessarily bigger than integrated ones. Modules have to be at least partially self-contained and they must have a way to hook up with each other. Enclosures and connectors add bulk and weight. Just making the battery removable adds a couple of millimeters to the thickness of a handset. A modular phone is going to be much bigger than an integrated phone of the same capabilities.

Physical Integrity. I love Lego. It can be used to built fabulous models. But they are models, not the real things as you find out if you ever drop one. It would be very hard to design any sort of snap-together modular phone that provides the sort of structural integrity and durability we expect for mobile devices. You can improve things by increasing the strength of the “endo”  and connectors that hold it all together and, but again you will pay a penalty in size and weight.

I find the idea that there would be much of a market for a modular phone a dubious one. Most people accept the idea that the engineers and designers responsible for handsets have a better idea of how the choose components and but them together than the average user. But even for the makers who really want the freedom to roll their own designs, the modular phone just has too many disadvantages to ever be practical.

iWork vs. Office: Apple Chooses, Microsoft Faces a Dilemma

iWork photos (Apple)

Apple took a big step last week when it made its iWorks apps–Pages, Numbers, and Keynote–free to buyers of new iPhones, iPads, and Macs. But the redesign of the programs themselves may have been a bigger, if less commented-upon move. Apple has finally decided what it wants iWork to be, and the decision should cause some real unease at Microsoft.

Apple has always been ambivalent about these productivity apps, first announced for the Mac in 2005. On the one hand, it seemed to want to challenge Microsoft Office. On the other, it wanted them to be simpler tools for the rest of us. As is often the case with indecision, Apple landed squarely between stools. Although the apps, particularly the Keynote presentation program, were embraced by some professionals, they never posed a serious threat to the domination of Office, even on the Mac, in business. At the same time, the desktop programs, which were last updated in 2009, were more complex than necessary for most consumers.

The rise of the iPad forced a choice. Apple knows that its customers are increasingly using iPad as primary computing devices, so it is promoting the use of its tablets to create documents, not just look at them or edit them lightly. To promote this, it has redesigned both the OS X and iOS versions of the software to be as alike as possible in both appearance and function.

Pages Mac and iPad screenshots

A Rich UI for the Mac. The apps are still significantly different. The OS X version has a considerably richer user interface that takes advantage of the larger displays and pixel-precise selection available on Macs. The only real storage option available on the iPad is iCloud, though that does make syncing documents between devices simple (The real time updating demonstrated in the Apple keynote was an illusion; in the real world, it takes up to a few minutes for documents to sync across the internet.) And the Mac, you has access to all the fonts installed on your system, but if you go beyond a core selection, substitute fonts will be used on the iPad (I’m assuming that no one wants to do much of this on an iPhone) because on iOS, the fonts you get are the fonts you have. But in many key ways, the apps are remarkably alike on different types of devices.

Of course, the price paid for this is a considerable simplification of the OS X versions. This set off predictable protests from the vocal minority of professional users who had come to depend heavily on the advanced features. Apple support forums filled with complaints, especially about Pages. (Keynote, perhaps because it is widely used internally to create Apple presentations, underwent less change. No one seems to much care about Numbers.) Seth Godin, who understands why Apple made the choices it did, complains, “Features and the goal of building for a craftsman are exchanged for the cross-platform ease and gimcracks that will please a crowd happy enough with free.”

Upsetting the faithful. It is unfortunate that in simplifying iWork, Apple has upset some of its oldest, loyalist customers, who may now need another program for creating complex documents (and it will be interesting to see where they turn, but that’s another article.) Apple wants iWorks to be software for the mass market, a customer base that increasingly wants to create on their iPads. For most of them, iWork is good enough on the Mac and the best thing available on the iPad. Consumers who don’t need to create (or handle; iWork apps can read Office document formats, but the conversions are often imperfect) large or complex documents or formula- and macro-laden spreadsheets don’t need Office. And if they want to switch freely between Macs and iPads, they don’t want it.

Microsoft, meanwhile, doggedly refuses to get it. In a blog post following the Apple announcement, communications chief Frank Shaw wrote:

And so it’s not surprising that we see other folks now talking about how much “work” you can get done on their devices. Adding watered down productivity apps. Bolting on aftermarket input devices. All in an effort to convince people that their entertainment devices are really work machines.

In that spirit, Apple announced yesterday that they were dropping their fees on their “iWork” suite of apps. Now, since iWork has never gotten much traction, and was already priced like an afterthought, it’s hardly that surprising or significant a move. And it doesn’t change the fact that it’s much harder to get work done on a device that lacks precision input and a desktop for true side-by-side multitasking.

As Harry C. Marks wrote in a Tech.pinions post yesterday, Microsoft has long avoided making hard choices between consumers and enterprise, between tablets and traditional PCs. The result is “no compromises” hardware and software that, in fact, represent the most dreadful compromise of all. So far, Office has remained true to its heritage.  It exists primarily to serve enterprise and government users, who are dependent on such features as very sophisticated, fine-grained change tracking and citations. But even the touch-enhanced Office 2013 remains all but unusable on a pure touchscreen tablet.

Choices for Office. Microsoft has promised touch-first versions of Office apps next year for both Windows and iOS and Android tablets, and it will be very interesting to see what choices they make. The complex, multilayered interface has to be simplified drastically, and unless Microsoft has found some until-now unimagined UI trick, that means that a lot of features are going to have to be stripped out.

But Microsoft has far fewer degrees of freedom than Apple. For one thing, Office is crucial to the company’s continued prosperity, while iWorks wasn’t even a footnote for Apple. Apple could afford to throw iWork power users overboard because, despite their passion, their numbers are small, while the users of advanced Office features are the heart of the market. Microsoft can afford to lose the Office consumer market, but it cannot ignore the growing use of tablets, most of them Apple’s, in the enterprise.

Will a redesigned Office be simple enough to work well in a touch-only environment? Will it still be Office in more than name? Apple has made its choice, though, in fairness, it wasn’t a terribly hard one. Microsoft has no easy way out of its dilemma.

 

Obamacare: Where Did 500 Million Lines of Code Come From?

Healthcare.gov screenshot

Anyone who knows even a little about enterprise software has to be horrified by the events surrounding the rollout of the Affordable Care Act. Not so much the obvious flaws in the enrollment process, though they are bad enough, but but the inane statements of politicians, the glaring lack of knowledge in both the tech and general media, and even the statements of a lot of people who should know better.

An example: It has now become commonly accepted knowledge that that Healthcare.gov consists of 500 million lines of code. And where does this wisdom come from?Digging into its origin, it appears the first reference was in an Oct. 20 New York Times article whose last paragraph read:

According to one specialist, the Web site contains about 500 million lines of software code. By comparison, a large bank’s computer system is typically about one-fifth that size.

No indications of who that specialist was, no indication of his or her credentials, and no reason why anonymity was granted for uttering what is presented as a statement of fact. And the reader is given no explanation of why a bank computer system is a relevant standard of comparison. (The same article cited a “specialist”–not clear if it was the same one–as saying that 5 million lines of code might need to be rewritten, with an equal lack of provenance.)

Meaningless metrics. In fact, “lines of code” is meaningless as a measure of complexity or anything else. For example, this is a completely valid, ((Assuming that there’s a matching { somewhere.)) and common, line of code in the C language:

}

On the other hand, a sufficiently clever Perl programmer could probably compress a million lines of code into a single incomprehensible and totally undebuggable, but functional, line. To a considerable extent, the number of lines of code required for a task is a function of the programming language used and the style of the coder as much as anything else. But as a general rule, using more lines than fewer for a given task produces code that that easier to read and easier to debug, especially if a lot of those lines are comments explaining how the code works.

Of course, the argument about the number of lines was high-level debate compared to Texas Republican Joe Barton’s attack on Helathcare.gov’s alleged assault on privacy. At a hearing Oct. 25, Barton got extremely exercised about “code” that stated that users of the site had “no reasonable expectation of privacy.” Of course, if Barton (or his staff) actually knew how to read HTML, they would have realized that the offending line was in a block of code that had been commented out and thus was of no significance. (For the curious, this slightly blurry PDF of the code shows comment markers at lines 1406 and 1411.)

Was a waterfall to blame? One of the stranger analyses of Healthcare.gov’s woes blames the use of “waterfall” rather than “agile” development. Agile and waterfall are two different approaches to organizing major software projects, and their devotees can argue their relative virtues with the fervor of religious fanatics. But no one has ever demonstrated the superiority of one to the other in all cases and  no one, including developer Larry Fitzpatrick in the cited article, has shown that waterfall was responsible for the problems or even that it was the technique used.

Instead of a lot of random speculation, we could use some serious investigation of what really happened in the development of Healthcare.gov. This isn’t going to come from politicians, who are more interested in scoring points than fixing anything, but it might come from some hard journalistic work.

I’ll throw out my own question. An article by Sarah Kliff of The Washington Post (her expertise is healthcare, not tech, but she has been doing by far the best coverage of Healthcare.gov) explains the error-ridden process by which applicant information is transferred from the government to insurance companies. The key is a standard insurance industry form called an 834 that is transmitted using an antiquated technique called electronic document interchange. Why was the system based on EDI rather then the current approach of storing the data in XML files and transferring it via an API? Was it the old fashioned government? Or was EDI all the insurance companies could handle (the same process is widely used to communicate between employers and insurance companies)? Might not Healthcare.gov have presented an opportunity to modernize the process rather than enshrine early 1990s technology?

This sort of question, not random speculation, is what analysis of the Obamacare mess should be focusing on.

 

 

A Better iCloud: Missing in Action

icloud

If anyone mentioned iCloud at Apple’s announcement event yesterday, it went by so quickly that I missed it. And that means that a glaring hole will remain in its otherwise strong ecosystem for the foreseeable future.

iCloud does a few things reasonably well, notably syncing contacts and calendar among iPhones, iPads, Macs, and to a limited extent, Windows. It also provides a clunky conduit for moving documents created in Pages, Numbers, and Keynote among devices, along with files for some third-party offerings whose developers have found a way to work with the baroque iCloud APIs.

But this leaves Apple way behind the competition in the increasingly important area of cloud services. I use SugarSync to make sure that important files are available on all my documents. I use DropBox to share files among my devices and, on a very selective basis, with third parties. I’m an officer of a non-profit that runs on Google Apps and we use Google Drive to share documents all the time. And I make occasional use of Microsoft SkyDrive and Amazon Cloud. All of these services are more comprehensive and useful than iCloud, which I is relegate to calendar and contact sync and Photo Stream.

iCloud’s 5 gigabytes of free storage is also relatively stingy compared with SkyDrive’s 7 GB and Google Drive’s 15. Using iCloud for music storage is essentially impossible without a paid account unless you have a really small music collection. And the fact that you cannot use it to store arbitrary file types severely limits its usefulness.

At a time when  Apple is both beefing up its key iOS and Mac apps and driving their price down to free, its failure to provide a better–and cheaper–iCloud remains a strange anomaly.

 

 

Apple Drives Consumer Software Prices to Zero

iLife screenshot

Oct. 22, was not a good day to be in the consumer software business.

In addition to a slew of new iPads and Macs, Apple announced the avaibility of new versions of some key software offerings. Mavericks, the new version of Mac OS X: free. iLife, the suite of media apps for Macs and iOS: free. iWork, the suite of productivity apps for Mac and iOS: free.

If your business model depends on selling software, the only saving grace is that these applications run only on Apple hardware. iWork and iLife have no real equivalent in the Windows world, but for contrast, upgrading a Windows 7 machine to Windows 8.1 (a bad idea for reasons unrelated to price, but that’s another story) will cost at least $70.

Apple did not slash software prices to zero to discomfort Microsoft; Apple doesn’t much care about Microsoft these days. Rather it is a solidification of a business model that Apple has been developing for years. ((In the past, Apple has always charged at least a nominal amount for major OS X upgrades. Its switch in policy was helped by a change in accounting rules. In the past, accounting rules required that companies charge for significant upgrades of built-in software unless the manufacturer had deferred recognition of some revenue at the time of sale. But a change in Financial Standards Accounting Board rules let Apple give Mavericks away even though it had not deferred revenue. I’m indebted to Glenn Fleishman for pointing this out to me.)) It earns hefty margins on hardware and uses inexpensive, and now free, software to attract consumers to the ecosystem. (Note that this is purely a consumer play; Apple has no compunction about charging for professional products such as Final Cut and Aperture.)

The impact of free iWork will be particularly interesting. These are all the productivity apps that most consumers and many small businesses need. Pages, Numbers, and Keynote do not have the power, flexibility, or complexity of Word, Excel, and PowerPoint. Features such as edit tracking and complex spreadsheet automation that corporate users find indispensable in Word and Excel offer little or nothing to home users or students. It’s difficult for me to see what value consumers will see in Microsoft Office for the Mac, which Microsoft is trying to sell as part of a $99 a year Office 360 household solution.[pullquote]While Apple may ignore Microsoft, Microsoft cannot afford to ignore Apple.[/pullquote]

While Apple may ignore Microsoft, Microsoft cannot afford to ignore Apple. iWorks offers a “good enough” productivity solution for iPad users. Microsoft, which cannot use hardware profits to subsidize free software, throws in key Office 2013 components–Word, Excel, PowerPoint, and Outlook–on its Surface 2 (the Windows RT 8.1 version.) But these are the standard Desktop versions and they are all but unusable without a keyboard and mouse. The iWork counterparts are stripped down, but are designed to be used on touch-interface tablets (though, admittedly, a keyboard is a big help if you are doing anything more than light editing of existing documents.)

We don’t know yet whether the Surface 2 will sell better than its ill-fated predecessor. But if Microsoft intends to continue using Office as a value proposition for RT table, it will have to redouble its efforts to produce true tablet versions. Microsoft is expected to offer new touch-first Office products next year, but so far has said little about their functionality or feature set and has yet to give a firm release date. Apple’s move just ups the pressure on the already deeply troubled RT effort. (Windows 8 tablets are a somewhat different matter, but I believe these are being marketed, and used, primarily as very light laptops rather than as true tablets.

Apple software policies will probably have little near-term effect on Microsoft’s corporate business, where it has been successfully migrating customers toward software subscription models. Long term, however,the pressure on prices can only be downward.

Of course, Microsoft is not the only competitor affected by Apple’s moves. The price of consumer software has already been sliding toward zero, with publishers relying more and more on in-app purchases and associated services for monetization. The trend is most advanced on tablets and smartphones, but has been spreading to traditional PCs since the advent of the Mac and Windows app stores. Here, too, Apple has upped the pressure.

Why Silicon Valley Can’t Fix Healthcare.gov

Healthcare.gov screenshot

Senator John McCain is hardly a darling of the tech community. But he expressed a sentiment widespread among techies when he said of the woes of the Obamacare enrollment process: “Send Air Force One out to Silicon Valley, load it up with smart people, bring them back to Washington and fix this problem.” Would that it were that simple.

Silicon Valley is, or course, full of many of the best software engineers in the world. But the odds that they could quickly rebuild a complex government system are close to nil. Let me say that I have a strong belief that the problems of Healthcare.gov will be dealt with in time for people to sign up by the yearend enrollment deadline (along with the phone enrollments that President Obama is promoting in lieu of the semi-functional web site.). Any problem that time, money, and skill can fix will be fixed. It may not be perfect, but it will be a lot better. But understanding why Silicon Valley doesn’t have the answer requires knowing something about legacy government IT.

A crew of crack HTML coders could undoubtedly do wonders for Healthcare.gov’s clunky web front end. But that’s not where the real problems are. The enrollment process set up by the Affordable Care Act is excruciatingly complex. The Department of Health & Human Services runs the central system. To verify all types of eligibility, its computers must check citizenship status with Citizenship & Immigration Services (Homeland Security), ascertain income from the Internal Revenue Service (Treasury), and check Medicare and Medicaid status with the Centers for Medicare & Medicaid Services (another part of HHS.)[pullquote]A crew of crack HTML coders could undoubtedly do wonders for Healthcare.gov’s clunky web front end. But that’s not where the real problems are.[/pullquote]

All of the backend systems involved in this process can politely be described as legacy. And by that I don’t mean just that they run on mainframes. These systems depend on a lot of very old, often poorly documented code (some of it COBOL) and some use antiquated technologies such as IBM’s Systems Network Architecture. And they were not designed to communicate with each other and do it badly if at all. CMS alone has multiple incompatible databases, and that’s before you consider the 50 state systems that hold Medicaid data.

This, to say the least, is not Silicon Valley’s métier. If the problems are to be fixed, the job will end up being done by the people who built Healthcare.gov and those who are responsible for maintaining (and often running) its constituent systems. This means a lot of the work will go to traditional government IT contractors such as CGI Group (the prime contractor on the front end), IBM, Accenture, Lockheed-Martin Information Systems, and CSC.

The good news is that despite the tendency to disparage these old fogeys, there actually is plenty of engineering talent out there. Healthcare.gov needs a lot of help but it will come not from Valley hotshots whose skills run to HTML 5 and Amazon Web Services but to engineers who know how to run a rigorous testing program on a complex, heterogeneous system and quickly fix the problems that turn up.

Of course this should all have been done before launch and the public should not have been used as guinea pigs for user acceptance testing. But it wasn’t, and that’s water under the bridge. The job is to get it fixed now.

Two Cheers for IT

In a new post, my colleague JohnKirk gives IT departments a well-deserved dressing down. I actually agree with everything he says, but it isn’t quite the whole story.

I have no love for IT. During the many years I worked for BusinessWeek, I had a number of epic battles with IT, an operation that I became convinced was dedicated to making sure that I could not do my job. Yet I have also learned a great deal about the constraints that corporate IT departments operate under.

Two key words are missing from John’s piece: “security” and “compliance.” IT managers are responsible for the security of systems and networks and the protection of data stored on them. They are also responsible for making sure that systems meet a large number of regulatory requirements, ranging from protecting the integrity of financial data to email retention policies.

It is unfortunate, but part of the human nature that John talks about, that these requirements have a tendency to make IT managers excessively rigid. If they have something they think is working (they are sometimes wrong about this, but that’s another story) they become extremely reluctant to change it, even if there are better alternatives. Their risk aversion also makes them averse to the introduction of new  technologies.

There’s a simple explanation for IT’s focus on things that are measurable. The metrics they insist on are the metrics by which they and their departments are judged. When it’s time for the annual budget or performance review, “My costs went up 10% but I have really happy users” doesn’t cut it. Even technology changes that improve productivity of line operations are unlikely to do IT  much good because the benefit ends up on someone else’s P&L.

A great example of this was when computer makers first started paying attention to energy consumption. It was fairly easy to sell power-saving servers to IT,but very hard to get companies to pay anything for power savings on the desktop. The reason: IT paid the electricity bill for the data center, but line operations paid for desktop power. It was only when corporations made energy savings and objective in itself that power-thrifty desktops became attractive.

In other words, IT managers sometimes make lousy decisions because they are given lousy incentives. And that’s a problem above the pay grade of even the CIO.

Tablets, Phablets, and Phones: Microsoft’s Confusion Continues

Windows Phone 8 with expanded display (Microsoft)An update to Windows Phone 8, due to begin rolling out soon, has some good news for fans of really big phones. Devices with 1920×1080 pixel displays will get an assortment of new user interface features, including the ability to display three columns of tiles on the home screen. The stated goal is to provide better support for screens up to six inches, a device type that has, alas, become known as a phablet.

This will be a boost for companies, most likely Microsoft’s soon-to-be Nokia subsidiary, that want to make big Windows Phones–or small tablets–to compete with the Samsung Note, a device that has won surprising success, especially in Asian markets. But it reveals the befuddlement about tablets that continues to cripple Microsoft’s efforts to compete.

I have to confess to a strong bias. Ever since Microsoft began to discuss its plans for Windows Phone and Windows 8, I have been arguing that they have been doing it all wrong. Instead of trying to somehow make Windows, an operating system developed for the desktop and with desktop deep in its code and DNA, work on mobile devices, it should have built up from a mobile phone OS, something it already had in Windows Phone.

When Apple designed the iPad,  it did not try to cram its desktop OS X into it. Instead, it went with a version of iOS, a lean operating system designed to the demands and constraints of mobile devices. (iOS and OS X, like Windows Phone and Windows 8, share a number of core components and development tools. But they remain distinct operating systems.)

Microsoft tablets, both its own Surfaces and those from third parties and both those running Windows 8 and Windows RT, have been hobbled by software that just doesn’t fit touch devices very well. The upcoming Windows 8.1 improves matters by reducing the frequency with which users have to resort to the traditional Windows Desktop UI, but it can’t change the fact that this is an operating system with mice and keyboards and a traditional desktop file system at its heart, with a lot of touch features bolted on. This feeling is exacerbated by the fact that the features Microsoft counts on to distinguish its tablets, such as keyboard in the ability to run Desktop Office, define them as ultralight PCs, not true tablets.

The enhancements to Windows Phone only confuse things further. It is entirely possible that coming months will see Windows Phones with 6″ displays next to Windows 8 or Windows RT tablets with 7″ screens. For devices this close in size to be running different and incompatible operating systems is a recipe to deepen the bafflement of customers, OEMs, and software developers.[pullquote]It’s remarkable that 3 1/2 years since the introduction of the iPad, only apple really seems to understand what tablets are and how they are used. [/pullquote]

It’s remarkable that 3 1/2 years since the introduction of the iPad, only apple really seems to understand what tablets are and how they are used. To Google, an Android tablet is a great big phone without voice capability. Although there are rumblings that this is about to change, there is still no way to distinguish phone apps from tablet-optimized apps in the Play store, something Apple took care of when it shipped the first iPad. And to Microsoft, a tablet is just a laptop with a detachable keyboard. I have Apple, Windows, and Android tablets and the iPad gets used all the time, while the Windows and Android version get picked up when I need to check a feature or evaluate an app.

Tim Bajarin has a post (for Tech.pinions Insiders) speculating on the possibility that Apple might build a larger iPad that would be something of an iPad-Mac hybrid. I’m dubious, but I am convinced that Apple would only do it if it can devise a software package that makes sense for its intended uses. When Apple introduced the iPad, it had no way of knowing how big a success it would become, but Steve Jobs perfectly articulated its use case when he said the Macs and PCs were trucks and the iPad was a car.

There’s still no evidence that Microsoft has figured on how the uses of laptops, tablets, and phones differ. And until it does, it will continue to struggle.

 

 

 

Let’s Stop Talking About Winners and Losers

No winners or losers

Enough already. The debate over Android, iPhone,  and occasionally Windows Phone as winners and losers in the smartphone market, being pursued with vigor in the comments  at Tech.pinions as well as nearly  everywhere else in the tech world, has become a hopelessly sterile argument. Worse, the whole discussion is based on the incorrect premise that someone must win and someone must lose,  with the loser doomed to shrivel into insignificance.

This paradigm seems to date back to the turn-of-the-21st-century tenet that technology markets, unlike the markets for anything else, were winner-take-all. This assumption was based on a belief in network effects: The value of a device–a PC in those days–depended on compatibility with like devices. Once a platform had achieved critical mass, it’s rivals were doomed because everyone would want to move to the dominant platform.

Fundamental flaws. This analysis, which continues to shape how we look at markets today, was fundamentally flawed in two ways. First, its bedrock assumption that Microsoft’s Windows had defeated Apple’s Macintosh was simply wrong. Second, it turned out that the platform that really mattered wasn’t the hardware or the operating system, but the internet, which made most compatibility issued go away as it matured.

Let’s look first at what actually happened in the PC market. From the day that the IBM PC overtook the Apple ][, Microsoft software dominated the market. The Macintosh, introduced in 1984, never challenged MS-DOS or Windows for dominance. But Apple never lost. Even through the second half of the 1990s, when Apple was turning out thoroughly mediocre products and was saddled with an increasingly obsolete operating system that it could not overhaul successfully, the Macintosh hung on to its most critical markets. The only time actual failure was a possibility was in 1997, when the company was in danger of running out of cash. A timely investment–more a bailout of sorts–from Microsoft and the introduction of the revolutionary iMac by the returned Steve Jobs put Apple back on its feet and prepared the Mac for its revival in the new century.[pullquote]Today the Mac, once written off as a loser,  totally dominates the high–and profitable–end of a shrinking PC market.[/pullquote]

Other rivals to Microsoft did indeed lose: Novell’s DR-DOS and IBM’s OS/2 operating systems disappeared, along with Netware, Novell’s once-dominant office networking system. But Apple hung on. Today the Mac, once written off as a loser,  totally dominates the high–and profitable–end of a shrinking PC market. Meanwhile, the dominance of the Internet means that the choice of platform is almost entirely a matter of preference, not necessity. Yes, there are some applications that are only available on one platform or the other, but these are mostly niche products and probably have little affect on share, especially among consumers. (I suppose there are some customers who will choose a Mac just to get
Safari or Windows just to get Internet Explorer, but there can’t be many of them.)

No clear winner. The phone business is even less likely to yield a clear winner. Without going over market-share numbers that have already been discussed ad nauseum, I think we can all agree that the iPhone and Android both hold substantial share in all important markets and that both are likely to continue to be important players. As in the case of PCs, your choice comes down to a matter of preference; whether an iPhone 5s or a Samsung Galaxy S 4 is “better” depends on what you want. Unless you depend on a app that is available only in iOS or only in Android, it is unlikely that either would fail to handle any conceivable task.

Phone platforms do fail. Palm died with the help of its would-be savior, Hewlett-Packard. BlackBerry appears to be headed for breakup or liquidation; at best, it appears unlikely to hang on as a hardware platform. Nokia failed to survive as an independent software platform or, ultimately, as a handset maker, but the strength of its brand is giving Windows Phone a fighting chance, especially in Europe.

Analysis of market trends for mobile platforms, especially iOS and Android, is important and useful. But we have to stop thinking about this as a war that one or the other will win and that the loser will ultimately go away. The simply is no reason to believe that markets work that way.

 

 

 

The Do-It-Yourself Cloud

Photo of WD MyCloud (Western Digital) My working life depends on cloud storage. I regularly work on two desktops (Windows and an iMac), a MacBook Air, an iPad, and an iPhone, plus whatever I may be evaluating at any given time. I want my critical content–documents, spreadsheets, slide shows, sometimes audio or video files–to be available on whatever device I happen to be using at the moment. Keeping the data in the cloud makes that possible.

Yet the cloud has its limitations. While cloud providers, including Amazon, Dropbox, Google, and Microsoft ((I am not including Apple’s iCloud in this list because I find it too restrictive in terms of the devices and file types it supports.)) offer varying amount of free storage up to 15 GB, that can quickly be exhausted, especially if you store a lot of audio, video, or photos. If you are using the cloud to share content within your home or small business, file transfers are limited by the speed of the internet, which can become a serious issue with large files. Finally, as has become all too apparent lately, there are real privacy risks in trusting your content to third parties.

Western Digital, which has been trying hard to move beyond the business of selling commodity disk drives, has a solution that lets you create your personal storage cloud in your home or office. Starting at $150 for 2 TB of storage, the WD MyCloud is at its heart a Linux-based network attached storage server. These have been around for years, but the complexities of setting them up and using them has kept their use restricted to the technically savvy.

Hiding complexity. MyCloud comes equipped with software that hides the complexity. It’s not quite as simple to set up as a Dropbox account or other commercial cloud service, but it is well within the reach of the non-technical user. Installing it consists of plugging it into power and your network. In an initial setup, you create user accounts and optionally enable internet access to your personal cloud the WDMyCloud.com (there is some security risk any time you open up your network to remote access.)

On each computer you want to connect to your cloud, you install a small desktop app that takes care of the complexities of connecting your computer to network storage (under the hood, MyCloud uses the server message block protocol just like other NAS devices, but it is well hidden.)  Once set up, the MyCloud shows up on a Mac as a shared device; it appears as a network drive in Windows 7 and as a local drive in Windows 8. Setting up a mobile device is a little different. You first download a mobile app, available for iOS, Android, and Windows Phone. When you run the app, you go through an authorization process very similar to that used by Netflix to add your account to new devices. The app asks you to generate an authorization code on a computer which you then enter on your mobile device.

Integration needed. The MyCloud personal cloud is not as convenient to use as Dropbox because it lacks app integration. The MyCloud app on your iPad (the device I mainly tested) gives you a list of available files. Click on one and it will display it (if it is a common file type such as Word or PDF) and offer you a choice of  apps, such as DocsToGo, that can open it. But to open a file in the markdown editor Byword, for example, I would first have to transfer the contents to Dropbox. (This is as much a limitation of the very limited file handling capabilities in iOS as it is in MyCloud.)

But MyCloud offers significant cost advantages over commercial cloud services if you are a heavy user. Two terabytes of storage on Dropbox or Google Drive will cost you $200 a year. A 2 TB MyCloud goes for $180, 4 TB is $250, and larger, multi-drive units are planned. You can also expand storage on your own by connecting an external drive through the MyDrive’s USB 3.0 port.

Enterprise and Consumer Tech Are Not Converging

Signpost "Consumerization"

In an important Stratechery post titled “Overstating the Consumerization of IT,” Ben Thompson argued there is a critical difference in how consumers and enterprises (or more broadly, business) approach technology. Consumers are willing to pay for hardware but balk at paying for software or services. Business values software a services and is willing to pay–a lot–for them.

There is a huge amount of confusion among tech writers, who often don’t know better, and analysts, who should, that produces a lot of very bad analysis. It leads to gross underestimation of the staying power of Microsoft, ((Microsoft, to be fair, has brought a lot of this upon itself by trying to redefine the company as a “devices and services” provider, focusing attention on its struggling consumer business rather than its successful enterprise business.)) not to mention a host of other business software and services providers, while overestimating the potential and value of the latest cool app.

Apple and Google, in their very different ways, have figured this out. Apple sells high-end hardware at margins  sufficiently fat to let it provide an array of free software and services to consumers. Of course, it’s not really free. Instead of trying to charge consumers for things they won’t buy, Apple builds the cost into the price of the hardware, which they cheerfully pay for. Google gives away software and services and uses the information it gains to increase the value of the services it provides advertisers. The common theme is that they make consumers pay for the goodies only indirectly.[pullquote]Apple sells high-end hardware at margins  sufficiently fat to let it provide an array of free software and services to consumers. [/pullquote]

Businesses have a very different view of the world. A business needs software to do a job and ultimately to make a profit, whether it’s QuickBooks for a small company or a multi-million-dollar SAP ERP system for a large enterprise, and it pays for it. I see this myself, as a one-person business. I pay for tools,  from Microsoft Office to Adobe Creative Cloud, because I need them to satisfy client demands.

There is real convergence between consumer and enterprise needs in devices. IT managers would have loved to keep the iPhone out of their companies because, at least initially, it did nothing but create cost and problems for them. But executives insisted, both  for their own convenience and because, at least among the more far-sighted, they saw real business opportunities in the technology. Once Apple made it possible for IT to support corporate systems on iPhones and iPads, CIOs had no choice but to relent.

Nut a result of this has been the development of expensive, by consumer standards, apps, both custom line-of-business applications and commercial products. Most consumers may balk at paying $5 for a useful app, but physicians will  cheerfully pony up $160 a year for Epocrates Essentials. (Epocrates has latched on to one consumers trend. It actually gives the iOS app away, but charges $160 as an in-app purchase for the Essentials module and more for supplementary modules.)

The willingness of business to pay for the software it needs doesn’t mean that incumbents such as Microsoft, SAP, and Oracle, have safe business models. Upstarts such as Salesforce (which is no longer really an upstart), Workday, and Box stand ready to disrupt them. The difference is that the enterprise takes a much more rational and value-oriented approach to investing in software. It understands ROI and is willing to pay up front. Consumers don;t and won’t, leaving would-be consumer software and service providers scrambling to find a different route to profits.

 

 

Schools and Tech: A Long-Running Tragedy

Classroom photo (© Tom Wang - Fotolia.com)

Last year, the Los Angeles Unified School District had a great idea: Provide all 640,000 students in the system with iPads equipped with custom software from Pearson Education at a cost of $1 billion. Today after 47,000 tablets have been distributed, the project is looking shaky. According to the Los Angeles Times, The LAUSD has ordered students at two of the pilot high schools to turn their iPads in. The problem:  The students, entirely predictably, have figured out how to load apps, play games, and get to Facebook, circumventing the school district’s controls.

The LA iPad fiasco is the latest act in the never-ending drama of technology in K-12 education. A quarter-century after forward looking schools got their first Apple ][s, Commodore PETs, and Ohio Scientifics, educators are still trying to figure out how to use them as something other than glorified typewriters and calculators and as a substitute for spending money on real libraries.

The use of computers in schools has been hobbled by risk-averse educators who apply a particularly repressive version of the precautionary principle: The top priority in any technology deployment is making certain that it is not misused (i.e., used in ways other than what is officially sanctioned) even if that means it cannot be used effectively. The result is a heavy emphasis on potential risks, while little thought is given to potential benefits, especially those that might arise serendipitously–say, by students figuring out something clever that teachers and administrators hadn’t thought of. Hence, LAUSD was ready to go back to square one at the first sign of trouble although it is far from clear to me there much danger of real harm. (The problem with students using Facebook or Twitter on their school iPads while at home is?)

My local district, the Montgomery County Public Schools, in the prosperous and tech-savvy Maryland suburbs of Washington, is a depressing example. Six years after the introduction of the iPhone and three years after the release of the iPad,  MCPS policy states:

High school and middle school students may have cell phones or other portable communication devices on school property and at school-sponsored activities, but may not turn them on or use the devices during class time. These devices must be kept out of sight. Students should be reminded that setting the device to “vibrate” is not the same as turning the device off. ((Although the policy statement was last updated this year, there is no mention of either tablets or laptops. This replaced an earlier policy that ineffectually banned students from bringing mobile phones or pagers to school, period.))

This was probably a sensible policy in 2005, when there was no benefit to students having phones in class. That was before the proliferation of apps, many of them potentially useful in class. How many times have you been in an adult conversation where someone added a useful insight gained by looking something up on a smartphone or tablet? Any chance that might happen in school, too? Students might even learn some useful research skills along the way.

MCPS is spending millions of dollars to finally set up wireless networking in schools. But students are theoretically prohibited from using their own devices on the school Wi-Fi (of course, access is controlled by WPA passwords it took them maybe 30 seconds to find the key.) Of course, wireless networking is useful to teachers and administrators, but it would be at least as beneficial to students.[pullquote]The top priority in any technology deployment is making certain that it is not misused (i.e., used in ways other than what is officially sanctioned) even if that means it cannot be used effectively.[/pullquote]

Allowing students to use personal wireless devices in schools does raise a variety of problems. Phones and tablets are powerful distractors and you don’t want students sitting in the back of the room tweeting. But students have found ways to be distracted in class since the Neanderthals set up the first cave schools. And good teachers can be as effective as catching the tweeters and texters as they were at catching note-passers in my day.

The use of the devices as aids to cheating is a more serious issue. But again, they are simply the latest tool for which cheaters have found ingenious uses. One solution is more effective  proctoring; a teacher who would let a student get away with looking something up on the internet in the middle of a test probably shouldn’t be in a classroom. Another is swift, certain, and effective punishment for students who get caught (something schools are all too reluctant to do today with students caught at more prosaic forms of cheating.) In some cases, teaching approaches and evaluations will have to be modified to cope with students having wireless access. But an obsessive focus on potential harms, such as cheating, must be measured against the potential benefits.

Higher education has far fewer qualms about the use of technology and seems to be reaping greater benefits. At Hood College in Frederick, Md., introductory calculus is taught entirely on iPads (video). Students complete worksheets inking in their answers using Notability (entering math from a keyboard on any sort of computer remains daunting) and turning in their work and sharing materials through Dropbox. It can be done.

 

 

 

 

A Comeback Product for Not-Dead-Yet Real Networks

Younger internet users may never have heard of Real Networks. But the Seattle-based company was once a major media pioneer, inventing postage-stamp-sized streaming video back in the days of dial-up connections and creating Rhapsody, the first subscription music service.

Real has had a tough few years, surviving on its mobile entertainment and games businesses and its venerable RealPlayer for PCs. But it may have found a route back to relevance by filling a a need for personal video sharing that has curiously been ignored by other players. YouTube and Facebook make it simple to share your videos with the world. But it is not so easy to watch a video you edited on your computer on the device of your choice, let alone share it with a group of family or friends. It can be done, but it’s a pain and different devices generally call for different methods.

Enter RealPlayer Cloud, a drop-dead simple cloud based sharing service. If you had a video on your Windows PC, Mac, iPhone, iPad, or Android device, you simply upload it to to the RealPlayer Cloud. Log on to your account with any of those devices or a Roku box attached to your TV, and you can watch your video. The service automatically handles transcoding and makes sure that the video is streamed in the correct format for the device. You can also download videos for off-line viewing.

While Dropbox, SkyDrive and the like make it easy enough to share files among all your devices or those of your friends and relations, video poses special challenges. Each video type, such as Apple QuickTime or Adobe  Flash requires specific software, called a codec, to play. Most mobile devices cannot handle Flash, while Android lacks a built-in QuickTime player. So unless you are careful about formats, there’s no guarantee that a video uploaded to a shared Dropbox folder will actually play on your friend’s device. With RealPlayer Cloud, you can share any video just by emailing a link.

It is also difficult, after all these years, to get video from a PC, phone, or tablet to your television display. Within the Apple world, the combination of AirPlay on a Mac, iPhone, or iPad and Apple TV works well. Other solutions rapidly get very complicated. But RealPlayer Cloud can be set up as a channel on Roku just like any other channel. This also fills a long-standing gap for Roku: The ability to easily watch your own videos.

RealPlayer Cloud comes with 2 gigabytes of free storage and various rewards can easily take that up to 3 GB or so. But that space won’t last long if you actually use the service. A high-definition video I uploaded that ran just a bit over six minutes filled over 400 MB. So Real’s business model is selling additional storage: 25 GB for $5 a month, 100 GB for $10, and 300 GB f0r $30. The premium tiers also provide higher-quality streaming. Free accounts are limited to 1.5 megabits per second–standard definition–while a paid account gets up to 3.5 Mb/sec.

RealPlayer Cloud appears to be the last survivor of a 2011 Real file sharing experiment called Unifi. It was designed to share all types of files, with an emphasis on music. But it was quickly overtaken by similar services from Google, Microsoft, and Amazon and never made it out of beta.

—–

Disclosure: I was a paid consultant to Real Networks on the Unifi project. I have no current financial relationship with the company.

Disruption: What Microsoft Got Wrong

Surface screenshot (Microsoft)Ben Thompson of Stratechery has deservedly been the talk of the tech world this week for his analysis of disruption theory, What Clayton Christensen Got Wrong. Thompson argues (and if you haven;t read his piece you should) that Christensen actually has two theories of disruption: new market disruption, in which incumbent fail to respond to basic technological change and low-end disruption, in which companies’ business models are undermined by commoditization and their inability to compete with cheaper, “good enough” offerings.

There has been a tendency to look at the struggles of Microsoft as a case of low-cost disruption. Sales of Windows PCs are suffering because customers are settling for cheaper tablets and smartphones that are good enough for their needs.  Certainly, Microsoft itself seems to look at the market that way: Its ads for the Surface focus on features the iPad lacks (“I’m sorry, I don’t have a USB port,” the tablet says in a wistful Siri voice) and Surface’s lower price.

Unfortunately for Microsoft, this misses the point. Windows has been hit by new market disruption, not its low-cost cousin. Many people–certainly myself–use an iPad not because we are willing to settle for it but because we find it meets our needs better than a laptop. I have a laptop, several of them to be precise, both Mac and Windows, but whenever I am not at my desk (where I use desktops) I will almost always go for my iPad or, if the spirit moves me, a Samsung Android tablet.

The problem from Microsoft’s point of view is that I use the tablet not because it is good enough but, for most of the jobs at hand, better. It’s always there, always on, and easily kept on my lap. Dedicated apps generally perform their chores with less fuss than their desktop equivalents.

Most studies show that tablet owners also tend to own conventional PCs. They just use them less. And because they use them less. they replacement less often, which is very bad for sales. I’m ready to replace my iMac, which I use for media production, with a newer and much faster version. Waiting 20 minutes to render six minutes of video was the last straw. But my nearly four-year-old Windows desktop is likely to go on chugging along for another year or two (on Windows 7, most likely.)

Microsoft’s response to this has been to offer a tablet that is as PC-like as possible. It is telling that the Surface (or Surface Pro) is rarely shown in ads without a keyboard. It runs a PC operating system. This Twitter dialog between Ben Bajarin and Ian Betteridge gets to the point:

tweets-surface

Surface’s  greatest point of differentiation is that in can run Microsoft Office, applications that are all but useless without a keyboard and mouse. But from Microsoft’s viewpoint, it’s better, it’s cheaper–what’s not to like?

Except that customers didn’t like the Surface, to the tune of a $900 million inventory writedown on the original version. And I don’t think they’ll be much fonder of its replacement, which offers better performance but an updated version of Windows RT, rather confusingly called Windows RT 8.1, that is only a modest improvement (at least it does limit the frequency with which the mouse-dependent Windows Desktop pops up.) It is still too PC-like and too bereft of apps to appeal.

Some companies caught by new market disruption really don’t have a chance. Kodak, for example; even if it had dominated the market for digital cameras, there just wasn’t enough money in that business to to make good the losses from film, paper, chemicals, and photofinishing services. Microsoft has the money and the opportunity to get out ahead of new markets. But like so many other incumbents, it could not loosen its grip on its lucrative legacy to seize the future. And for this it will pay dearly.

 

 

 

Sense and Nonsense About Biometrics

Apple’s Touch ID fingerprint scanner seems to have fueled an important but ill-informed and ultimately nonsensical debate about biometrics and privacy. The latest example is this muddled editorial in the Sept. 22 New York Times.

Fingerprint photoThe Times editorial, and a great deal of other discussion of the issue, errs in confusing two completely different uses of biometric data: authentication and identification.

The iPhone uses fingerprints for authentication. It scans your finger an checks if it matches previously recorded data (read this for a deep dive into how the  process works and why it is secure.) You can record up to five prints. If you want one of them to be your cat’s paw, fine. You can give your cat access access to your iPhone. The phone does not care who the print actually belongs to, just that it matches.

This is what authentication is about. You attempt to access a system claiming to be Mr. X. The system confirms that this is the same person (or cat) who previously  claimed to be Mr. X. It offers no warranty whatever that the person claiming to be Mr. X is Mr. X or, indeed, that Mr. X exists.

Authentication is relatively easy. It is still non-deterministic and, like any other statistical process, subject to both false positives (accepting a print it should reject) and false negatives (rejecting a print it should accept.) But a properly designed system with a good sensor, like Apple’s, can keep the rates of both types of error very small. And as long as the biometric data is stored locally and securely, as Apple maintains is the case with Touch ID,  there is no real privacy issue. In fact, biometric authentication can increase privacy by reducing identify theft.

Identification is what happens when the police find a fingerprint at a crime scene. The FBI lab must compare this unknown print to millions of known prints in its database in search of a match. The likelihood of both false positives and false negatives is much higher than in the authentication case and the quality of any match–the probability that it is not a false positive–may be low. (Good defense lawyers know how to challenge expert witnesses on the quality of fingerprint matches.)

Fingerprint matching is at least backed by decades of experience and a fair amount of science. Other forms of biometric identification, such as face recognition in  crowds, is far more problematical. As Adam Harvey pointed out in an Ignite talk at the Privacy, Identity, Innovation conference in Seattle last week, the current state of technology makes it all but impossible to capture useful biometric data without the cooperation of the target. You have to touch something, hold still for iris scanning, or at least look squarely into a camera with you face unobscured. At best, the data we collect from tens of thousands of surveillance cameras is good only for after-the-fact identification of suspects.

But the technology for on-the-fly biometric data capture is only going to get better. This, not Apple’s fingerprint scanner, is what poses the real threat to privacy and where the debate ought to focus.

 

BlackBerry: The Last Act of a Grim Play

twitter-bbThere will be more stories about the final agonies of BlackBerry, but this is it. The company announced today that it  expects to report a loss of nearly $1 billion in its second fiscal quarter and that it is dumping nearly half of its remaining employees. This is the corporate equivalent of entering hospice care; all that is left is making the end as painless as possible.

My colleagues Ben Bajarin and Patrick Moorhead got into a discussion on Twitter of just what sealed BlackBerry’s fate. Patrick argued that BlackBerry should have stuck to serving the corporate market it knew, which Ben maintains that these days, you can’t be a corporate player in mobile without appealing to consumers.

They are both right, but the story is a bit more complicated. The fact is that BlackBerry couldn’t give its customers, corporate or consumer, what they wanted because it didn’t know. Co-CEO Mike Lazaridis is a brilliant engineer who I hope will be remembered for his enormous contributions to mobility, but he became convinced he knew what the market wanted even as it was slipping away from him.

Lazaridis was justifiably proud of three BlackBerry hallmark features, each of which he had personally played a personal role in: The excellent physical keyboard, outstanding battery life, and exceptional phone quality. The iPhone, he believed, fell woefully short in all three and he was convinced that loyal BlackBerry customers would never forsake their solid handsets for the iPhone’s easy charms.

He might have been right about the loyalty of  corporate customers, who loved the security and manageability that BlackBerry offered for mobiliZing their Microsoft Exchange mail systems. But to keep them loyal, it had to deliver phones that corporate IT managers could get executives–their bosses–to carry in the age of the iPhone.

BlackBerry’s failure to do so wasn’t just stubbornness. By the mid-aughts, the Java-based BlackBerry operating system had reached the end of the line. It was not conducive to a good browsing experience or robust app development.  But the company’s strongest asset in the corporate market, the BlackBerry Enterprise Server, was hopelessly integrated with the device OS. It was also architected in such a way that it was all but impossible to support multiple devices on a single account, a necessity once tablets came along.

Way too late, BlackBerry began serious development of a replacement OS based on QNX, a real-time OS it acquired in 2010. But the first QNX-based product, the PlayBook tablet, lacked a BackBerry mail client because engineers couldn’t figure out how to make it run on the new OS.  Ultimately, BlackBerry abandoned BES for the QNX-based BlackBerry OS 10 in favor of Microsoft Exchange ActiveSync. Since solid ActiveSync implementations were also available on iPhones and some Android phones, BlackBerry lost much of its corporate cachet.

It’s a sad, sad story, but it is at its end. At this point, the loss of talent has been so severe that it seems unlikely that BlackBerry could execute a recovery plan even if it found a path to redemption.

 

 

 

Apple Maps: Still a Disaster

I was hoping that with the official release of iOS 7, Apple would finally produce some major improvements in Apple Maps. But for all the attention Apple has lavished on other parts of the new OS, Apple seems to have given Maps the Find My Friends treatment. It looks like an iOS 7 apps, but that seems to be about it.

apple-maps-wjhs

The worst problems continue to be in the map database. I know that in some places, such as the San Francisco Bay area, the maps are pretty good. But in my neck of the woods, they stink.

Consider the image to the left. A search for a Bethesda, MD, high school found it at its correct location, more or less. But look to the right, across Old Georgetown Road. There’s another Walter Johnson High School that is a permanent feature. And wrong.

In fact, there are at least three other errors in this one little panel. That street south of Democracy Boulevard is Bells Mill Road, not BeVs Mill.  The Giant Food is on the wrong side of Rock Spring Drive. It should be next to the Chipotle, where both are part of an otherwise missing shopping center.

In fact, just about every map screen I look at in my neighborhood has a mistake of some sort. A nonexistent school shows up a few blocks from my home, several miles from the school’s actual location. The National Institutes of Health Bethesda main campus, not exactly a minor landmark, is not indicated on the map. (I reported both of these errors to Apple a year ago.) The Walter Reed National Military Medical Center is shown as the national Naval Medical Center, a name dropped two years ago, and the Uniformed Services University of the Health Sciences and Howard Hughes Medical Institute are missing.

Apple has still not done what is needed to improve the shortcomings of the apps itself. There are still no public transit directions, one of the more useful features of Google Maps. Switching between driving and walking instructions remains awkward.

At least the driving directions from my home to Dulles Airport no longer terminate at the side of a highway next to a security fence, as they did originally. But the instructions come with a curious warning that the route requires tolls. It does’;t and the app ought to know it, since it correctly routes me onto the free Dulles Access Highway rather than the parallel Dulles Toll Road.

Fortunately, for the past several months, we have had an excellent version of Google Maps for the iPhone, so I rarely use Apple’s offering. But if Apple wants to be a serious player in this important part of the mobile business, it will have to do better–eventually.

Apple Research: An Immodest Proposal

A recent column by Brian S. Hall and a followup conversation in the comments got me thinking about one of his “wild and crazy” ideas for Apple: That the company should fund a research lab in the tradition of Bell Labs. And the more I think about it, the better an idea it seems. I don’t believe for a minute that Apple would do this; it just doesn’t seem to be their style. But that is a big loss for the company and the world of innovation.

Apple is sitting on well over $100 billion in cash that it has no real ideas about using. It’s giving some back to shareholders a dividends, is using some to buy back its own stock, and is letting the rest sit, doing no one much good. Using, say, $10 billion to endow Apple Research would be a gift of which Apple itself might ultimately be the greatest beneficiary.

The great industrial research labs arose out of special circumstances that made certain companies very rich. Bell Labs was a product of AT&T’s government-sanctioned monopoly. (Anyone who believes that lack of competition is necessarily the enemy of innovation should study the history of research at AT&T from the 1920s through the 60s.) IBM built IBM Research into a powerhouse during a period when it had an effective monopoly in computers. Xerox build its Palo Alto Research Center at a time when its dominance of the office copier business brought in big profits. Apple is nowhere close to being a monopoly, but it does enjoy monopoly-like profit margins.[pullquote]The great industrial research labs arose out of special circumstances that made certain companies very rich. [/pullquote]

Bell Labs in its heyday may be the best model. I have been looking into the history of mathematical research there for a project and have come to an interesting realization. Most of the esoteric math research at Bell Labs was actually closely tied to AT&Ts business needs. AT&T hired Claude E. Shannon, one of its most important scientists, because of his MIT master’s thesis, which created a mathematical model for a telephone switching system (and later became a model for digital computers.) His work on the mathematical theory of communications was very relevant to AT&T’s business as was mathematician Richard Hamming’s work on error-detecting and error-correcting codes.

Bell Labs researchers occasionally wandered far afield. But the Nobel Prize-winning work of physicists Arno Penzias and Robert Wilson on cosmic background radiation was the product of AT&T’s version of Google’s 20% time. Penzias and Wilson were allowed to experiment with an huge unused microwave antenna (photo above) that had been built for an early satellite communications project. ((For an excellent account of the experiment, see Jeremy Bernstein’s Three Degrees Above Zero.  And for a general history of Bell Labs, see Jon Gertner’s The Idea Factory.))

IBM Research, too, did basic research that ended up making major contributions to the company. It’s groundbreaking breakthroughs include hard-drive storage and solid-state memory, both cornerstones of modern computing. Though IBM had to rein in many of the more freewheeling aspects of Research when the company fell upon hard times in the 1990s and most research projects today are closely tied to business units, IBM Research still manages to do a fair amount of basic science. ((In the interest of full disclosure–and parental pride–my son Jon is a research staff member at IBM’s Thomas J. Watson Research Center.))

Not all industrial labs are great successes for their sponsors. Xerox PARC famously developed such breakthroughs as the graphical user interface and Ethernet that the company failed to exploit. And Microsoft’s massive research effort remains something of a mystery in its failure to produce successful innovations for the company.

Still, by sponsoring a real lab, Apple could do well by doing good. It’s not that Apple doesn’t do innovative research; its products a patent portfolio attest to that. But the company has a tendency to acquire key technologies, such as low-power semiconductors from PA Semi or biometric sensors from AuthenTec, through strategic investment rather than develop them in-house. And the disadvantage of a too-focused R&D effort is that you are denied the benefits or serendipity that a more wide-ranging effort can produce.

If I were running the U.S. government, I’d offer Apple a deal. Most of its cash represents foreign earnings that avoid U.S. taxes as long as they remain in foreign accounts. I would offer tax-free repatriation of the funds Apple uses to set up a research endowment. The U.S. badly needs to increase research spending. But a federal government on a starvation budget can’t do it and private industry is not picking up the slack.

Data Broker Acxiom Reveals How Little It Knows About Me

I recently accepted an invitation from Acxiom, the big data broker, to check out some of what they knew about me on a new web site. What I discovered was a considerable surprise; in an era when both private data aggregators and the government are presumed to know everything about us, most of the information Acxiom had compiled about me was simply wrong. If my record is typical, marketers who are paying for this stuff are throwing their money away. They’d be better off with random guesses.

You create an account at AboutTheData by supplying some basic information about yourself–full name, address, the last four digits of your Social Security number. When you return to the site, you need supply only your email address and four-digit SSN. This would be a horrible privacy issue if the information that is exposed weren’t completely useless. AboutTheData breaks information down into several broad categories: Basic demographics, home ownership, economics, automotive, shopping, and interests.

Beyond democraphics. The demographics were fine, not surprisingly since this is easily obtained public information including age, education, occupation, and voter registration. Giving my race as “other” was bit odd, but I can live with that. The home ownership data was mostly OK as well. It basically is the same stuff you can find on Zillow, with the same minor errors (which are mostly errors in tax records.)

But things go seriously off the track in the economic data. Our household income was off by an order of magnitude and was seriously inconsistent with other data, suggesting a complete lack of sanity checking of the data. It listed my credit cards, including the American Express card I have not had in at least 25 years. Then it listed my number purchases five for cash, 15 on credit cards, and five “other.” It did not specify a time period, but that’s too much for most days and not enough for most weeks.

The automotive section was just weird. It had a correct date for when my next car insurance payment is due, but no information of vehicles. The shopping data was more garbage. The amounts spent and number of purchases–12 online and 11 offline–were again ridiculous. The “Most Frequent Retail Purchase Category” was “Standard Specialty; Specialty Apparel.” I’m not sure what that is, but it’s wrong. We don’t buy a lot of clothes. And in a checklist of purchase categories, every type was marked “true,” but the categories are so general that most of them are true for most people.

Interested in everything. Acxiom also marked “true” for all of a very long list of interests, many of which are not including cat ownership (dogs weren’t listed), hunting and shooting, boat ownership, and antiques. It said I was a modem owner, which I guess is technically true, and that I am a Windows user, also technically but incompletely true. I suppose the information Acxiom supplies to real customers is better, or at least more detailed in its inaccuracies.

The company does stay in business and its customers can’t all be total idiots. But KnowThe Data raises two possibilities, both really disturbing. Perhaps the data they have chosen to reveal is deliberately obfuscatory, in which cases the Federal Trade Commission and states attorneys general ought to be coming down on them real hard. Or the information they sell really is terrible. The latter might at least explain why I keep getting marketing pitches for products that I would never consider buying.

Apple vs. Microsoft: The Value of Strategic Thinking

Having a strategic plan and following it doesn’t guarantee corporate success. There’s always the possibility that the strategy is bad and fated to fail. But you can rest assured that the lack of a strategy will doom any enterprise to failure–and why I worry a lot about the future of Microsoft.

As Ben Thompson at Stratechery and my Tech.pinions colleague Ben Bajarin point out, Apple’s iPhone 5c and 5s announcements this week were logical steps in the careful execution of a mobile strategy that goes back at least to the original iPhone introduction in 2007. Apple’s plan is simple to state, though difficult to execute: Provide an outstanding customer experience and focus your energy on dominating the high–and profitable–end of the phone and tablet markets.

The strategy has no lack of critics. It leads to product choices that are predictable and a bit dull, endlessly disappointing tech writers who live for novelty.  And Wall Street simply hates it, applying its “past success is no guarantee of future results” disclaimer to Apple with a special vengeance.

Apple doesn’t care; it has its vision and it is sticking to it.

A key element of executing a strategy is knowing what not to do. Despite its latest explosion of iPhone variants, Apple offers amazingly few products for a company of its size. And it will sell no product before its time, much preferring doing it right to doing it first (Wall Street and tech writers hate this too.) Yes, it has had its failures–me.com and Ping were recent ones–but it has had an astonishing percentage of hits over the past 15 years.[pullquote]A key element of executing a strategy is knowing what not to do. Despite its latest explosion of iPhone variants, Apple offers amazingly few products for a company of its size.[/pullquote]

Contrast this disciplined approach to the chaos swallowing Microsoft these days. All of Microsoft’s major businesses face serious threats: Long-term shrinkage of the PC market and thus the PC software market seems inevitable, attempts to turn Windows into a tablet operating system and to become and integrated producer of tablet hardware and software are sputtering, competition for Apple and Google is driving the cost of consumer-grade software to zero, and on and on.

A real strategy would force Microsoft to take a hard look at its lines of business and decide what is savable and what is worth saving. I’ve made no secret of my preference–that Microsoft should focus its efforts on business software and be prepared to let consumer-facing products go.

The acquisition of Nokia makes it clear that this is not Microsoft’s choice. But it gives no clarity whatever to what choices Microsoft will make. To attempt to defend everything is ultimately to defend nothing.

Strategic choices are difficult and usually painful. A strategically focused Microsoft, whatever focus it picks, will at least initially be a smaller company. But for Steve Ballmer in his remaining months or his successor to fail to make these hard choices will jeopardize the entire enterprise.

Touch ID: A Big Deal If Apple Doesn’t Mess It Up

The Touch ID fingerprint reader could be one of the most important features of the new iPhone 5s. Although it will initially be used only to unlock the phone and to log into the iTunes Store, it has the potential to improve the security of a wide range of mobile purchases and payments. But first Apple has to convince iPhone owners that it will not be a new assault on their privacy.

A few weeks ago, this would not have been an issue. But Apple is introducing Touch ID in an atmosphere in which many of the most far-out paranoid fantasies about government snooping seem to have been confirmed. A sampling of Twitter reactions to the Apple announcement, and this New York Times Bits article suggest what the company is up against:

Twitter screenshot

The sad thing is that there is a well-understood way to implement biometric tests such as fingerprints that is safe and will prevent the sort of leaks these tweeters fear. And I suspect that Apple, which bought AuthenTec, the leader in fingerprint technology, in 2012, is following these procedures. The problem is that Apple refuses to say so.

Despite several requests, all I could get Apple spokespersons to do was reiterate marketing chief Phil Schiller’s statement that the fingerprint data was encrypted and stored in “a secure enclave” on the A7 processor that could not be accessed by any apps. The data is never uploaded to iCloud or other servers. This is good, but not nearly good enough.

Here’s how you are supposed to do it. First, and Apple says this much, the reader never makes a copy of your actual finger print. What is does is collect data on a number, perhaps as many as several hundred, points called “minutiae” that uniquely identify a print. The minutiae are reduced to a string of numbers. The next step is really important. The fingerprint data should be run through a mathematical function called a one-way hash, which produces an encrypted version that cannot be decrypted. Because it cannot be decrypted, the original fingerprint cannot be reconstructed from the data, protecting your privacy.

The way this works is that the next time you scan a finger, the process is repeated and a new hash is generated. The new hash is compared to the stored hash and if they match, you pass. The same procedure is used for the secure storage of passwords. It is even more important for biometric data, because, while you can always replace a compromised password, you cannot grow a new finger.

If Apple wants to sell suspicious opinion leaders on the security and integrity of Touch ID, the company is going to have to be a great deal more forthcoming about just how it is protecting fingerprint data, including providing details on the encryption or hash protocols used. Ideally, it would let security experts examine the actual code in hopes of identifying the all-to-common implementation errors that can undermine seemingly secure encryption.

We definitely need an alternative or supplement to traditional passwords to make our devices more secure and useful, especially in commerce and payment. Biometrics, such as fingerprints, are a good choice, but only if they can be handled safely and, even more important, people are convinced their use is safe. That is going to require more transparency than Apple is used to providing.

The good news is that in my brief hands-on tests, Touch ID worked flawlessly. It was easy to register my fingerprints (you can use multiple fingers) and once the prints were set up, the iPhone responded instantly to my touch. It is by far the easiest fingerprint recognition system I have used.

For the moment, Apple is not allowing third-party app developers to use Touch ID, but I think it is only a matter of time until Apple expands its use beyond login and iTunes. The potential is just too great.

—–

An aside: I don’t worry in the least about the government getting my fingerprints, since I have been fingerprinted many times and my prints have been in the FBI database for decades. But the U.S. government isn’t the only snoop out there and I do worry about securing biometric data. as I said, once your fingerprint is gone, it is gone forever.

 

 

 

Microsoft and Nokia: A Strategic Blunder

There’s an old military adage, “Reinforce success; never reinforce failure.” By purchasing Nokia’s device business for about $5 billion, Microsoft has just reinforced failure in a big way. It has been three years since Microsoft attempted to reboot its mobile business with Windows Phone 7, two and a half years since the company struck a broad partnership with Nokia, and a year since the introduction of Windows Phone 8 and the Surface tablet. Microsoft has next to nothing to show for any of these efforts.

Microsoft can easily afford the purchase price; it has the money lying around under the cushions of various couches around the world. The issue is one of strategic focus. At a time when Microsoft should be turning its attention to its successful core businesses to build for the future, it is redoubling  its efforts in an area where it is struggling, at best.

Microsoft financials chartAt a time when it should be thinking about the strategic direction of  a new CEO, Steve Ballmer in his remaining months and his now probable successor, Nokia CEO Stephen Elop, who will become a Microsoft executive vice president, will instead be devoting a lot of time and effort to integrating Nokia. The money-losing device business had about $15 billion in revenues last year, which would make it Microsoft’s fourth largest division (see chart.) But its 32,000 employees will increase Microsoft’s worldwide employment by nearly a third. A Finnish hardware unit and Microsoft, the quintessential software company have cultures that likely will resist easy integration.

The challenges for Nokiasoft are overwhelming. I thought for a long time that there was room for a third platform in mobile phones and that Windows Phone might well be it. But Microsoft, even with the Nokia partnership, has yet to rise above minuscule market share in the U.S. or worldwide. The implosion of BlackBerry was the best opportunity for Microsoft to grab share, but it has failed to do so. Microsoft must struggle to carve out a niche in what has become an iOS-Android world, or maybe an Apple-Google-Samsung world if Samsung and Google part company.

Missing apps. Furthermore, Windows Phone, now with more Nokia, still has the same old problem: The lack of an adequate app ecosystem. In software, Microsoft doesn’t get anything from Nokia that Windows phone didn’t already have (Nokia’s strongest mobile software asset, its maps business, is not part of the deal.) After three years, Windows Phone still lacks such table stakes apps as native YouTube and Instagram clients. Maybe a Herculean effort by Microsoft management could change this, but such an effort means other, probably more important things, are not going to be done.

The outlook in tablets is even bleaker. Windows RT, the version developed specifically for tablets, is a resounding flop and Windows 8 on tablets hasn’t faired much better.  Nokia reportedly has a Windows RT tablet ready to launch this fall; unless it is a lot better than the Surface or the Surface’s planned successor, it would just split a tiny market.

The iPhone has turned mobile phones, even business phones, into an overwhelmingly consumer business. This means the Nokia acquisition has plunged Microsoft far deeper into an area it really should be abandoning, Microsoft simply is not very good as a consumer company. And it is hard to see what Nokia, headed by a man whose greatest managerial success came as head of the Microsoft Business division, brings.

The Xbox problem. Xbox is Microsoft’s one consumer bright spot, but the chart above shows its fundamental weakness. Even putting aside the enormous sunk cost of Xbox and the fumbled launch of the Xbox One, the Entertainment & Devices segment is too small, especially in profit share, to make much of a difference. With little prospect for explosive growth in the game console-cum-set top box market, Xbox is not going to save Microsoft.

With whatever energy Microsoft management has left after coping the the challenges of the Nokia acquisition, the company should focus on what it does well, and that is to sell business software. That is a market that has been changing,  but here Microsoft has been adapting, converting its traditional sale of permanent software licenses into software-as-a-service and platform-as-a-service offering.

Windows sales will shrink with the PC market, but they aren’t going away and will remain highly profitable; a 50% operating margin for the Windows division in a crummy year is impressive. The urgent need is for Microsoft to develop a replacement for Windows 7 that businesses might want to buy–something with the under-the-hood improvements of Windows 8 but without either of its unloved user interfaces.

Reinforce success. The business software operations also deserve reinforcement. The big part of the tech commentariat that knows little or nothing about business software consistently underestimates the importance and staying  power of Office (I agree that Office is finished in consumer markets, but that was never its real business anyway.) Back-office tools such as Exchange, SharePoint, and SQL Server remain mighty money-makers and the Microsoft Dynamics suite of resource planning, customer relationship management, and accounting tools is growing nicely.

Web services, particularly those that serve business rather than those that are directly consumer-facing,  are another area of strength. While behind Google in many areas, Microsoft is well ahead of Apple, which often seems as clueless about Web services as it is savvy about devices. Azure, another service little-known to those who do not follow enterprise software, has made impressive gains the the platform-as-a-service business, though Microsoft should stop hurting itself by branding the product as Windows Azure. Windows has had a great run as a brand, but it is time to move on.

In the constantly mutating tech world, Microsoft cannot afford for its top management to take its eyes off these successful operations. But I fear that it will be hard to give these operations, which I think represent Microsoft’s best chances for future success, the attention they deserve while management is deeply distracted by the enormous challenges of Nokia. The $7 billion investment (including a patent licensing deal) was not a huge amount of money, but its ultimate cost to Microsoft could be a lot higher.