Ahead of the Crowd

As I’m a sucker for just about every consumer technology that comes down the pike, I had to try Compact Fluorescent Lamps (CFLs) in my new house when they first appeared on the consumer market in 1995. I quickly discovered that the expensive (about $25 in today’s money) bulbs were not very bright, so I installed them in relatively inaccessible places like the basement crawl space, hoping that the manufacturer’s claims of long life would come true. Alas, the bulbs died young. Not recognizing the environmental hazard, I tossed the dead bulbs in the trash and forgot about them.

Fast forward ten years: I found CFLs at Costco for less than $3 per bulb. The manufacturer, Feit Electric, specifically claimed 8 times the lifetime of a 60 watt incandescent lamp. Do the math: 8 x 1,000 hours = 8,000 hours (11+ months, operating continuously). So I bought a pack and paired some of them with double-life (2,000 hour) incandescent lamps. Guess which lamps failed first: incandescents or CFLs?

Yup, another disappointment for me, the Green wannabe. Was it an industry conspiracy or was I just unlucky? Now Consumer Reports shines light on this dark enigma in its May, 2008 issue. Since 8,000 hours is a long time, CR’s tests aren’t finished. Still several brands have passed the 7,600 hour mark. But Feit Electric ESL13T bulbs “failed between 3,300 and 3,900 hours.” I would have been happy if my Feit Electric bulbs (not the same model) had lasted even that long.

Moral of the story: if you want to buy a long-lasting CFL, brand and model matters. Before plunking down hard earned cash, read this Consumer Reports update to find a bulb that’s likely to be reliable. So now I’ve got a pack of dead CFLs, each containing 3 to 5 milligrams of mercury, making them toxic waste. Anybody want to take these bad boys off my hands? I can’t get rid of them!

Many bloggers, including respected author Nicholas Carr, recently applauded Amazon for offering a Service Level Agreement (SLA) for its S3 storage service in response to competition from Nirvanix. Though SLAs have long proved an effective technique for managing corporate information technology, in Web infrastructure the SLA is nothing more than a scam that only a used car salesman could love. (Thanks, Paul D. Cocker, for the lemon.)

See what the Amazon SLA offers:

we commit to 99.9% uptime, measured on a monthly basis. If an S3 call fails … this counts against the uptime. If the resulting uptime is less than 99%, you can apply for a service credit of 25% of your total S3 charges for the month. If the uptime is 99% but less than 99.9%, you can apply for a service credit of 10% of your S3 charges.

Sounds great, doesn’t it? Let’s calculate “99% uptime,” which is the same as 1% downtime. A month has 43,830 minutes, so your site will be down 1% of that time, 438 minutes, or over 14 minutes per day on average. Suppose just 14 minutes of downtime occurs during your daily peak period. How will that downtime impact your revenue? Will being able to “apply for a service credit of 25%” compensate you for lost income, troubleshooting time, and unhappy customers?

Now consider the worst case of having all 438 minutes of downtime occur in one big failure during, say, the peak selling hours of the day after Thanksgiving. Then what recourse do you have? The dirty little secret is that the SLA protects the infrastructure provider, not the customer.

Amazon’s 99.9% uptime commitment means average daily downtime of 1.4 minutes. To put this statistic in perspective, I hosted a website for family and friends at a data center that, according to my measurements, delivered slightly worse than 99.9% uptime over a 3 month period. The number of complaints I received and the time I spent dealing with downtime astounded me. Do you think the infrastructure provider graciously provided me the 100% refund to which I was entitled according to its generous SLA? Think again.

I would have been fired for delivering 3 months of 99.9% availability back in the 1980s when I managed a corporate data center.

Web SLAs today are no better than the “9/90 warranty” my father offered years ago on his used car lot. If you shopped carefully, you could buy an awesome car at my dad’s store, but the warranty was only good for the first 9 seconds or 90 feet, whichever came first.

If you’re like me, you strive for a low profile while traveling. You want to avoid the watchful eyes of every nosy Tom, Dick, and Harriet as you fly the Gulfstream to London to visit the tailor. Alas, there is precious little privacy left. Once your inquisitive comrades know the tail number of your personal aircraft, your life is an open book. They can track your jet’s every move on FlightAware. (Photo credit: albspotter.)

But money can still buy happiness. By filling out a simple form and paying a mere $720 annual fee to FlightAware, you can conceal your plane’s whereabouts from the prying eyes of the site’s users. How nice of FlightAware to provide this helpful service. They didn’t invent the hush money business model, but they’ve certainly done a great job translating it to Web 2.0.

I wonder how long it will take government to catch on to this. After all, you can look up on the local property tax site the value of my neighbor’s house and even the size of her swimming pool. The tax man could easily whip up a form that would shake me down for a pretty penny to remove data about my house from the tax site. Ain’t Web 2.0 grand?

I ran into Vinny the barber on Friday at Starbucks and sat down with him over a latte to ponder the state of the Net. He had stumbled upon the Twitter web site, and wondered what was happening. As he put it, “I thought connecting with others to make better social and political decisions using the wisdom of the crowds was such a good idea. Now we have behavior that seems to have no social purpose whatsoever, merely generating stupendous amounts of inane chatter about personal events no one cares about in the first place. What’s going on?”

Taking a long pull at my latte, I gave his question some thought, and came up with several possible explanations, none of which consoled him. First, it seemed to me that pushing social networking to its extremes is by no means unprecedented; small-town behavior, where everyone knows everyone else’s business, has been doing that for centuries. Nor did I feel that the fact that some site produces such trivia is an indication that social networking is doomed; on the continuum of group behavior there are always extremes, which tend to wash out over time.

These remarks did nothing for Vinny’s despair over the deterioration of social networking, so I tried again, recalling Michael H. Goldhaber’s article on The Attention Economy and the Net. Goldhaber argues that the product of the Net that carries value is not information (of which there is a glut) but attention, which can be viewed as existing in inverse proportion to the amount of information. But that was no help either, for I wondered how any of these non-stop personal situation reports like Enjoying the weekend with family… Just got a great $400 haircut could generate much attention for the typical twitterer.

I finally gave it my best shot, arguing that not all such services would be worthless. For instance, imagine a service that reports your child’s whereabouts at any time. In spite of the privacy concerns, as a parent who has lived through his child’s struggle for independence, I have been torn between the desire to let her make her own way and the need to protect her if necessary.

Vinny seemed mollified, if not encouraged, by these observations, but time will tell whether social networking will produce useful results or just chatter.

My barber was commenting the other day about the disappearance of Internet hackers. “Seems like there used to be a deadly new virus on the Net every other day”, he said as he clipped away. “They made the evening news, caused terrible disruption for a while, then faded, only to be replaced by other more malicious worms, trojans, and malware. But you don’t hear about them anymore; why not?” I pondered these remarks later as I did my online banking, checked auctions on eBay, and visited my seniors-only social networking site.

He’s right, but why? Is it because there is more pressing news to devote the airwaves to, like Anna Nicole Smith? No, I didn’t think so. Networks just not reporting it anymore? Maybe. Is security so much better that these exploits are defeated? Possibly, but as everyone knows, there’s a long way to go, and some very smart people out there are dedicated to mischief.

I think the openness of Web 2.0 will create new opportunities for hackers. Ajax, for example, offers many ways to get security wrong. It’s already clear that Web 2.0 provides a context for antisocial behavior, such as death threats and Google bombs. But the worst is yet to come.

In today’s Wall Street Journal, a front page piece tells amazing stories of Alaska Airlines pilots flying up north. In beat-up Boeing 737-200s affectionately called “mud hens,” they flew into the world’s toughest airports. What got my attention was this snippet:

Capt. Malcolm af Uhr, 45, co-piloted a flight headed for Juneau in a snow storm. He and his pilot aborted four attempts to land because they couldn’t see the runway at the critical moment. After refueling back in Sitka, 95 miles away, they returned to Juneau and tried to land five more times without success. As local fliers dozed or read the paper, a passenger from California stood and demanded, “What’s wrong with you people?” The plane finally landed on the 10th try.

I have to admire that kind of patience, persistence, and derring-do. Seldom have I experienced similar effort in the computer industry. Capt. af Uhr’s everyday heroism makes me feel jealous of his passion.

Yesterday’s post mentioned alpha geeks, so I thought they should be the rightful stars of my April Fools Day essay. Through expert salesmanship, the alpha geek meme has gone viral and become a badge of honor for a particular technological elite. I think the alpha geek is a marketing gimmick that will behave like an economic bubble. And the end is near.

Credit for coining alpha geek goes to Tim O’Reilly. In an insightful 2002 essay Inventing the Future, he defined the term as:

hackers who have such mastery of their tools that they “roll their own” when existing products don’t give them what they need.

Although the meaning of hacker is ambiguous and controversial, I’m sure O’Reilly intends the flattering “expert programmer” sense:

one who knows a (…) set of programming interfaces well enough to program rapidly and expertly. This type of hacker is well-respected (…), and is capable of developing programs without adequate planning…

O’Reilly asserts that alpha geeks provide early radar and valuable insights into the computer industry’s future:

The alpha geeks are often a few years ahead of their time. They see the potential in existing technology, and push the envelope to get a little (or a lot) more out of it than its original creators intended. They are comfortable with new tools, and good at combining them to get unexpected results.

What we do at O’Reilly is watch these folks, learn from them, and try to spread the word by writing down (or helping them write down) what they’ve learned and then publishing it in books or online.

This is brilliant strategy for O’Reilly Media, whose main business is publishing for geeks. As customers and suppliers, geeks constitute a large part of the O’Reilly ecosystem. Promoting alpha geeks as an elite class makes great sense. O’Reilly can hire the best of the elite to write books, lead online communities, and speak at conferences. The elite will feel smug and customers will guzzle the media. It’s a win-win proposition: harness collective intelligence to tap the mother lode of IQs above 140. Get the crowds to do the heavy lifting.

But how much value does this strategy provide for those outside the O’Reilly geek ecosystem? Less than meets the eye. Let’s analyze the value from investor, executive, and non-geek consumer perspectives.

Do alpha geeks provide useful radar for investors? By starting a venture capital fund, Tim O’Reilly thinks so. No doubt he has enjoyed a modicum of success in alpha geek ventures. Other venture capitalists (VCs) seem to be steering clear of the geek space, as evidenced by their limited participation in O’Reilly conferences. Simply put, if alpha geeks were such hot stuff, wouldn’t VCs be crawling all over them at conferences? I haven’t seen any VC swarms and below I present several reasons why not.

Executives know that customers, not geeks, drive their business. Alpha geek skills may occasionally help further specific objectives in the enterprise. But from a Fortune 500 CIO’s perspective, most geek behavior, and especially that of the alpha variety, is foreign and unwelcome. What’s more, the geek’s penchant for “developing programs without adequate planning” conflicts with the emphasis on teamwork that prevails in successful IT shops. In short, alpha geeks are viewed as nothing more than a necessary evil in a large corporation. (Google may be an interesting counterexample.)

Consumers desire cool products like iPods. Do products of such scope and scale spring straight from the minds of geeky individuals? Nope (again, Google might be an exception). Almost any large technology project requires substantial resources, processes, and value networks. Geeks say, “leave me alone and I’ll write the code.” In my experience, a good product or invention is a necessary, but insufficient, condition for success. Standing alone, few alpha geeks possess the full range of skills to deliver sophisticated products to a consumer audience.

What’s the outlook? The alpha geek meme will behave as an economic bubble, comparable to 17th century tulip bulbs. Thanks to Web 2.0 mania, alpha geek skills are overvalued, but the likely upcoming economic recession will bring the value down to earth. Lacking strong strategies or business models, many alpha geek web 2.0 ventures will fail, just as web ventures perished when web 1.0 crashed. The alpha geeks will crash and burn along with those ventures.

Are you feeling lucky? You could bet against this prediction by starting your own geek venture fund as O’Reilly did. Just don’t call on me to invest.

At the shoe shine stand on Friday, the workers busily buffed and chatted with customers. When I mentioned I worked in Information Technology, the shoe-shine guy bragged he had just flown back on the red-eye from the O’Reilly Emerging Technology (ETech) conference in San Diego.

How was the conference? “Great, I was amazed at how much fun everyone had,” he gushed. “Especially those alpha geeks, the scraggly guys with Apple laptops.” I gave him a skeptical look. “All the beautiful people were there, but I was disappointed to miss the rock star who got the death threat,” he intoned with a visible wince. Could that be Kathy Sierra? “Yeah,” he marveled, “she writes a wonderful world-class weblog.”

What’s the buzz on emerging technology? “To be honest, we non-geeks had no idea what the alpha geeks were talking about. But the geeks grokked each other and their stuff looked pretty cool,” he confided as he stroked the final buff. I handed him a wad of cash including a generous tip. Deftly straightening the rumpled bills, he whispered, “I have an even better tip for you: Buy Google stock.”

Pondering this surreal encounter, I felt as though I had passed through a time machine and landed on Wall Street in 1928, six decades before alpha geeks roamed the planet. Back then, Joseph Kennedy, Sr. spoke these prophetic words: “You know it is time to sell when the shoe-shine boy tries to give you stock tips.”

How many Dell employees does it take to screw in a light bulb? According to Heard on the Street (paid subscription) in today’s Wall Street Journal, that’s a question CEO Michael Dell and his management team are now deliberating. The company’s employee base jumped by nearly 50%, to 82,200 workers, in the past two years. Wall Street thinks now is a perfect time for Dell to reduce headcount, just as rival Hewlett-Packard successfully did two years ago. A Goldman Sachs analyst upgraded her rating of Dell’s falling stock to ‘buy’ because she predicts that slash-and-burn moves are imminent. I counsel thinking one more move ahead in this chess game.

Given that the key to Dell’s past success was an efficient direct sales model, why did headcount go out of control? Was it sloppy management? Or is something more fundamental going on?

No doubt missteps occurred, including an ongoing SEC investigation into company finances as senior managers fell on their swords. After Dell faded in customer satisfaction and laptops exploded in flames, plenty of bad press ensued. In response the company said last September it was investing $150 million to enhance customer relationships, including adding 2,000 support staff. But that move failed to reignite sales.

Why didn’t ramping up support headcount pay off? It’s tempting to blame poor execution. But I think that Windows PC support costs are rising so fast that Dell, no matter how hard they run, will never profitably catch up. When customers suffer malware, phishing attacks, or defective patches, they call tech support. With razor-thin margins in the PC hardware business, every tech support call erases a pile of profit. As a thought experiment, imagine what two additional years of support (above the one year warranty) for a $359 PC should cost. Now go to the Dell website, price that computer, and check out the support cost. Ouch.

Why is Dell considering offering Linux on its computers? Hint: it’s not just to save the few dollars that go to Microsoft for every computer shipped. Support costs are almost certainly a key part of the equation. Imagine how many tech support calls would vanish if Dell delivered a robust operating system.

What’s more, Dell is struggling with a global trend: transition from a computer industry driven by corporate information technology to one that’s centered on consumers. The company’s response involved broadening its product mix to include consumer items like digital cameras and television sets. That strategy didn’t pan out for CompUSA; it nearly put them out of business. Considering Dell’s accounting issues, it’s hard to evaluate the toll this strategy has taken, but the outlook isn’t favorable.

So the time has come not just to “streamline the organization,” but to consider real alternatives to the Dell 1.0 business model, which has grown too long in the tooth. The company must recognize that Windows PCs have become low-margin appliances like lamps, dishwashers, and toasters. Going forward, PCs need to be reliable like lamps and supported like toasters. You can’t achieve that by throwing thousands of warm bodies into a call center in India in a futile attempt to screw in that light bulb. Dell 2.0 ought to mean reshaping PC support by totally redefining the PC product experience. Else nobody will be left at Dell to turn out the lights.

In today’s Wall Street Journal (WSJ), the article Linux Starts to Find Home on Desktops describes how Chief Information Officers (CIOs) are thinking about deploying Linux on desktop computers in their enterprises. Corporate data centers began switching from Unix to Linux servers years ago, but most CIOs still say Linux on the desktop isn’t ready for prime time. Thinking one step ahead of the WSJ article, I see people increasingly relying on Web 2.0 services to get important work done. Individuals will have less and less need for traditional Windows applications, eventually accelerating corporate adoption of desktop Linux.

Let me tell my company’s story. To save money on software licenses, we replaced all our Windows servers with SUSE Linux (now Novell SUSE Linux Enterprise) five years ago seamlessly and without skipping a beat. Emboldened by that success, I switched my office desktop computer to SUSE Linux, but the pain was excruciating. For over two years, I had both a Windows laptop and the Linux machine on my desk, and, until recently, the Windows laptop was the one I mainly used. Gradually I did more of my work in the Firefox web browser, so I needed the laptop less. By adopting Web 2.0 tools like Writely (now Google Docs and Spreadsheets), I discovered I didn’t need most of the “bells and whistles” of Microsoft Office. Still, my Linux desktop machine simply couldn’t do many things as well as Windows, especially anything involving audio and video.

My desktop environment took a quantum leap when I installed Ubuntu Linux about four months ago. After a bit of customizing, Ubuntu is reliably doing everything I need. The Windows laptop is off my desk. I can’t say I’ll never use Windows again, but now I’m getting most of my work done in Linux and Firefox.

Why did I suffer the pain of migrating to Linux? Mainly the reasons are cultural: Gate is a small firm and we pride ourselves on doing things simply and efficiently. We don’t see the point of buying and reinstalling the same basic functionality again and again (for example, Office 97, Office 2000, Office XP, Office 2003, Office 2007) when we can get it at no cost. For us, the switching costs are not very high because our workforce is highly computer-literate and flexible. I wanted to see whether the gain of escaping Microsoft lock-in was worth the pain of migration to Linux. Thanks to the web, the pain is no longer intolerable.

Let’s go back to the industry view. A key trend in Web 2.0 is AJAX applications replacing their desktop counterparts. For example, two years ago, you couldn’t edit photos in the web browser. Now, Snipshot enables easy web photo editing and Adobe will soon deliver a Web 2.0 version of its flagship Photoshop. As more and more Web 2.0 applications need only the web browser on the desktop (or PDA, or phone), we all become less dependent on the Microsoft technology ecosystem. Companies that deliver Web 2.0 server infrastructure will gain traction in low-end applications and traditional desktop software providers will move further up-market. After all, the web version of Photoshop won’t do all the high-end effects and image manipulations that Photoshop CS3 on the desktop will do.

The Photoshop scenario is a perfect example of disruptive innovation. As new players enter a market, initially they satisfy the needs of less demanding customers (like me). Gradually, their products improve, starting to meet the needs of mainstream customers. Well-entrenched incumbents (such as Adobe and Microsoft) then move to higher ground. Of course, the incumbents try to compete with the new players, but competition isn’t easy because the incumbents’ corporate values and partner networks aren’t optimized to conquer low-end markets. We saw the same scenario years ago when Microsoft attacked Novell’s NetWare and we all know who won. In the face of Web 2.0, Adobe is fighting by introducing the advertising-supported Web Photoshop. But they are fleeing to higher ground by introducing Photoshop CS3. Microsoft is doing likewise with Windows Live, Vista, and Office.

As the WSJ article mentions, two big Microsoft partners, Hewlett-Packard and Dell, are talking to customers about better Linux desktop support. Such conversations would have been inconceivable two years ago, but the potential of Linux adoption on enterprise desktops will affect hardware vendor strategies. So we are seeing the first cracks in the hardware partner network. Changing alliances often signal disruptive innovation and changes in industry values. Watch that space.