Have we seen peak tech? Is it becoming a game only giants can play?

On Thursday, LinkedIn posted some very disappointing numbers, and the result was a massive bailout on the stock. The companies reported losses and slowing growth led to erasing nearly $11 billion in the professional networking site’s market value. Combined with lowered forecasts for the year, this translated into about 40% drop in the company’s valuation.
Another major collapse in confidence seems to be hitting Tableau, which dropped 45% in after hour trading on Thursday, after announcing higher than projected revenue and earnings per share, but a real slowdown in licensing revenue.
Twitter continues to stumble, losing 5%. Facebook likewise took a 5% drop. The tech selloff with Apple (2.67% drop) and Amazon (6.36% down). Box fell 7.44%.
The tech market appears to be getting whipsawed by the uncertainties in the world economy, with those showing the most significant drop off in past and projected revenues getting hammered.
But is there something larger at work? I read a great analysis by Jessica Lessin at The Information, suggesting that there may be. In The End of Tech Startups she writes,

[…] the period where tech startups can readily disrupt larger tech companies is ending for a simple reason: Today’s tech behemoths aren’t the lumbering giants of yesteryear. They are leaner and meaner and more competitive precisely because they have co-opted the same technologies startups used to attack them.
Take cloud computing. Sure, AWS makes it dead simple for two developers in a garage to spin up a company. But Microsoft, Facebook and Google have massive cloud infrastructure advantages of their own. In fact, they’re the ones powering some of these startups. Anything startups have access to, big tech companies have access to in a much deeper way. So they can operate faster—and test faster. And because they can test faster, they can build faster.
Then consider internal communications. One of the biggest advantages any startup has is the ability to make decisions and communicate quickly without layers of bureaucracy. Often they do so by adopting the latest sort of collaboration method quickly.
[…]
To all you aspiring tech entrepreneurs out there, it’s time to get creative if you want to take on a tech company. And if you don’t, there’s still plenty of opportunity going after non-tech incumbents in everything from media to education and health, which is probably why we’re seeing so many startups turn their attention outside of tech these days.

Lessin suggests we’re moving to an era where the Internet giants simply will have too much juice for startups to prevail against them. I think this borne out in many sectors, like the melting away of the valuations (and opportunities) for file sync-and-share companies, like Dropbox and Box, as the monsters move in and drop the price point to zero.
So, as the bull market grinds on in the coming months, note the difference in the losses that the market will deal to larger and smaller players. The LinkedIns and Tableaus will lose much more than the giants, and the giants will continue to turn the screws, leveraging their positional, financial, and operational advantages. They will continue to win even as investors lose.
And startups will face the worst conditions: less capital, worse valuations, very strong entrenched Internet giants dominating in all important markets.

Facebook Beta Launches Work Chat Application

Late last week, Facebook quietly made its entry into the work chat (enterprise real-time messaging) arena with the very limited release of its appropriately-named Work Chat application. There was no announcement in the Facebook Newsroom; the app just showed up in the Google Play store and was called out in a TechCrunch article. Work Chat is available for Android devices only now; an iOS version is in development and expected to be available soon.
Work Chat is the corporate equivalent of Facebook Messenger. Those applications appear to have the same user experience and feature set, although TechCrunch noted that Work Chat allows individuals to temporarily turn off their notifications, so as to not be disturbed when on vacation and when other personal activities are prioritized.
Work Chat is intended solely for organizations that are Facebook at Work customers. Anyone can download and install the app, but it will not work without a Facebook at Work login.
Screenshot_2015-11-20-14-13-51
Facebook at Work is still in closed beta, so very few companies and individuals will be able to use Work Chat today.

Is This a Market Disruptor?

While it’s impossible to gauge the actual market impact of Facebook’s Work Chat at this point, we can draw some conclusions about its potential effect. First, it will boost awareness of, and interest in, chat-based, real-time communication tools in organizations of all size. Individuals who use Facebook and its Messenger app in the personal lives will push their IT departments to consider the Facebook at Work and Work Chat combination.
In all likelihood, many organizations will try Work Chat, at least in a pilot implementation. It’s been reported that Facebook at Work will be available in a free version that will likely have a limited feature set and support. If that is true and the same applies to Work Chat, then a company’s cost to try the app is negligible.
Facebook’s land and expand strategy for enterprise sales may indeed work and, if it does, Work Chat would likely be swept along with the tide of Facebook at Work adoption. Facebook has already said that some of the roughly 300 companies in the Facebook at Work trial program have announced their intent to scale its use next year. Heineken has already grown its user base from 40 to 550. Royal Bank of Scotland plans to have 30,000 employees on the platform by the end of Q1 2016 and aims to roll it out to all 100,000 employees before the end of the year.
It is entirely possible that Work Chat will see those kind of adoption numbers as well, resulting in a decent share of the enterprise real-time chat market segment for Facebook. Other vendors of communication and collaboration platforms, suites, and applications should not dismiss the potential impact that Facebook at Work and Work Chat could have on their revenue streams. If Facebook can build an enterprise sales capacity and execute well, they will become a formidable competitor.

This Digital Transformation is Not the One You’re Looking For

I was sorting through some browser tabs that had been open for a couple of weeks on my laptop and rediscovered a press release that had caught my attention earlier. After rereading it, I realized that I had left the release up in my browser because it could be the poster child for the inane manner in which technology vendors and IT consulting firms are talking about and selling what they very much want to be the next big thing – Digital Transformation.
CA Technologies’ press release was a horrific example right from the start. It’s title, “CA Technologies Study Reveals Widespread Adoption of Digital Transformation”, nearly made me spit coffee all over my laptop. Really? Is Digital Transformation (DT) something that can be adopted? Hardly. After all, DT is not a discrete technology. Rather, it’s a never-ending journey that organizations undertake to better the efficiency and effectiveness of their operations.
DT involves making changes to business objectives, strategies, models, cultures, processes and so many other elements. Many of those changes can be supported by the deployment and adoption of enabling technologies, but DT isn’t about the technology itself. It’s a mindset, a way of thinking and acting as an organization that spans across all of its planning and execution.
In that regard, DT is very much like the discipline known as Knowledge Management (KM) that was similarly a darling of technology vendors and their consulting partners nearly 20 years ago. Most large enterprises at least considered implementing KM practices and technologies. In fact, many did, although the majority of those ‘efforts’ failed to survive an initial pilot program. In the end, only a few big companies, the ones that treated KM as something more than a technology set to be adopted, whole-heartedly embraced the discipline and successfully wove it into nearly every aspect of their businesses.
We’ve seen the same phenomenon play out with Social Business. McKinsey & Company has been tracking the deployment and impact of social constructs, behaviors and tools in a cohort of roughly 1,500 enterprises for nearly 10 years now. Earlier this month, in a teaser to its complete report of annual survey results, McKinsey published these related and telling findings:

“…35 percent of the companies had adopted social technologies in response to their adoption by competitors. Copycat behavior was also responsible for their diffusion within organizations, though at a slightly lower rate: 25 percent of all employee usage. Roughly a fifth of the companies we studied will account for an estimated 50 percent of all social-technology usage in 2015.”

Most organizations and individuals tried to ‘adopt’ social technologies because they felt competitive pressure to do so (thanks, in part, to vendors and consultants), not because they had investigated and understood how ‘being social’ at work could change how well their organization actually performed relative to both its current state and its competitors. On the other hand, a minority of organizations (20% in McKinsey’s survey) have made the dedicated, all-in commitment needed to succeed with Social Business.
Today, we are beginning this cycle all over again, this time under the moniker of Digital Transformation. Consider these findings from CA’s study:

“Digital Transformation is being driven as a coordinated strategy across a majority of organizations (55 percent)…  As a result, 45 percent of respondents have already seen measurable increases in customer retention and acquisition from their digital transformation initiatives and 44 percent have seen an overall increase in revenue.”

In other words, if you aren’t “adopting” DT already, you’re toast. At least that’s what CA and other technology vendors and consultants want you to believe in a fresh state of panic. Hence these findings from CA’s study:

Digital Disrupters have two times higher revenue growth than mainstream organizations. They report two and a half times higher profit growth than the mainstream organizations.”

That may be accurate, but surely those “Digital Disrupters” did not achieve the reported results merely by adopting technology, whether it be from CA or another vendor. They’re the ones who have taken a comprehensive view of DT and, as CA itself puts it, have “…many projects underway in multiple areas of the company, including customer services, sales and marketing, and product/service development.” It’s not a coincidence that CA was only able to include 14% of the organizations surveyed in the group it labeled “Digital Disrupters”. That matches up pretty well with McKinsey’s finding of just 20% of organizations surveyed making more than a token effort at becoming a social business.
All of this is to say beware of vendors and consultants selling technology as the cornerstone of DT initiatives. Yes, technology is an invaluable piece of the puzzle, but it’s not the only or most important one. DT can’t simply be adopted; every aspect of it must be considered and actively embraced by the entire organization.

FCC mobile competition report once again dodges its key question

Another year, another report from the Federal Communications Commission on the state of competition in the U.S. mobile industry, and as has been the case in the last four years, the FCC didn’t actually reach any conclusion on whether that industry is competitive.

Instead the FCC just presented the facts it gathered over 2013 and the first half of 2014: More consolidation has eliminated big regional operators like MetroPCS and Leap Wireless as independent providers and put more subscribers and revenue into the hands of the Big Four (AT&T, Verizon, T-Mobile, and Sprint), which accounted for 96 percent of the U.S. market.

The report (pdf) noted that while 99.9 percent of the population lived in census blocks with at least one mobile carrier providing coverage, the number of overall service choices for consumers is in decline. The percentage of people with a choice beyond the Big Four was only 22.8 percent, though the report did find that 91.4 percent of the population did have access to at least four different carriers. While carrier choice may be shrinking, the report also found that new technologies like LTE are expanding to further corners of the country, giving consumers more service options.

The FCC claimed that it can’t draw any single conclusion about whether the overall wireless market is competitive or uncompetitive since there are so many other factors that go into such judgment beyond those it analyzes in its reports. That may be true, but it also means the report can mean anything anyone wants it to be.

For years consumer advocacy groups have want to the FCC to come down more strongly on the issue since its view on the state of competition would have a big impact on the big mergers and buyouts that wind up in front or regulators. Meanwhile, the mobile industry takes the FCC’s lack of conclusion as a sign that the market is plenty competitive after all. For instance, here’s the statement CTIA VP of Regulatory Affairs Scott Bergmann issued after the report was released:

“The FCC’s report yet again proves that America’s wireless users enjoy a variety of choices, from carriers to service plans to devices. According to both the FCC’s report released today and more recent figures on the competitive landscape of America’s wireless industry, 97 percent of Americans may choose from at least three different carriers while a previous report said only 15 percent of wired users may choose from at least three different providers. With more than 700 different smartphone plans offered by the four national carriers, and more than 790 unique handset models to choose from, it’s no surprise that the Department of Justice Assistant Attorney General for Antitrust Bill Baer said that when the agency looked ‘long and hard at the wireless industry,’ it found ‘the [wireless] market is thriving and consumers are benefiting from the current competitive dynamic.’”

 

Microsoft axes its EU browser choice mechanism after five years

Five years ago, Microsoft began offering a choice of browsers to European customers who were booting up a copy of Windows for the first time. It did this in order to settle an antitrust case with the European Commission and avoid a hefty fine.

That commitment – which [company]Microsoft[/company] wasn’t entirely consistent in sticking to — ended on Wednesday. The firm has accordingly axed its browser choice mechanisms, telling users: “Microsoft encourages customers who want more information about web browsers or want to download another browser to do so by visiting the websites of web browser vendors directly.”

Windows is obviously still a big deal, but not as market-dominating as it was back in 2009. Back then, if you wanted a personal computer, you were most likely to buy a Windows PC. As of next year, according to analyst estimates, you’re as likely to buy a tablet instead – though don’t write off the PC just yet, particularly in Europe and the U.S.

The main reason that the European Commission wrung the browser choice concession out of Microsoft was that the company was trying to extend its market dominance past the operating system to the next big platform: the web. It was doing so by making Internet Explorer the default browser in Windows, something that the Commission saw as an anticompetitive abuse of its dominant position.

By removing that default status, other browsers got their chance to shine – it was no longer necessary for users to already know about that other browser and consciously visit its download site on Internet Explorer, for them to be a click away from downloading it. Five years later, Chrome is now the most popular browser in the world.

Internet Explorer browser choice

And the statistics for Europe versus North America, for example, are telling. Looking at desktops specifically, in North America, Chrome has a 41.52 percent share of the browser market and Internet Explorer is in second place with 32.75 percent. In Europe, Chrome has a 47.2 percent share and IE has just 17.53 percent, putting it in third place behind Firefox (on 25.68 percent.) While regulatory intervention isn’t the only reason for this situation — Chrome still beats IE in North America, where there was no intervention — it’s likely to have been a big one. Defaults matter.

The rise of Chrome across the desktop and mobile, with [company]Google[/company] as its default search engine, has become a key factor in Google’s 90+ percent dominance in the EU search market. Now it’s that company’s turn under the Commission’s antitrust spotlight, thanks to its abuse of that position to stamp out vertical search rivals and the like. If the Commission manages to cut Google down to size with whatever the settlement of that case entails, who knows which future monopolist will get the chance it craves?

This article was updated at 9.20am PT with some statistics about browser share, and slightly rearranged around that addition.

EU market tests Booking.com antitrust commitments

The European Commission has asked for comments as it tries to settle a series of antitrust cases surrounding the hotel-booking website Booking.com. The Dutch company, owned by U.S.-based [company]Priceline[/company], is being investigated by competition authorities in France, Sweden and Italy over its price parity clauses. Currently, Booking.com forces hotels that it lists to offer the platform’s customers the same room prices (or better) as they offer anywhere else, online or offline. The company has proposed allowing the hotels to offer better prices through other online travel agents, though they still wouldn’t be able to offer better prices through other channels. The Commission, which is coordinating the national investigations, is “market testing” these commitments until the end of January.

Android antitrust investigators ask Yandex to detail Google woes

The Russian web firm has confirmed that it was asked to provide evidence in a potential EU antitrust case against Google, over its bundling of core services with Android. Investigators are also looking into claims of Google forcing manufacturers to delay or cancel devices using non-Google services.

How Europe could cut Google down to size without splitting it up

Google’s EU search antitrust case is a complex beast that is being overloaded by vested interests. Competition commission Margrethe Vestager would be best advised to keep her solutions simple, and here are some suggestions for what those solutions might entail.

European Parliament reportedly wants Google to be broken up

The Parliament is, according to the Financial Times, poised to call on the European Commission to separate Google’s core search business from its other businesses or take some other serious measure to tackle the firm’s dominance in the EU.