Reality Check | Ephraim Schwartz | September 2007

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September 2007

September 25, 2007 | Comments: (0)

Can SAP make the transition to a services business model?

Saas and SAP Flak is already flying around SAP's Business ByDesign. And it's not entirely about the suite of online services itself. It's more a question of whether a stalwart ISV of the traditional, client/server-packaged-applications-for-the-enterprise vendor can become a major player in the SaaS (software as a service) market for SMBs.

In SAP's favor is the fact that ByDesign is a more comprehensive solution than what is on the market now, says Paul Hamerman, vice president of the business process and applications group at Forrester. Hamerman points out that most SaaS offerings are point solutions, mainly for CRM or HR. There are a few exceptions such as NetSuite, which offers ERP and e-commerce, in addition to CRM.

SAP ByDesign, on the other hand, offers a full suite of solutions for running an entire business, including compliance management, CRM, executive management support, financials, human capital management, project management, supplier relationship management, and supply chain management.

With a lineup like that, how can SAP lose?

For one, SAP's business model has thus far been set up around licensing and maintenance. Can the company really get its head around the nuances of monthly billing, let alone offer the kind of sales and customer service models necessary to woo SMBs?

On the revenue side, SaaS has a long ramp up period to profitability, Hamerman notes. He points out that NetSuite is losing "tons of money" and that SuccessFactors is "losing 100 percent of their revenue."

In other words, SuccessFactors' net loss equals its revenue.

Still, Hamerman is positive about SAPs long-term success, believing that SAP will keep its current enterprise business and revenue stream flowing and that SaaS will earn SAP incremental revenue rather than cannibalizing its current business.

Gartner analysts are far more negative.

Back in June, a group at Gartner got a good look at what was then known as A1S and there were a lot "ifs" in their final recommendations.

Last week I caught up with Rob Desisto, one of the group of A1S naysayers, to see whether Gartner's opinions, findings, and recommendations have changed since June. Desisto said no. SAP revealed a few more details, specifically around the database on the back end that Gartner had not been aware of in June. Pricing has since been announced. Otherwise, everything the analysts said in June still holds.

While being optimistic because "the business application market lacks a global leader in this category," the Gartner group felt that the inability to customize the service models and the paucity of implementation partners offers a "significant" risk to the offering's success over the long term.

Whereas Forrester's Hamerman feels that offering a full suite of business solutions is a plus, the Gartner group contends it is a negative.

A negative, I suppose, because many companies want best-of-breed applications rather than a horizontal, one-size-fits-all solution.

In fact, Gartner warns that unless SAP incorporates a customization/extension model based on enterprise services "and an integration method with on-premises software," users should not consider the product viable.

This has been promised, with no details available, and has not been demonstrated to date.

Forrester's Hamerman is also quite disappointed with the UI.

If SAP is truly going after the SMB market, then you would think the first item on its new application agenda would be a simplified interface. Unfortunately, Hamerman says, the UI "needs more refinements. It is not a big improvement over the current ERP UI."

Yikes.

Hamerman had nicer things to say about the configuration layer, however, finding the set of checklists and procedures and tools to rapidly configure an application to a customer's requirements, "innovative."

The big unanswered question is, Can SAP keep its two domains, packaged applications for the enterprise and SaaS solutions for the SMB market, separate?

Gartner says that, at present, the "product will not functionally support the majority of SAP's installed base."

Well, if SAP believes that strategy will work over the long term, it isn't reading the market right. And the rock and the hard place for the software giant is this: If SAP is wrong, as I believe it is, and even if it is able to turn the ship around to offer SaaS solutions to the enterprise, this move will dramatically affect its business model in a way that may not be so easy to recover from.

The road ahead for SAP is the same road ahead for Microsoft, Oracle, and all of the traditional client/server vendors. The big shakeout is happening right before our eyes. Over the next couple of years, the software landscape will look entirely different.

Posted by Ephraim Schwartz on September 25, 2007 03:00 AM

September 20, 2007 | Comments: (0)

Cities reconsidering Wi-Fi coverage

It is always nice to be right. And so I patted myself on the back today after reading a story by Judy Keen, in USA Today,Cities turning off plans for Wi-Fi. that said Wi-Fi as a city service is running into roadblocks and many municipalities are having second thoughts.

Here's the first two graphs.

"CHICAGO — Plans to blanket cities across the nation with low-cost or free wireless Internet access are being delayed or abandoned because they are proving to be too costly and complicated.

Houston, San Francisco, Chicago and other cities are putting proposed Wi-Fi net-works on hold."

This is something I predicted a long time ago:
November 1, 2002, Coffee, Black, no Wi-Fi

Public wireless in a death spiral August 15, 2003.

And on April 30,2004 Wireless hot spots in critical condition .

There's even more but why bore you with the details.

The point is the that as predicted Wi-Fi roll outs require far too many players for each player to get a piece of the revenue pie that makes it cost effective for them to participate.

The only way it will work is if the municipality in question paid for everything. But alas, Wi-Fi which promises to eliminate the digital divide between the haves--those with broadband access--and the have nots--those without--does not have the same clout as a baseball or football stadium.

Plenty of cities are more than willing to pay for that.

WiMAX is a possible solution in that less infrastructure is required and it does run on an IP network, but I doubt the big WiMAX players, Intel and Sprint for example, will be willing to give away anything at this point, unless maybe like a sports stadium, they will get to name the network. So, instead of Wi-Fi coverage users will have to say something like, "I use I-Fi," aka the Intel Network. Just a thought.

The other more likely solution is 3G data cards in laptops and 3G smart phones, both of which are here in terms of client devices and infrastructure.

I'm just not sure if cellular providers are willing to help eliminate the digital divide or at least pay as much lip service to it as the politicians and the Wi-Fi providers did.

Nevertheless the fact is that fees for data are continuing to drop and smart phones are getting more and more powerful. So in a few years we won't need Wi-Fi or even a laptop unless it sits on our office desk.

Of course, Wi-Fi will always have a place as a tremendous point solution for connectivity, but if we are talking about horizontal broadband, cellular will win out.

Posted by Ephraim Schwartz on September 20, 2007 02:56 PM

September 19, 2007 | Comments: (0)

SAP SaaS solution is not just about technology

When a company like SAP unveils a new software service it is usually big news. This was the case today when SAP announced SAP Business ByDesign, a full suite of business solutions delivered and based on the SaaS [Software as a Service] model.

Technology aside, I was wondering how SAP, a traditional client/server company, will handle what amounts to an entirely different business model, i.e., a different method of generating revenues.

Under the old model, a customer paid all the money up front. Under the new model it is pay over time. In the old model revenues were created around licensing fees and maintenance.

Billed monthly, SaaS creates a different sales and billing process and a different way of delivering customer service.

From a financial reporting standpoint, SaaS affects cash flow and sales compensation. Even the financial statement must be changed to include a line item for subscriptions.

"In the old model, you got your money and ran," Greg Gianforte told me.

I spoke with Gianforte over the phone so I couldn't tell if he was smiling when he said that, but he probably was since he is the CEO of RightNow, a SaaS provider to the enterprise for customer service.

Gianforte says with packaged applications there was never the sense that you were delivering a service. After all, that's what SIs [System Integrators] were for.

An annuity business is a different animal, Gianforte claims, and the kind of meat eating, blood thirsty account managers that sometimes exist in the traditional client server world won't be as successful when they try to manage an annuity business.

Because service was typically handled by someone else--th SI--the packaged application vendor never felt responsible for the customer's success. Under the new model, if the vendor doesn't deliver success, they will probably be gone in a few months or less.

Gianforte cites by way of warning that as soon as Siebel introduced what he calls a "viable on demand solution" their license revenue dropped off a cliff.

While Paul Hamerman, a senior analyst with Forrester, doesn't believe that a SaaS offering from SAP will cannibalize SAP's enterprise business, Gianforte strongly disagrees saying, "why are large customers not interested in faster deployment and lower cost of ownership?"

Why indeed.

Posted by Ephraim Schwartz on September 19, 2007 02:34 PM

September 18, 2007 | Comments: (0)

Microsoft guns for Adobe rich Internet apps crown

Flash and Flex owned rich Web application development until Silverlight came along

There is little doubt that RIAs (rich Internet applications) are here to stay. After all, the promise of desktop app functionality delivered through the Web is compelling.

But what remains to be seen is whether content providers, Web designers, and Web 2.0 application developers will suffer as a result of the development-platform and client-player fight brewing between Adobe and Microsoft.

My conclusion? Maybe, sort of, and it depends.

For the longest time, Adobe stood nearly alone, claiming 90-plus percent of the RIA development market. RIA developers simply used Flex on the back end and Flash on the front.

And then came Microsoft's announcement of Silverlight, a runtime meant to compete with Flash.

The truth is that there can be no definitive answer as to the problems a competing development platform from Microsoft will bring; it depends entirely on the angle you are viewing it from.

End-users, who will access RIAs through a browser, will likely have little to worry about. Browser leaders Microsoft IE and Mozilla Firefox will both offer a plug-in for each. Thus, no matter how the content was developed, your PC or Mac should in theory be able to seamlessly view and use it.

Unless, of course, the Silverlight plug-in from IE offers users of other Microsoft applications and components additional advantages. In other words, Silverlight, being a .Net-compatible technology, could offer better integration with other applications built on .Net.

Chris Swenson, director of software analysis at NPD Group, says that Microsoft actually has two development environments for Silverlight: Visual Studio and all of its Expression applications.

Designers will be able to create stuff in Expression, the results of which can then be imported into Visual Studio, allowing a unique and, some would say, first-time collaboration between developers and designers.

"Microsoft has a huge installed based of Visual Studio users who would never touch [Adobe Flex]," Swenson says. And because Microsoft has imported it to the .Net platform, you can run it in both Windows and Mac through Silverlight.

While this could result in lock-in, Roger Kay, founder of Endpoint Technologies, says that, in general, integration is better for consumers but worse for competitors.

"Apple, which is not being charged as a monopoly, integrates everything," Kay pointed out.

It is true that integrating all components using the same platform offers end-users and IT a simplified approach. Rather than having to figure out an infinite number of pathways through heterogeneous technologies, integration presumably means all of the platform's components have been tested to ensure that they work with one another.

In the long run, integration could result in de facto monopoly, stifling innovation.

Is this the path Microsoft will go down? It wouldn't be the first time.

One thing is certain, from the folks I spoke with: Silverlight is an excellent technology.

Rob Enderle, principal at Enderle Group, called Silverlight, "super-Flash."

I also spoke with a very large company (not Adobe) that claimed Microsoft was trying to usurp the Internet with Silverlight but admitted that the technology is a powerful, exceptionally good RIA player that is "visually compelling" with the ability to render 3-D graphics and full-motion video.

The good news for the end-user, however, is a double-edged sword for IT.

Remember: Most Web sites are designed to drive commerce. If, as a consumer, you like the solution that Silverlight offers, IT will have to respond.

"In a contest between IT and line-of-business executives, line wins," Enderle says.

So if the line organization says Flash can't do what we want done, IT will have to redo it for Silverlight.

And while Adobe never has and never will own the entire vertical stack for RIAs, Microsoft does and can offer it to IT. They can put it all together in a nice package.

IT may worry about lock-in, but if it drives revenue, then IT will be beholden to Microsoft. There is no way around it.

End of story.

Actually, there is a lot more to this story. And here's a tease: .Net runs on top of a CLR (Common Language Runtime). It's not in Silverlight 1.0 but is promised next year in Version 1.1.

Silverlight 1.1 will include, in the package and the browser, the CLR and a large subset of .Net class libraries, perhaps with the code complied in C#. What will then be running inside the browser will basically be a .Net application.

Where that will lead raises issues worth discussing.

Posted by Ephraim Schwartz on September 18, 2007 03:00 AM

September 17, 2007 | Comments: (0)

Is Salesforce planning to offer an online operating system next?

While the big news at the Salesforce.com Dreamforce 2007 user conference in San Francisco was leaked a week early, CEO Marc Benioff added more details and said something either inadvertently or on purpose that hints at an even bigger role for Visualforce and its platform-as-a-service technology.

The unveiling of Visualforce was the major announcement for the user conference because it represents yet another significant step forward in creating what Benioff calls a Platform-as-a-Service.

Visualforce adds the user interface as a service to Salesforce's other platform components: infrastructure and security, database services, integration services, logic services, and application services, now called in its entirety, Force.com

Benioff compared Force.com to other well-entrenched development platforms, Java and .Net in particular.

Although he didn't state it outright, there was a hint during his address of something more. What, it seems to me, Benioff hinted at was that Visualforce combined with all the other platform components beneath it could in fact rival Microsoft Windows, at least as a quasi-operating system.

This occurred when Benioff ticked off the many different types of devices that developers could design a user interface for using Visualforce.

Among those devices were laptops, desktops, mobile devices and even medical devices.

If, Salesforce is indeed targeting medical and other industrial devices that typically use an embedded proprietary operating system or one with somewhat limited capabilities like Win CE or an OS from Wind River, then Visualforce could become the front end for an online operating system that includes the security, the database, the application layers and now the UI.

In an interview following the keynote, Parker Harris, a Salesforce.com co-founder said the technology for working off line, which includes the UI, is currently part of the platform.

At first blush an on demand embedded operating system sounds like an oxymoron. However, add in more reliable networks, the ability to work off line when needed, and the ubiquity of online access through Wi-Fi and cellular, and it begins to sound far less outlandish.

By starting with devices that have limited capabilities Salesforce could be heralding a major advancement in what the future network is able to deliver.

Posted by Ephraim Schwartz on September 17, 2007 02:36 PM

September 14, 2007 | Comments: (0)

Cell phone ban for teens is ridiculous

I never heard of anything so ridiculous as just barring teenage drivers from using any "electronic device" while driving.

The rationale, according to California Governor Arnold Schwarzenegger who signed such a bill into law on Friday, is that "teenagers are more easily distracted."

More easily distracted than whom? A mother fighting with her teenage daughter while mom is driving? A husband fighting with his wife over cellular? An employee being told don't bother to come back to the office, you've been laid off anyway?

From what I've seen as a pedestrian and as a driver cell phones are a distraction to just about any human being and should be banned from use, even with headsets, while driving period.

Actually, there are some studies on the topic. Here's an excerpt and a link.

"Researchers at the University of Illinois at Urbana-Champaign have tested the hands-free approach and found that drivers – young and old – struggled to see dangerous scenarios appearing in front of them."

It is ridiculous on another level as well. By picking out one particular age group a precedent is being set that could have repercussions down the rode.

Why not ban anyone over 65-years-old because that group may have more difficulty multi-tasking? I'm sure there is some study out there that proves it.

Next, let's ban any driver with a baby in a car seat because it is likely that the baby at some point will start crying and it is definitely harder to drive, talk on the cell phone and try and keep baby quiet simultaneously.

Actually, the entire cockpit of a car, by the way isn't a car nowadays also an electronic device, is filled with distractions from GPS screens and multi-change CD drives, to iPhone ports and climate control.

I'm sure the politicians will say barring teens is a first step and that it is better than nothing.

Well, what is the next step, legislation to ban 20 somethings from cell phone use in a car because they are busy planning the next party, followed by thirty-somethings who trying to figure out what they want to do for the rest of their lives, followed by...well you get the point.

Posted by Ephraim Schwartz on September 14, 2007 02:19 PM

September 12, 2007 | Comments: (0)

12 Governors call on Congress to increase H-1B cap

In an unprecedented move, one dozen governors sent an open letter to Congressional leaders requesting that the Senate and House raise the cap on H-1B visas and permanent resident visas [Green Cards].

The letter was sent to Harry Reid, majority leader, U. S. Senate, Nancy Pelosi, Speaker of the House, minority Senate leader Mitch McConnell and John Boehner, minority leader in the House and signed by the governors of Washington, Massachusetts, Wisconsin, California, Wyoming, Kansas, Indiana, New York, Colorado, Arizona, Nevada and Texas.

For the full text of the letter and for the names of each governor go here.

The governors both patted themselves on the back--"we continue to make significant investments in math and science education--" while claiming at the same time that more needs to be done, "we and our nation face a critical shortage of highly skilled professionals in math and science to fill current needs."

Unfortunately, the letter did not cite any actual statistics to back the governors' claims of a "critical shortage."

The letter continued with what I would call a nice bit of double-speak:

"We urge Congressional action this year that recognizes states' immediate need to recruit and retain professionals in key sectors, while we continue to produce here at home the skilled workforce our companies need in the long-term."

So, when we produce here at home "the skilled workforce our companies need" are the governors going to send to Congressional leaders another letter advising them to shut the H-1B visa program down?

Or better still, if someone can show these governors the statistics that there is no shortage, rather the call for more H-1B visas is motivated by the desire for cheap labor will they take back their letter and say, never mind?

I guess we will have to wait and see.

Posted by Ephraim Schwartz on September 12, 2007 02:55 PM

September 12, 2007 | Comments: (0)

IBM announces system-on-a-chip breakthrough for multi-band cell phones

The holy grail for all chipset and device manufacturers is to reduce the chip count.By doing so the BOM [Bill of Materials] is also reduced as is the heat and power generated, critical in small mobile devices such as cellular handsets.

This is often called system-on-a-chip.

So I suppose a few corks were popped today when IBM announced that it has designed a way to put multiple RF functions onto a single chip.

The chip, designanted CMOS 7RF SOI, will allow manufacturers to burn multi-band RF frequencies and analog functions onto a single semiconductor.

If the technology does indeed result in lower cost cell phones it should be good news for emerging markets that look to mobile phones as a low cost way of by-passing deployment of traditional telecommunications infrastructure for communications.

Evaluation chips along with design kits will ship in the first half of 08.

The technology is also expected to "minimize insertion loss and maximize isolation" which will improve signal loss and the occurrence of dropped calls, according to an IBM statement.

Posted by Ephraim Schwartz on September 12, 2007 02:06 PM

September 11, 2007 | Comments: (0)

R&D sets sail for offshore

A rising tide of software development service providers have more ISVs outsourcing core components

Outsourcing and offshoring are not just for IT services and business processes anymore. A small but growing niche of providers targeting R&D for application development is coming to the fore.

I'm not sure which came first, the demand for software development services or the service providers themselves, but my guess is that, like all trends, it is probably a case of the need for something new perfectly timed with the technology that makes it possible.

The concept itself has been around for a while. Companies such as General Motors were among the first to employ what the manufacturing industry calls contract manufacturers. As part of the model, GM enlists other companies to manufacture almost all of its cars' components, which are then delivered to GM for assembly. The major PC manufacturers do this as well. In fact, PC manufacturers even leave the assembly to OEMs.

The software industry, however, has been slow to adopt this model. But now, thanks in part to SOA outsourcers' ability to deliver components to ISVs, software companies are beginning to catch on to this development strategy -- one that engineering companies such as Ford, Boeing, and Nortel practice routinely.

Software development outsourcers work with the CTO rather than the CIO, says Peter Harrison, CEO of GlobalLogic, one such service provider.

Typically, an ODM (original design manufacturer) will work with a customer to create the design. As with hardware, software contract manufacturers then take on anywhere from 10 percent to 100 percent of product development. In many cases, especially with startups, says Harrison, a company comes to GlobalLogic with just an idea, and GlobalLogic helps give the idea shape and texture.

Within the past three years, the concept of code libraries and reusable code and processes has taken on a new meaning, says Bob Kramich, vice president of business development at DarwinSuzsoft, an outsource service provider based in the United States and China.

Reusable processes are key to contract software manufacturing. What an outsourcer has developed for one customer can now be repackaged for another, reducing development time and cost. For example, in mobile software development, memory utilization is a big issue that when solved can be used many times over. And then there is all the back-end synchronization with the hub. Such challenges are common to most mobile development endeavors, says Kramich, and they can be solved rather quickly by outsourcers who have done it for customers many times over.

Other recurring components include security and data encryption, plus the need for performance testing and optimization. All these things are consistent across every application.

Part of what is driving this trend is the nature of today's startups, which are more likely to be launched by business-oriented investors than technologists. To these individuals, the idea of outsourcing the design and development of software at a lower cost than building an in-house infrastructure is very appealing.

As this trend grows, development will accelerate, and the cost of software will go down. There will also be more competition, as the bar is lowered for buying into the creation of a new product.

GlobalLogic's Harrison believes the model will also result in more user-friendly applications tailored to business users. As opposed to SAP, for example, which built everything but the operating system, including the application server, the message queue, and the whole stack, these days there is a greater willingness among software vendors to adopt third-party processes and components. After all, it frees them to focus on the differentiating aspects of their solutions, rather than having to create every possible layer.

Harrison, however, believes that even companies' crown jewels will eventually go this route.

"The days of the three- to four-year Vista product lifecycles are coming to an end," Harrison says.

Of course, as predicted here numerous times, eventually these software service providers will create their own application solutions and sell them back to the enterprise, thus bringing the trend full circle.

Posted by Ephraim Schwartz on September 11, 2007 03:00 AM

September 10, 2007 | Comments: (0)

Was the iPhone price cut and the rebate part of an ingenious marketing plan?

Apple announced today that it has sold its one millionth iPhone.

Pretty good. Congrats from this blogger.

But, they are giving back $100 on every iPhone sold that means they are losing $100 million dollars. That has to be more than chump change even for Apple.

Well, things are not always as they seem.

The $100 is actually a store credit. So, if you figure that Apple's margin on products is about 35 percent, standard in retailing, then they are actually only giving away $65 or $65 million.

It's getting better all the time.

Next, how much would an Apple marketing executive give to bring one million people back into Apple stores? One million people who perhaps were not planning on returning until, say Christmas time.

Now you've got one million people coming into the store looking at all that eye candy and maybe, just maybe they will buy something else.

My guess is they will end up having to add to their $100 store credit and end up walking out with lots more stuff than they planned on buying.

A nicely timed promotion to coincide with those coming in to get their rebate is probably in the cards.

Nice going Apple. Is this a case of Apple marketing being handed lemons and making lemonade? Or perhaps, just perhaps, it was planned that way from the very beginning.

Who knows what evil lurks in the hearts of marketing men, and women.

Posted by Ephraim Schwartz on September 10, 2007 09:46 AM

September 07, 2007 | Comments: (0)

Patent reform favors high tech over biotech

While the recent battle over the Patent Reform Act of 2007 plays itself out in Congress, the really big patent news took place over at the Supreme Court this past spring and also at the Patent Office just last week.

Interestingly, in general it can be safely said that the Patent Reform Act, the Supreme Court ruling and the Patent rule changes all favor high tech over the biotech and pharmaceutical industries.

For the full story on the Patent Reform Act of 2007 see InfoWorld news, House passes overhaul patent bill.

I spoke with Steven Saunders, patent attorney and partner at Bromberg & Sunstein in Boston for an update on all the issues.

Patent Reform Act

One of the significant changes in the Act addresses the apportionment of damages clause.

Up until now when a company or an individual won a patent infringement suit they won huge amounts of money. This bill cuts down the awards substantially, said Saunders.

Because the high tech industry is built on thousands of small patents while the pharmaceutical industry typically would have one or two patents that covers years of research, pharmaceutical companies would like to see awards kept high to discourage patent infringement while high tech companies hope that by limiting damages it will also limit the huge number of so-called nuisance suits these large companies receive year in and year out.

Patent Office Rule changes

A week and a half ago there were dramatic changes at the Patent Office limiting the number of claims that can be attached to a patent.

A claim appears as numbered sentences at the end of the patent and it is how you define the scope of your patent and your protection. In other words it helps to clarify what the significant portion of the patent covers.

Until now, patent applications typically had dozens of claims. The patent office has now put a limit on that.

Another rule change limits the number of "continuation applications" on the same concept that can be filed.

Continuation applications are second, third, ad infinitum, application on the same patent, each one redefining the significance of the patent in a different way.

The pharmaceutical industry which may have a single patent to cover ten years of research at a cost of hundreds of millions and sometimes billions of dollars wants as much protection in as many ways as possible for a patent.

The drug companies take advantage of this ability to file multiple versions of the same patent to figure out what is the most valuable part of the patent to protect. They could keep the patent process going by following multiple continuations until they found the best way to defend it.

The pharmaceutical industry expects a long multi-year approval process, anyway, and so they are willing to file multiple continuations.

On the other hand, high tech wants to get to market quickly. It has lots of small patents. A single solution may include 50 patents. High tech especially the larger companies, gain no benefit from numerous "claims" and continuation applications.

"The [overall] environment for patents is definitely hurt," said Saunders.

Biotech likes strong patent rights, whereas electronics companies aren’t as keen on it. Saunders says even if patents went away a large high tech firm would still be in a good position to defend their turf whereas that is not the case with the pharmaceutical industry.

Supreme Court Rules

Last April, the Supreme Court ruling in the case of KSR International v. Teleflex ruled in favor of KSR.

For a full explanation of this case read my Reality Check column.

Basically, it makes it easier to prove that an invention, is "obvious." Here, "obvious" is a technical term, meaning a company took known technology and while they may have put it together in a unique way, it was obvious that that could be done so the finished product does not deserve a patent.

The Supreme Court ruled that a company doesn't need to prove a patent is obvious in order to defend itself against a suit.

"You don’t need to show a motivation in the state of the art to combine the patents together," said Saunders.

This will severely limit the number of patents granted, good for the large high tech companies that are slapped with hundreds if not thousands of law suits annually from smaller companies.

That is why Microsoft and Cisco filed "friends of the court" papers in the suit.

The Court went beyond making it easier to prove an invention is obvious and therefore not patentable by saying you can resort to common sense to prove that it was obvious to try to link two or more technologies together.

In conclusion, between the Reform Act, the Supreme Court and the rules changes the environment for patents is definitely hurt, Saunders says.

Will there be less innovation? Saunders seems to think so.
Why would a biotech or pharmaceutical company invest $500 million and more without patent protection, Saunders asks?

Posted by Ephraim Schwartz on September 7, 2007 02:54 PM

September 06, 2007 | Comments: (0)

Apple iPhone demonstrates the value of brand

The value of brand is incalculable.

Consider that Apple entered the extremely crowded cell phone handset market and became a major player overnight.

Stats coming in for July sales of Apple iPhones put them as the market leader for the month.

I don't think you can over estimate the significance of brand when you read statistics like that.

The truth is the Apple brand name gets its value from other products that offer a combination of design and utility hard to match in either high tech or, with the iPod, consumer electronics.

But in an industry, telecommunications, where the major players, Nokia, Samsung, Motorola, refresh their lines every six months with dozens of new flashy cellular handsets it is nothing short of amazing that Apple, as a newbie in the market can command both the respect of its competitors, who now claim they have an iPhone killer, and customers who were willing to pay quite a premium to be one of the first to own an iPhone.

Of course some of those customers may be having some regrets now that Apple announced a whopping $200 price reduction just two short months after it was launched.

Nevertheless, I can't think of another brand that has successfully entered a new market with similar success. Neither can I imagine a company that could get away with a huge price reduction so soon after launch.

Kudos have to go to the engineers and industrial designers who were able to leverage past triumphs and create another winning product that adds even more luster to the brand.

With such a string of successes I wonder what Apple might build next?

Posted by Ephraim Schwartz on September 6, 2007 09:29 AM

September 05, 2007 | Comments: (0)

Installation difficulties with Windows LIve: Is it just me?

Okay, so it is nice to write about Windows Live and opine on whether or not they are playing catch up.

I could also cite all of Microsoft's past victories where they came from behind only to obliterate their competitors.

But before I do that has anyone out there actually tried to downloaded Window Live?

I'm asking because I tried and found it quite confusing. For example, I didn’t want to add Microsoft's Hotmail to my account, I already have three emails but there seemed to be no other choice if I wanted a user ID for Live.

But if I did that would it make Hotmail my default email and what problems might that cause?

So, like so many times before when a service or program has piqued my curiosity I ended up abandoning it, afraid of the consequences to my delicate system.

I know I'm opening myself up to abuse but is anyone out there as lame as I am?

Posted by Ephraim Schwartz on September 5, 2007 02:40 PM

September 04, 2007 | Comments: (0)

ISO rejects Microsoft OOXML but the battle is far from over

While Microsoft lost round one in its campaign to gain ISO approval of its OOXML [Office Open XML]file format, it is best to remember this is still early in the game, especially when it comes to battles over standards.

What the ISO membership really did when it rejected fast track status for OOXML as a standard was say to Microsoft wait in line like everybody else. We don't care if you are a celebrity this will go through normal, not expedited, channels.

Now, Microsoft will have to respond to the objections or comments from the members on the OOXML specifications.

Despite the fact that some of the objections to OOXML sound serious-- the Brazilian contingent alone raised 60 objections-- for Microsoft that may be in the famous words of Ralph Kramden, "a mere bag of shells." [For you youngsters out there that means it is trivial.]

If you recall, I wrote about the fight to gain approval for IEEE 802.11n in which the standard process fielded 12,000 comments, 6,000 alone from AT&T Labs, each of which had to be responded to.

In fact, IEEE 802.11n is still not officially approved but it is now close enough to approval that manufacturers are building products off the current specifications.

Final approval won't come until 2008.

The real question is what will this delay mean to Microsoft and OOXML?

My personal feeling is Microsoft has time. ODF [Open Document Format], its open source rival, is still in its nascent stage. Given even a year's head start over OOXML, ODF will have an uphill struggle, to understate the size of the battle, before it is ever able to seriously challenge the huge Microsoft Office installed base.

Posted by Ephraim Schwartz on September 4, 2007 12:52 PM

September 04, 2007 | Comments: (0)

GPS in taxis: Big Brother or boon?

New York City cabbies don't like the idea of being tracked by satellite. But what alternative do any of us really have?

I feel badly for New York City cab drivers, but I'm inclined to be philosophical about their plight. What they are going through is a precursor to what all of us face as technology gets deeper and deeper under our skin.

I touched on this topic a bit last week: Where exactly do we draw the line between technology and expediency? Or more specifically: Where do we draw the line between our rights as individuals versus the ability of technology to strip away almost all of our freedom to behave like humans?

To the story at hand, it seems the New York City Taxi and Limousine Commission (TLC) in its infinite wisdom is mandating that every cab in the Big Apple be equipped with GPS. In response, the New York Taxi Worker's Alliance (NYTWA) is threatening to pull its 10,000 drivers off the street for 48 hours.

The NYTWA says it amounts to spying on drivers. The GPS will monitor where the cab was, at what time, how many fares were picked up, when the cab went off duty, and how much money the driver made.

TLC says this will help automate paperwork, help customers locate packages left behind in a cab, and even create a safer environment for the driver by allowing a dispatcher to notice any unusual or unexpected stops by a taxi cab.

Of course, GPS will also be able to tell if a driver is taking a snooze on the job. This is not a major issue for owner-operated cabs -- but the price of installing the system, estimated to be more than $5,000 plus yearly maintenance, is certainly a big deal.

The problem is that the NYTWA will have a hard time defending its drivers because to do so the group would have to admit its membership is only human. Machines don't get tired. Machines don't goof off. Machines are cold sons-of-you-know-what that are relentless in reporting the so-called truth.

In high tech, we always like to say we want "one version of the truth." But the truth is more manifold than we give it credit for. One version of the truth may be useful when reporting financial numbers -- and it could be critical for managing the supply chain and knowing where your goods are. But people aren't goods.

When a cab driver pulls over and turns off the light that says he's available, that may be the only way he can catch 40 winks because he's been driving for 15 hours in order to pay for the gas, pay for the use of the cab, and bring some money home to the family.

Of course, cab companies believe they can dispatch cabs far more efficiently by knowing which cab is the closest to a customer. And by looking at street traffic, dispatchers can redirect drivers to alternate routes. The TLC also sees the technology as protection for the cab-riding public because there will be a display in the backseat to make sure that the driver isn't taking them for a ride. Which, I admit, probably happens, but not as often as we think.

Here we have technology supposedly creating the perfect system to increase profits, improve safety for drivers, and deliver better service for the customers. What could be wrong with this picture?

The TLC is trying to foist machine-like standards onto human behavior. GPS is great at tracking people, but what they can't do is cut a person some slack. That never figures into the algorithm.

As I write this, the drivers were meeting with the taxi commission. But even if they dodge the GPS bullet this time, it's inevitable that technology will win out. The allure is too strong. You see, people may eventually tire of fighting the relentless intrusion of technology into their lives. But machines don't know how to say "no mas."

P.S. If you don't want to be tracked, simply place a coffee cup full of shredded tinfoil over the GPS antenna. That should do the trick.

Posted by Ephraim Schwartz on September 4, 2007 03:00 AM

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