Thursday, August 30, 2007

ATRACs of my tears

Sony — the Japanese master of proprietary system integration — today announced that it’s surrendered in an important front of the consumer electronics standards wars:

Acknowledging its proprietary audio technology was a marketplace flop, Sony Corp. is shuttering its Connect digital music store and will open its portable media players to other formats.
With the death of the download store goes Sony’s ATRAC proprietary DRM format — although the AP story implies ATRAC may survive in the domestic market. American and European music players will instead support MP3, AAC (the format used by unprotected iTunes files), and of course Windows Media Audio.

As the AP story continued:
Sony Connect launched in 2004, but like other online music services, it has had a tough time competing against Apple Inc.'s iTunes Store, which is tied to the market-leading iPod portable player.
I’m not sure what galls the Sony execs more — losing to Apple (which it could have bought for a song in the 1990s) or having to license Microsoft’s Windows Media to have a viable product. Both must be creating a few tears around the Sony building in Tokyo’s Minato ward.

Yes, I know the title refers to a Motown or Warner/Elektra/Asylum title. No metaphor is perfect.

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Too cheap for my own good?

I usually work at home, where I have good computers, a printer, a (usually) adequate Internet connection and all my books. Usually it’s the most productive place to work.

Today isn’t one of those days. This afternoon the temperature is in the mid-90s here in the South Bay.

Today is a “stage one” power emergency for California because the projected peak demand of 49 gigawatts is approaching the state’s system capacity of 49.8 gigawatts. We are supposed to conserve energy by not using A/C, but (to conserve energy, money and reduce pollution) we never bought A/C for our house — so there’s nothing I can cut.

Today is also a “spare the air” day according to Bay Area air pollution regulators — which is usually triggered in the summer by projected high levels of ozone. There are limited transit subsidies available (but only in the morning) but transit isn’t very useful in getting to our off-campus MBA center (ca. 1:20 one-way instead of 0:30). Mondays I take the (light) rail because service is relatively convenient to downtown SJ.

I suppose if I had a Prius, I could drive around town in my air-conditioned splendor and feel good about “saving” energy. Instead, I’m at home for another two hours hoping to be able to concentrate as sweat drips off my brow (OK, more than anyone wanted to know). If work were closer with better parking, I’d be there already: back in Oceanside, I had a 7-minute one-way commute, making the prospect of driving to the A/C much more appealing.

Wednesday, August 29, 2007

More evidence of total world domination

In my MBA class tonight, we talked about the disruptive impact of VoIP service on the telecom industry. At the end of our discussion of the various firms offering VoIP service, I asked:

Professor: Who’s going to be our VoIP provider 10 years from now?
Student (enthusiastically): Google!
(I didn’t see who it was — so whoever made the prediction should take credit.)

Yes, we’d mentioned the VoIP service available with Google Talk, Yahoo! Messenger and the like. Perhaps my class was sensitized by the ongoing mention in my blog of Google’s aims for total world domination.

Perhaps — whether or not they know Google has a 29% return on sales and is throwing off $4 billion/year — they see that Google has the resources and strategic intent to diversify into voice communications in a serious way.

Or maybe — after discussing the Skype reliability debacle — they were hoping that if anyone could provide quality, scaleable services for free, it’s Google.

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Tuesday, August 28, 2007

Monetizing innovation

Sometimes an engineer or scientist will make a technical breakthrough but have a hard time figuring out how to monetize it. If markets exist for innovations — as with open innovation — then such breakthroughs can readily be commercialized, whether or not the innovator has the relevant complementary assets (as defined by David Teece in 1986) to bring them to market.

Last week, George Hotz announced that after working all summer, he had unlocked the iPhone so it can be used on other networks. While he graciously credited his collaborators, Hotz won 15 minutes of fame that has included national TV and his own Wikipedia biography. (He had also previously won some recognition as a finalist in the 2005 International Science and Engineering Fair). He used the new media — a blogspot blog and YouTube — to get the word out. But it seemed like a curiosity — and an advertisement for future employment — rather than something that could be directly monetized.

Over the weekend, he announced that he had traded his unlocked iPhone for a Nissan 350Z, a story picked up by the news media today after he finally arrived for his first week of college. He got the car from a cell phone refurbishing company that wants him to teach unlocking secrets to its other technicians — whether or not they will be able to unlock and sell iPhones.

So this is a clever way to commercialize something that may or may not be legal to commercialize. Even if the invention cannot be commercialized, the ability to invent can.

As various commentators have noted, Hotz has great career possibilities, although I’d add two caveats. One is that many early stars flame out, so hopefully he won’t let the acclaim go to his head. The other thing is that his choice of car is exactly the model that a reckless 19-year-old last month wrapped around a tree here in San José, killing himself, his teen passenger, and two pedestrians. Let’s pray that Mr. Hotz has more responsible parents than the late (not so great) Z-head of Almaden.

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Monday, August 27, 2007

What, me worry?

Two weeks ago, I saw it as a disadvantage that Skype went offline in an unprecedented service failure. Shows how little I know.

Globetrotting Business Week correspondent Stephen Baker has set me straight. Last week he got around to writing a magazine article. (Shows how 20th century I am — I thought that’s what a senior writer for a news magazine normally did.)

But in his article from this week’s dead tree edition, Baker proclaims:

Say you have a crucial conference call in an hour and your phone goes dead. What do you do? A generation ago, this wasn't much of an issue, at least in the U.S. Phones in the days of the Bell monopoly were engineered to be “mission critical.” You picked up one of those heavy receivers back then, and the dial tone was as prompt and reliable as water from the tap. It worked.

Yet these days, even as we pack global multimedia in our pockets, phone service sometimes seems to march backward. …

Are communications getting worse? Not by a long shot. We’re surrounded by miraculous machines and services, most of them calibrated to a level software engineers have long called “good enough.” In the right circumstances, good enough is great for the entire economy. A marketplace that’s not hung up on fail-safe standards is open to risk and innovation, and drives down prices. Ever since the dawn of the PC — the archetype for a good-enough machine — inventors have been freer than ever to piece together and launch their visions. Some are brilliant, some are half-baked, many are a blend of the two. A precious few are up and running 99.999% of the time — Bell's old standard. But they cost far less to build.
Alfred E NeumanClearly I’ve been worrying about the wrong things all these months, like telecommunications services that are reliable enough for real business use. I guess I should have adopted the adolescent motto: “What, me worry?”

Experimentation is good. Unreliability of mission-critical business infrastructure — whether a PC, cellphone or VoIP phone — is not.

The other alternative is more interesting. Linux used to be much less reliable than Unix — a decade ago, no one would consider using Linux for mission critical applications. That’s no longer true: open source users now enjoy the benefits of the millions that IBM has poured into Linux since 1999 — in addition to the the contributions of Intel and HP and others funded by/through OSDL/LF.

Not controlling the end-to-end Internet infrastructure makes it harder to deliver voice-quality signals across a network entirely controlled by Bellheads. Still, if the Internet was designed to reliably transmit packets in the event of nuclear war, transmitting a simple voice call should be a solvable problem. Although the solution might come long after Business Week has stopped killing trees for Messr. Baker’s observations.

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Friday, August 24, 2007

NOTHING beats a good monopoly

Before I finished my last posting, I had grabbed the dead tree edition of Fortune from the department mailroom. Even more blatantly than previous years, Fortune, Business Week and the Wall Street Journal are using teaser rates and faculty promotion to get our help hooking business students on their respective periodicals. (I can see why it works — I’ve been reading the Wall Street Journal for over 25 years although — after this year’s redesign shrunk the space for news — I’m getting ready to dump the paper copy.)

Fortune 2007-08-20As implied, the cover item was about Carlos Slim, the Mexican oligarch who’s now the richest man in the world (who others speculated earlier this year had passed Bill Gates). It was the first detailed account I’d seen of how Slim had made all his money.

Fortune presents the org chart and the Slim’s holdings, now worth $58.5 billion. The short version is that Slim was a savvy investor who bought 20% of the (newly-privatized) Telmex telephone monopoly — and then leveraged that into América Móvil, the Latin mobile phone franchise. The two holdings are now worth $13 billion and $31 billion, respectively.

At a time that the telecom industry was embracing liberalization, Slim got the government to guarantee monopoly protection for the next seven years — keeping competition out of the Mexican market at the one time there was foreign capital to available to create new competitors. Winning political influence was easy during seven decades of single-party rule:

“He made his billions because of an extremely close and advantageous relationship with the Salinas government,” says professor [George] Grayson of William & Mary. More recently Slim has been pragmatically investing in multiple parties, a common practice among Mexico's oligarchs.
Interestingly, this is one of the few places the liberal Fortune and the conservative WSJ would agree: Fortune doesn’t believe in monopolies, and the WSJ doesn’t believe in government distortion of the markets (whether through bribery, lobbying or sheer ignorance).

Clearly, if you can’t inherit a monopoly, the next best thing is to be able to buy one at below market prices. Such monopoly (or oligopoly) restraint of trade is a focus of the economic subfield of industrial organization — best known for Michael Porter’s five forces model studied by MBA students around the world.

IO economics has been criticized for over-emphasizing structural explanations for profitability. But real monopolies — like that enjoyed by Señor Slim — are still a sure path to riches. (Or more riches, as the case may be.)

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IP haves and have nots

The question of nullifying or not enforcing patents for foreign drug manufacturers has been a brewing controversy over the last few years. This year’s earlier dust up was between Abbott Labs (of the US) and Thailand, and this month it is Novartis (from Switzerland) and India. There is also the issue of whether these drug companies will be supported by their home governments, or attacked for political purposes.

Having a consistent enforcement of intellectual property was supposed to be solved by having emerging countries like India and China join the WTO, and then enforcement of the TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement that was part of founding the WTO. Still, enforcement of IP rights is up to national governments, legislatures and even local magistrates.

Supporters of the Indian (or Thai or other) actions argue that human health is more important than drug company profits. (Presumably not economists let alone Friedmanites making this argument). Or that rich markets should cross-subsidize poor markets. Ironically, the same activists who argue that developing countries should import the labor and environmental laws of Western countries are the most vocal in trying to keep out the IP laws.

Such pro-LDC analyses tend to downplay the benefits to local pharma companies that will make money from the compulsory licensing (or nullified patent). But then, before TRIPS, it was quite commonplace for countries to ignore foreign IP to help develop their local industry. Legally, countries are going to enforce the IP laws they feel like enforcing. No foreign countries are going to go to war over copyright or patent theft.

However, as Manuel Davis observed 40 years ago, TANSTAAFL (i.e., no free lunches). Ranjit Shahani made exactly this point in an interview Friday. Certainly as head of Novartis India, he’s hardly a dispassionate observer — in fact, he was very passionate:

First of all, the Madras High Court’s decision is not a setback for Novartis. It is a setback for innovation, for public health. …

On the issue of data protection and patents, the “copycat Indian generics” companies and MNCs are split. But there are no differences [between the MNCs and] the Indian research oriented companies, which are putting quite a bit into research themselves. The average spend of the top ten drugmakers stands at 6.6% of revenues and it compares to 18-20% spent by global drug companies. But this 6.6% expenditure will become infructuose if we don’t have a strong patent law, an environment which protects data and IP. So, it is not the Indian companies but the “copycat generic companies” versus the MNCs.
Shahani makes the argument if you want a domestic industry, you need good IP enforcement. Based on political reality, I argued exactly the inverse in 1995 paper on Japanese copyright law: you get good IP enforcement only when you have a strong domestic industry that needs it.

Meanwhile, as the FT reported earlier this week, Novartis has decided to cancel plans to increase R&D spending in India. As others have noted, research in developing countries is normally a prereq for researching health problems specific to such countries, so India takes a double loss.

Speculation is that the €90 million investment will go to China, consistent with earlier comments by Shahani that China has a more favorable IP climate. Foreign MNC money has created the high-tech industries in many counties — with talent and knowledge that spilled over to local startups - so the Novartis decision could hurt the Indian pharma industry more than they gain from cloning one drug.

I think Novartis is being realistic — go where it’s wanted, avoid where it’s not, and let sovereign governments make their own decisions. If Big Pharma gives up on developing country health problems — because they can only sell the drugs in countries that don’t believe in patent monopolies — then perhaps philanthropist Bill Gates can pay for all the missing R&D. It may be harder for Mr. Gates now that (since March) he’s only the world’s 2nd richest man.

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Thursday, August 23, 2007

iPhone: BMW of the mobile set?

Over the past 20+ years, the Mac attracted its share of fanatics, and apparently the iPhone now has them too.

Seth had passed along an earlier survey among members of the ChangeWave Alliance showing interest in the iPhone. (The Alliance seems to be a unique group that defies simple characterization). I couldn’t find its internal report to members on a public website, but they got some coverage in June from a Bloomberg news story.

However, I did find a recent report of customer satisfaction by ChangeWave members, where the iPhone figures were more than 2x as high as most of the rest of the industry, including Samsung, Motorola and Palm (Nokia was only slightly better). The only firm to rival Apple was Blackberry maker RIM, which was #2 as reported in earlier ChangeWave surveys this year. They admit that the sample may be biased, since obviously the earliest iPhone buyers are the most motivated. (And I think by its nature the membership is probably an atypical sample of technology lovers — representative of smartphone buyers but not cellphone owners as a whole).

[iphone satisfaction

The survey also enumerates likes and dislikes of iPhone owners, of which (as predicted on introduction) the speed of AT&T’s 2.5G EDGE network was the biggest problem. Interestingly, 77% were “very likely” to recommend the iPhone to others — a phenomenal number.

I think this suggests a very specific marketing tack for Apple, consistent with its earlier product strategies. Keep the iPhone expensive, exclusive and “insanely great,” with low volumes and high gross margins. Make sure that every customer is highly satisfied with the experience, generating strong word of mouth, and don’t go chasing after customers who are less likely to appreciate the price/features trade-offs. Unlike the iPod, don’t try to dominate the market from top to bottom.

More than a decade ago, the forgettable Gil Amelio said Apple should aspire to be the BMW of the PC industry. Eventually, Apple was hummin’ on all 8 cylinders, but switching costs and network effects mean that most buyers today don’t even consider a Mac. (There aren’t many switching costs when it comes to buying a new car). I think the “BMW” metaphor may actually come true with the iPhone: a premium product at a premium price — something that everyone would love to own, but not something that will be confused with a Chevy or a Kia.

If Apple tries to join the top 5 global phone makers, it could sell hundreds of millions of phones a year, but it would likely face a ferocious battle among established phone makers (as well as end its current strategy of national market exclusive carriers with side-payments). So far — like Pixar — Apple in the iPod era has gotten ahead by piling success upon success, not overreaching and not making any major mistakes.

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Cingular is terrible, but …

David Pogue is a onetime Mac trade journalist who made it to the big time with a NYT column. I don’t read the NYT anymore because (among other reasons) they now charge for opinion columns — presumably arguing that (Walter Isaacson’s latest complaints notwithstanding) ranting is more more expensive to generate than hard news.

However, the NYT is quite happy to e-mail me the Pogue e-newsletter for free. After remarking how great the pocket digicam has become, in today’s column Pogue then lists several product categories that are not there yet. #2 on the list is

The great cellphone carrier. When the iPhone came out, everybody grumbled and moaned about how Apple had chosen AT&T as its exclusive carrier. I grumbled along with them—and then it hit me: Whom wouldn’t people have grumbled about? People also hate Verizon, and T-Mobile, and Sprint. Everybody feels oppressed by the contracts, mistreated by customer service and victimized by billing gaffes.

I don’t know why one of these cell executives doesn’t just wake up one morning and realize that the way to dominate the cellphone industry isn’t taking out more ads on billboards and newspapers. It’s creating a service that’s so good, the customers love you, recommend you and (here’s the big one) don’t leave you at the first opportunity.
I think that’s fair — if Cingular (aka AT&T) is terrible, the others aren’t much better. My sense is that each is terrible on at least one thing, each creating a legion of anti-fans. (Although perhaps Mr. Pogue didn’t read this morning’s NYT article about AT&T’s 300-page phone bills for iPhone owners).

I’ve stayed with Sprint because they’re cheap (regular readers know I like cheap), because when I signed up they had excellent San Diego coverage, and now their Bay Area coverage has gotten better. They built up enough loyalty that I stuck with them after they fouled up my bill last fall, which took several hours on the phone (in 5 phone calls across 3 months) to straighten out. But this sort of billing snafu — particularly for a brand new customer — would often make an enemy for life.

That raises the question: is this an inherent problem of telecom oligopolists? Do the carriers that have good networks get hated for arrogant customer service, contract or pricing policies? (With the remaining carriers offering lousy coverage and lousy networks?) Or is there a cell phone carrier somewhere in the world that is generally loved? (Please let me know)

I would not be surprised if Metro PCS or Leap Wireless have devoted customers, if for no other reason that their flat-rate pricing model avoids the huge surprise overages that piss people off, and probably avoids most potential billing hassles too. (IIRC, they also don’t require contracts). However, neither has a national license so they’d only be suitable for customers who plan to stay within a specific metro region — clearly making enemies of people who bought the service not understanding this major limitation.

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Wednesday, August 22, 2007

Swimming against the business model tide

About five years ago, I was brought as a consultant to help turn around Live365, an Internet radio station aggregator. The gig didn’t last long, but I did come up with a couple of teaching cases.

Live365 was founded in the go-go 1990s, and with a 1999 VC infusion took the standard dot-com business model: get as many eyeballs as you can, and then monetize those eyeballs by selling banner ads. The problem was, after the dot-com crash, the online ad market had cratered and most companies couldn’t give them away. With very loyal broadcasters and a unique product for listeners, company made a transition to a primarily fee-based model and (AFAIK) is now cash flow positive.

Thus, it was more than a little ironic for me to read in Tuesday’s WSJ about the VC reaction to the latest round of web startups. Reporter Rebecca Buckman spelled it out:

Tech entrepreneur Glenn Kelman's online real-estate brokerage, Redfin Corp., allows consumers to buy or sell homes online and takes a cut of each real-estate transaction it brokers.

To Mr. Kelman, it’s a sensible business model. But when he sought backing from venture capitalists this past spring, he found the process much tougher than he had expected.

During his meetings with Silicon Valley financiers, many kept urging the Seattle company to start selling advertisements on its Web site instead of making money from commissions, he says.

“Today, there’s nothing more fashionable than having an ads-driven model,” says Mr. Kelman, 36 years old. Content to be unfashionable, he stuck to his guns and ultimately raised $12 million.
Dig a little deeper, and the VC concerns are not just the revenue model: charging money for services requires people to deliver them, and thus VCs worry that such models don’t scale as well. As blogger David Kaplan notes, Redfin may not make the best poster child for VC myopia, since the company has other issues.

Still, the idea that all Internet startups need to use Google’s business model is absurd. As Yogi Berra would say, this seems like déjà vu all over again, with companies trying to imitate the unique market position of the market leader. In the 1980s, every mainframe company wanted to be IBM; in the 1990s, every software company wanted to be Microsoft. Today, there’s still only one IBM, Microsoft and Google. As the earliest Marx brother said, History repeats itself, first as tragedy, second as farce.

With any of my hats on — teacher, researcher, consultant or entrepreneur — I can’t understand why anyone would embrace the one-size-fits-all business model idea. Where would Amazon or Google or eBay or Skype be if they had only used established business models? My conjecture is that the Internet encouraged business model experimentation, because delivering value was often decoupled from the physical limits of retail locations, travel and inventory.

One of the people who’s done more than anyone to advance the study of business models is Henry Chesbrough, both with his 2002 paper on Xerox spinoffs, and his three books on open innovation. In his 2003 book, the last section of Chapter 9 “The Value of a Multiplicity of Business Models for Innovation.” That says it all.

Later this year, I hope to have some evidence to support my assertions. Right now I’m supervising a master’s thesis project at SJSU, where German Benitez and Eduardo Sanchez are looking at social media business models. They’re still working on the hypotheses, but in the sample so far there’s considerable variation in business models. The companies may not be old enough to get success measures (even survival), but eyeballing the data suggests that different value propositions require different revenue models.

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Tuesday, August 21, 2007

HD DVD says “I’m not dead yet!”

While I was never a huge Monty Python fan, I still enjoyed the British comedy troupe in small doses. After all, who could forget the infamous exchange from Monty Python and the Holy Grail: “Bring out your dead” and repost: “I’m not dead!”†

This week my MBA students are picking term projects and several have suggested the next-generation video format war, which pits Blu-ray (Sony, Panasonic, Samsung) vs. HD DVD (Toshiba, Microsoft). As a standards researcher, there’s nothing I like better than a good standards fight, but since Blockbuster dumped HD DVD two months ago, it looked like things were tipping to Blu-ray and the battle was all but over.

Now HD DVD has proven “I’m not dead yet!” It shows that when you’re behind in a standards war, there’s always something you can do. In this case, Toshiba and/or Microsoft bribed two major studios to switch sides. Here’s the new lineup:

  • HD DVD: Universal, Paramount, Dreamworks Animation
  • Blu-ray: Sony, Disney, Fox
  • Both: Time Warner, Paramount
The story is a little messy, because Dreamworks Animation is a public company still controlled by two of its billionaire founders (Katzenberg, and Geffen), but in 2005 they sold Dreamworks Pictures to Paramount. Also, pictures directed by Steven Spielberg (the “S” in SKG) are not exclusive to either format. Still, the announcement means that November’s release of the popular Shrek the Third will be exclusive to HD DVD (plus plain old DVD).

Of course, when you’re behind in a standards war, you have to do something or you’ll get wiped out. The NY Times quoted anonymous executives of Viacom (parent of Paramount) as saying that the HD DVD group was paying $150 million for the switch. It’s not a huge risk, because that the exclusive was promised only for 18 months (according to the NY Times), just long enough for two Christmas seasons.

Uncertainty is bad for Hollywood, which has long memories of VHS vs. Beta. However, the HD DVD camp is pushing down prices of players — at $150-200 less than Blu-ray — which is likely to fuel adoption. The stakes are more than just players. Sony is pushing Blu-ray in its PS3, while Microsoft’s Xbox 360 includes a HD DVD player. One estimate said 90% of the Blu-ray movies are being played on the PS3.

HD DVD buyers still have the legitimate fear of becoming (as economist Paul David put it in a 1987 paper) an “angry orphan.” Given this, consumers may be willing to risk $200 on a player but not more money on a large library of content — ideal for the rental market, except that Blockbuster is exclusively Blu-Ray. Netflix is quietly supporting both HD DVD and Blu-ray, but it’s not like they’re promoting either one. Would winning over Hollywood Video be enough to matter? If I were Microsoft (or Toshiba), I’d offer a joint promotion with Hollywood Video to mail introductory coupons to affluent neighborhoods near any Hollywood store that carries HD DVD.

† For the past 30 years, I’ve heard it quoted as “I’m not dead yet!” but the “yet” is clearly missing from the original.

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NEC doesn’t get open innovation

Last week, I was contacted by Kenji Hall, a Business Week reporter in Tokyo. (He sought to gain my trust by mentioning that he too once lived in San Diego, but left out the part about going to that little liberal arts school up the river from the ’Tute.)

Hall was doing a story on the new high-tech research lab by NEC (the Japanese electronics giant) that purported to be about open innovation. I guess I was contacted because of my open innovation research, because I’ve written extensively about the Japanese IT industry, or perhaps because I’ve specifically written about NEC.

Hall referred me to a brief press release about the NEC lab. What’s notable is the snippet:

Intellectual Activity History Recording System: This system has been designed to analyze the innovation generation process via a data base of activity history that is accumulated by recording all image, voice, movement, human contact, book, document and whiteboard use, and PC operation inside the laboratory. Utilizing this data, NEC will strive to reveal the relationship between human-to-human/human-to-object contact and innovation generation, and to identify the process of intellectual activity.
After I did the reading, we then did a telephone interview after midnight (6 days ago) when I got home after an out-of-town trip. (Fortunately it wasn’t a Skype call).

Hall published his article last Thursday on the Business Week website, and quoted me briefly. I did get the final paragraph of the article, which in a business magazine is the honored position (kinda like the furthest seat from the door in a Japanese office). Here is the capper:
As for how NEC's surveillance of researchers would sit with Silicon Valley's techies? San Jose State's West says, "It would be a real hard sell in the Valley."
Since I had to make some notes before talking to him so late at night — and the report is necessarily abbreviated — let me summarize my reaction to the NEC plan, based on what little was available online:
  • As Scott Gallagher and I outlined in our 2006 journal paper, open innovation is about three things: 1) motivating a supply of external innovations, 2) incorporating those external innovations, and 3) maximizing the return from internal innovation. The NEC plan seems to emphasize #2 while ignoring (or denying) the importance of #1.
  • Specifically, most ecosystem management is built around win-win propositions, including a viable (and sustainable) business model for innovation suppliers. In their 2004 book The Keystone Advantage, Iansiti and Levien contrast the “keystone” model of ecosystem leadership with other more domineering (or parasitic) models they refer to as landlords and dominators.
  • The NEC approach — “what’s mine is mine and what’s yours is mine” — is symptomatic of high buyer power enjoyed by dominant industrial conglomerates managing captive supplier networks — such as the Japanese keiretsu (often confused with the neo-zaibatsu groups, the kigyo shudan) or similar entities in Korea, Germany or elsewhere. The only way suppliers sign up for such a lousy deal is if they have no choice; the applicable Japanese phrase is “sho ga nai.”
Using technology to suck ideas more efficiently from captive suppliers is not open innovation. Using the same set of captive suppliers is also not about open innovation, it’s just carrying the books ownership of the firm boundaries differently.

[NEC ecosystemThe ecosystem diagram on the NEC website seems more win-win, so I don’t know if the suggested technology is just a technology-push design gone amok, or whether the PR department thought through the design but not how the “Orwellian” screens would play among the public. The story doesn’t seem to be picked up elsewhere, so it’s not like there’s been a big hue and cry at the gates of NEC.

Finally, there’s one last wrinkle on the story. NEC is one of the corporate sponsors of Berkeley’s Center for Open Innovation, the mother ship of open innovation knowledge for the Fortune 1000. Either there’s more to their plan than meets the eye, or they’ve failed Open Innovation 101 and no one had the heart to tell them.

PS: I do have a problem with the adjective “Orwellian” because it is much overused today. The original 1984 of Orwell’s imagination is an extremely depressing place and even Ridley Scott’s famous interpretation doesn’t do it justice.

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Saturday, August 18, 2007


This week Apple announced that it had signed the 2nd (and most problematic) member of the Fab Four to its iTunes Store download site. Perhaps the long-rumored online offering of the lucrative Beatles backlist is not far behind.†

Inspired by my hero Richard Stallman as well as John Lennon’s utopian anthem — and with no apologizes to the controlling, controversial executor of Lennon’s estate — I offer this:

Imagine there's no copyright
It isn’t hard to do
No royalties to live from
And no mansions too
Imagine all the people
Listening for free...

You may say I'm a dreamer
But I'm not the only one
I hope someday you'll join us
So buying music will be done.
I know: “Don’t give up your day job.”

† OK, “lucrative Beatles backlist” is redundant

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Thursday, August 16, 2007

Disadvantages of commodity telephony

I love Skype. I mean free calls, no up front cost, no obligation? What’s not to like? Skype is the only way I make calls to Europe and make 3-way calls, although I use a regular (phone number-based) VoIP service for calls in “North America.” I even sometimes help support their “freemium” business model.

But today Skype failed me when I most needed it — when I was trying to finalize decisions for the conference minitrack (on IT standards) that I’ve been running for the past 4 years. I needed to confer with my two co-chairs who are in Europe, but all I got was a Skype client that wouldn’t work, and even a website that wouldn’t come up.

Finally, Skype admitted to their problems on their home page:

UPDATED 16 August, 2007 14:02 GMT: Some of you may be having problems logging in to Skype. Our engineering team has determined that it’s a software issue. We expect this to be resolved within 12 to 24 hours. Meanwhile, you can simply leave your Skype client running and as soon as the issue is resolved, you will be logged in. We apologize for the inconvenience.
Reading between the lines, they did a planned maintenance on Wednesday, suggesting that they installed new software yesterday that doesn’t work. I held off posting this waiting for a resolution, but 13 hours after the original posting they are still making excuses
Author-VilluarakApologies for the delay, but we can now update you on the Skype sign-on issue. … This problem occurred because of a deficiency in an algorithm within Skype networking software. This controls the interaction between the user’s own Skype client and the rest of the Skype network.

Rest assured that everyone at Skype is working around the clock — from Tallinn to Luxembourg to San Jose — to resume normal service as quickly as possible.
and even more excuses
Author-VilluarakEveryone at Skype continues to work hard at resolving the current software issue. We are making good progress. We feel that we are on the right track to bring back services to normal.

We thank you for your continued support and are thinking of you every step of the way.

(Updated at 2:15am GMT)
Once upon a time, people in the U.S. paid for telephone service which was probably the most reliable and dependable function of our entire industrial economy. If the power went out, if there was an earthquake or blizzard, the phones would still work. About the only thing it couldn’t handle was the annual flurry of long-distance calls on Mother’s Day.

The disadvantage was that long-distance calls were way overpriced, until 1969 and 1977 when MCI found a way to arbitrage the cross-subsidy to create America’s fastest growing communications company. After that, a railroad subsidiary decided to string fiber optic lines along its right-of-way and SPrint bragged that you could hear a “pin drop.”

Now VoIP is threatening the Baby Bells, because people would rather have unreliable and low-quality service that’s free, than expensive reliable service. Will there be competition that makes “free” service better? Or are we doomed to have mediocre quality in the name of commoditization?

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VC greed and the open source cause

VCs fund companies so they can get 10x or 100x of their money back. They don’t want to own a company, they want to flip it. This, of course, determines the growth trajectories and exit strategies of the firms they fund, including open source startups.

Two weeks ago, publisher Tim O’Reilly wrote:

FOSS companies have essentially the same business model as Microsoft, except that they've largely given up on revenue from the consumer market and instead target the corporate market. (So let's say they have the same business model as Oracle, just to be more precise.) And while OSS is far superior to proprietary software as a development model, and has some advantages in lower marketing costs, a close study of any FOSS companies shows that they have no demonstrated business model advantages over Microsoft's or Oracle. …

I will predict that virtually every open source company (including Red Hat) will eventually be acquired by a big proprietary software company.

The real change to proprietary software is going to come from the Web 2.0 challenge.
O’Reilly used to make money publishing Linux books and now he makes money publishing books on Web 2.0, a term that he invented. Hmmm. Still, he has proven a clever trend-spotter in the past.

Yesterday, my friend Matt Asay tried to rebut the O’Reilly claim. Asay was formerly a GM at Lineo (an embedded Linux company) before they cratered, then director of Novell’s Linux business office, and now a VP at Alfresco, an open source content management company.Matt claims:
I actually believe that open source, not proprietary software, is the natural state of the industry, and that Tim's proprietary world is anomalous. …

Suddenly, the license matters more, not less, because it is the license that ensures the conversation focuses on the right topic — service — rather than on inane jabberings that only vendors care about. You know, like intellectual property. …

I look forward to buying Microsoft. I've got a great job ready for Steve a product evangelist.
I’m sure Matt is neither smoking something nor drinking anything stronger than Coca-Cola, so I guess he just has a fertile imagination.

Those VC-backed startups need an exit strategy to make the VCs happy, and (absent something silly like an ESOP) the choices are limited to IPO or be acquired. Yes Red Hat and a few other OSS companies IPO’d in the red-hot 90s, but today that’s very unlikely for any software company. There are noises that MySQL is hoping to IPO, but how many other OSS companies are there with a similar installed base?

Instead, the normal path is to be acquired. Embedded database company Sleepycat was bought in Feb. 2006 by Oracle, and yesterday virtualization company XenSource sold itself to Citrix, a close ally of Microsoft.

VCs sell their OSS startups to proprietary software companies because (as Willie Sutton didn’t say) that’s where the money is. So as long as impatient investors are looking for liquidity — and the IPO market remains closed to all but a handful of companies — OSS companies will be gobbled up by proprietary software companies.

That’s not to say that Matt is wrong on the other stuff. The software industry is likely to shift from selling licenses to selling service, as product categories mature and users revolt against upgrades with unneeded features. This was a “trend” when I was an ISV 20 years ago: companies keep paying for support and assurance, not for creeping featuritis.

Enemy of my enemy 2

In the vein of “the enemy of my enemy is my friend,” Google and Sun have declared war on Microsoft Office.

Unless you’re an open source hacker, you probably don’t know that Sun has actually been fighting MS-Office for the past 8 years through sales of its StarOffice suite. Most of the StarOffice package is available free as an open source project via OpenOffice. Meanwhile, Google has been providing clunky web-based applications with its Google Docs & Spreadsheets website.

Now StarOffice is being distributed by Google, in hopes of getting firms to pay for a bundle of Google Apps, marking the culmination of a two-year collaboration.

Other than that Sun no longer hopes to get $70 for the paid StarOffice that competes with its free OpenOffice, I don’t know what to make of the bundle. StarOffice provides absolutely essential technology for competing with Microsoft’s stranglehold of offices and the desktop, but no one but the most fanatical OSS (or more likely, free software) adherent would say that OpenOffice/StarOffice is easier to use or has more features that Microsoft Office, although it does run better on Linux and has more open file formats. And my initial reaction to Google docs was “why”?

So other than a common dislike of Microsoft (with ex-Sun COO Eric Schmidt calling the shots) what is the point of the announcement?

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Wednesday, August 15, 2007

Total world domination ... or not!

So far I’ve been writing about Google’s path to total world domination, and the debate over whether it will succeed.

Today’s smackdown is not for Google vs. Microsoft (or Yahoo or Nokia or Apple or even China). Instead, it’s a debate in the WSJ between two academics studying Google — over whether Google will achieve total world domination:

  1. In one corner: best-selling management author, consultant, former HBS lecturer and London Business School visiting professor: Gary Hamel!
  2. In the other corner: Harvard Business School network economy expert (and tenure-track associate professor) Tom Eisenmann!

Hamel is about to publish a book The Future of Management which praises Google for inventing a new management style. Meanwhile, Eisenmann says that what made Google successful in delivering Internet experience will have to be changed if it becomes a more conventional software company.

While Eisenmann is a casual friend, in terms of the quality of their ideas I’m seriously torn. Hamel has been the “big idea” strategist with books like Leading the Revolution and Competing for the Future, with a particular strength in helping a top management team reshape their own and their industry’s cognitive map. Meanwhile, Eisenmann has written most of the good technology cases out of HBS in the past decade, as well as one of the few plausible papers about the two-sided markets fad.

How do I decide? I’ve seen too many academics (or consultants) take their one hammer and assume everything is a nail. So I’ll go with Eisenmann’s argument because in the past he’s always understood the fundamentals of the industries and firms he covers.

Does Google think it will achieve TWD?
“We’re happy to have folks do case studies on their own,” says Google spokeswoman Sunny Gettinger, “but we focus on our core business and generally don’t actively participate in them or seek them out. Likewise, we don't monitor the results closely.”
Translation: we don’t see any payoff in cooperating with academics and telling our competitors about our secret sauce.

Clearly Google will someday get its comeuppance. But Microsoft had a 20-year run — while IBM had a 25-year run (or 70 years if you count punched cards) — so it’s not clear whether Google will hit the wall before or after it gets to Total World Domination.

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Hell froze over

While I was travelling earlier this month, on Aug. 10 Microsoft submitted two of its open source licenses for approval by the Open Source Initiative: the Microsoft Community License and the Microsoft Permissive License, which are identical except for a single clause.

On the open source license discussion e-mail list, the reaction to the licenses (particularly the MS-CL) was generally positive. Of course, approval under the OSI process is not a done deal.

Still, this is not something we would have expected 7 years ago when Microsoft introduced its first “shared source” plans as a response to the threat of open source. Within the open source community, I suspect there would be a split between those who welcome Microsoft as legitimating open source business models, and those suspicious of Microsoft as trying to undercut support for OSS with its own nefarious plans.

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Tuesday, August 14, 2007

Mobile LinuxWorld: Accessing the other Palm story

If Palm Inc. (née Palm Computing) is trying to find life after the PDA, its former alter ego (PalmSource) is trying to run to the front of the parade of adapting Linux to mobile platforms.

Of course, PalmSource was purchased in fall 2005 by Access of Japan, outbidding Palm (Inc.) and Motorola. This was only about six months after PalmSource started shifting towards an embedded Linux strategy with its money-saving strategy of buying China MobileSoft, a Nanjing-based Linux developer.

Today, the business cards in the booth say Access Systems Americas, but the address show the same Sunnyvale address of the former PalmSource.

“How did they hope to make money off of Linux?” is what I asked myself after the original sale, rebranding, and abandonment of ongoing Palm OS revenues. Actually, after visiting the booth (and doing some background research), I realized I already had the answer. What ASA (PalmSource) is doing is exactly what I would have recommended from my 7 years of studying “how do firms make money from open source” — and they didn’t have to pay me a dime.

ALP hierarchy diagramThe most obvious point was the Access Linux Platform (ALP) architecture diagram — which is a mixture of off-the-shelf open source (shown here in blue), technology developed by ASA released as open source (purple), and the proprietary code licensed by ASA (gray).

As I understand it, ASA’s open source contribution is mostly found in the “Hiker” project, which is intended to supply many of the key APIs missing from GTK/GNOME but necessary for writing real native Linux mobile applications. (Hiker is described in a PDF white paper and now has a downloadable tarball). The Hiker part was originally MPL (because it’s a better license) but OSS guru “Lefty” Schlessinger said it will be available Real Soon Now dual-licensed in LGPL(v2) to make the GPL-centric GNOME community happy.

As befitting all the ex-Apple people at ASA, its decision to give away some (but not all) technology parallels the early Apple Computer open source strategy, which I described in a 2003 research paper as “opening parts.” It also fits the general pattern I found in my subsequent larger study of open source business models, where firms sell some parts and give away others.

In addition to the opening parts, the other key point was that (as Bill Lee of ASA developer relations told me) “On this side [of the Pacific], we’re a services company.” Services (despite lower margins) are also common with open source companies. Services have historically been big in the embedded market because no two devices are identical. Unlike the PC industry (where commonality is sought to reduce costs), embedded device makers relish differences (and differentiation) as they seek to push the envelope. There are lots of reasons why hardware companies need help with embedded software, which is why there are companies like MontaVista.

In fact, (today) ASA doesn’t sell a Linux distribution, but assumes that most of its customers have an existing distribution from MontaVista or Wind River (which just won Palm Inc.’s business). This was probably the part that made the least sense: once upon a time PalmSource sold an entire operating system, so the dependency on MontaVista or Wind River doesn’t make sense in the long run. That seems easily fixed: four years ago, WindRiver was a proprietary embedded OS company and the ultimate anti-Linux — and then they got into Linux. So Access could buy (or sell to) an existing Linux distro, or build it from scratch.

ASA is evangelizing developers (using the process perfected by Apple in the 1980s) to support its new Access Linux Platform. (To run the installed base of 25,000 old Palm OS apps, the ALP has a Palm OS compatibility layer). I’m sorry I couldn’t make Tuesday’s developer event but they wanted money and besides I was out of town. In addition to courting ISVs, ASA has also won support as the preferred Linux provider to Orange, the large French mobile phone operator.

There was one more surprise as I riffled through the various ALP white papers, i.e. marketing brochures (in the dead tree version handed out at the booth but also available online.) To put it starkly, Access wants to be the Symbian of mobile Linux.

Specifically, their white paper “Mobile Linux - Going Native” contains arguments that could have been ripped from a Symbian brochure. For users of “smartphones” (a term practically invented by Symbian), it extols the importance of making full native applications (as with a PDA or PC) rather than using lightweight application frameworks like Java or BREW. One excerpt:

Applications that run in a “sandbox” are nice, but future users of smartphones will come to expect the performance and capabilities of applications designed to run in native mode.
So Symbian and Access are predicting a world in which native applications continue to matter, while Google and thus far Apple expect mobile devices to use device-independent rich internet apps (based on things like Ajax) to be the wave of the future. The jury is still out.

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Mobile LinuxWorld: A tale of two Palms

Regular readers know that I spent 15+ years as an Apple Computer ISV and did my dissertation on Apple’s missteps and struggle for survival in the 1990s. I published a book chapter that IMHO is the definitive treatment (thus far of their woes), plus another paper on the operations and e-commerce aspects of their turnaround.

During Apple’s troubles, many of its employees bailed to the next great thing in computing platforms, i.e. Palm Computing, founded in 1992. Palm picked up a lot of Apple people and from the outside it seems like Palm picked up much of the Apple culture. Now it seems to be reprising Apple’s woes, but a decade later and with a different root cause.

Since 2003, the company founded by Jeff Hawkins has been split into two. (In fact, I met my now-coauthor Mike Mace back in May 2002 when we tried to get Palm to let me study the split.) Palm originally split into PalmOne (hardware) and PalmSource (software), but PalmOne immediately bought rival Handspring to get Hawkins and Donna Dubinsky back.

When PalmOne (now Palm) bought back an OS license and the trademark from PalmSource, I assumed that its future was stable. Meanwhile, PalmSource — deprived of its only remaining major customer, seemed doomed, particularly after it was bought by Access, an obscure Japanese web browser company.

After my visit to LinuxWorld, I’ve pretty much done a 180°. The PalmSource strategy today makes a lot of sense, whereas I still can’t figure out what Palm Inc. is going to do to survive.

Palm was showing the Foleo, the “mobile companion” unveiled to great hoopla in May. At the booth they said the Foleo is due to ship “this summer” (which I pointed out would have to be sometime in the next 6 weeks).

Applenewton Emate300Fitting the Apple legacy, the Foleo is a lot like the eMate 300 — Apple’s last gasp to save Newton PDA by making one with a bigger screen and a keyboard. The Foleo is somewhere between a PDA and a laptop in price and capabilities. The one difference is that it doesn’t run PalmOS, it runs Linux; during LinuxWorld Palm announced it would use the WindRiver Linux distribution from now on.

I see three problems with the Foleo. First, it’s neither fish nor fowl so the market may not understand it. Although it had some dedicated owners, the eMate was no great market success. And since then, laptop computers have fallen below $800, eliminating the price argument for the most price sensitive.

FoleoSecond, it’s a new platform, with a new ecosystem and a new user training curve. If desktop Linux were established, a slimmed-down Linux subnotebook could be a smash hit. As it is, there are few desktop Linux apps. Even if there were, they wouldn’t run because Palm went off and invented their own UI because (unlike Motorola or PalmSource) they didn’t like GTK or the other technologies that seem to be coalescing in the Gnome Mobile initiative.

Finally, there are already devices in this intermediate position. They’re called smartphones, specifically the Nokia Communicator series of phones, which have been shipping to European loyalists since 1996.

Price~~ $1100$599†$1400
Weight7.4 oz2.5 lbs2.9 lbs
Screen size 10.2"12.1"
Optical drive--CD-RW/DVD-ROM
OSSymbian 9.2,
S60 Rev 3.1
Linux 2.4,
proprietary UI
Windows XP
Applicationsthousandsbuilt-inhundreds of thousands
† Before $100 rebate

The Nokia is smaller, more portable, and makes phone calls to boot. Plus the new ones share a common platform with 70+ million S60 phones out there. Ordinary laptops also are available for a slightly higher price at roughly the same weight. So if I were an internal MIS dept., would I choose to develop for the world’s leading cell phone maker (with a 12-year track record on this product family), the ubiquitous PC platform, or the last surviving firm in a dying product category with its brand new and unproven platform?

The only advantage is the price: it’s cheaper than the most portable business-oriented computers (or the Nokia), although still quite a bit above the $200 of today’s OLPC price.

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Monday, August 13, 2007

Mobile LinuxWorld: Motorola

In Thursday’s visit to LinuxWorld Expo, I decided to focus on mobile Linux — both because I’m interested, and also (like Linux on the server 5 years ago) because there are a lot of interesting and important changes happening right now.

Probably the biggest news at LinuxWorld was that Motorola unveiled its new open source initiative at the show. Consistent with Motorola’s youth-oriented (i.e. text messaging) ersatz word construction (rokr, razr, etc.) the Linux initiative is called Motomagx (or MOTOMAGX if you’re screaming). I spent a half hour in the Motorola booth, talking to someone from the UK about the strategy, and then filled in the gaps up with online research.

Motorola has been talking about its Linux phone strategy for more than five years. Unlike Nokia (which has a very consistent platform strategy), Motorola has been dabbling with various technologies, often with no two phones in the same family using the same OS. Thus far, Motorola has mainly used Linux for a series of Chinese smartphones.

This week’s news was about phones, about a new corporate platform strategy, and about Motorola’s embrace of open source. [Since I’m posting a little late, “this week” refers to the week of Aug. 6]

New Phones

[Z6]This week the Motorola booth was showing two new Linux-based phones: the music-optimized MOTOROKR Z6 and the Motorola RAZR2 V8 handsets, both of which are now shipping. As the press release says, “The RAZR2 V8 will be Motorola’s first Linux-based device bound for North America, representing another milestone in the company’s global mobile Linux leadership.”

I was a little puzzled, because this week it’s called a Motorokr Z6 but 7 months ago it was a Motorizr Z6. (Both were said to be Linux based). Interestingly, the official page for the Motorokr Z6 has a picture link that in the HTML says “Motorizr Z6.” (Today the Motorizr seems to come in a Z3 and Z8 but not a Z6).

Meanwhile, the Motorola RAZR2 V8 was announced in June, and is an EDGE version of the RAZR2 V9 phone for WCDMA networks.

New Platform Strategy

Motorola had a big booth at a Linux show. Although it would love to have attendees buy a phone, the booth (and the full day of training sessions) were intended to attract developers to the Motomagx platform.

As I understand it, Motorola’s new platform strategy segments the handset market into three tiers:
  • Low end is Ajar targeted at mass-market phones, which is expected to comprise 30% of unit sales. Oddly, the Ajar website has info for handset vendors, but it’s hard to imagine someone else would license this.
  • Mid range is Motomagx (Linux). In (last) Monday’s press release, Motorola said Linux will be 60% of all unit sales “in the next few years.”
  • High end is Windows Mobile or Symbian, as represented by its Q phone (as well as the MPx200, MPx220) and Motorizr Z8, respectively.
This is analogous to the Nokia platform strategy, which uses the proprietary S40 for its low-end phones, and S60 (with Symbian) for its high-end phones. Motorola’s difference is that it has unprecedented hopes for going from little to mostly Linux across a broad swath of customers in the developed and developing world; Motorola will either drive Linux adoption in mobile phones, or show why Linux is not yet ready for such widespread usage.

The new Motomagx platform will be replacing Motorola’s existing proprietary platform, Synergy. Motomagx should be comparable to the Synergy UI, as in the V3xx phone being shown in the booth. The features should also be comparable, although (as with any platform) I expect the Motomagx features to grow over time.

Even the names have meaning: Synergy and Ajar sound like code names, while Motomagx is a Motorola vowel-impaired consumer brand. Is this “Intel inside”? To me, a platform brand would imply a common user experience and set of features — not merely an enabling technology for a family of unrelated devices.

The branding ties back to Motorola’s overall phone strategy. As the inventor of the hand-held mobile phone, Motorola seems to be a company that distinguishes itself with hardware design and while software has been just an afterthought. If Motorola is branding a software platform (and not just a family of hardware products), perhaps this is changing.

Open Source Strategy

Unlike earlier one-off Linux efforts aimed at China like the Motoming (A1200), the new phones reflect more of a consistent platform strategy. The new phones use a stock Linux kernel, and the Z6 is “all open source.”

On the one hand, Motorola is being utterly corporate, as befits a company that’s been one of the top 3 mobile phone makers for the past 30 years. It’s got its fingers into all the various Linux standardization initiatives:
  • Linux Mobile (LiMo), a gated source effort driven by European mobile phone carriers;
  • LinuxFoundation, the main nonprofit promoting Linux for all uses (big and small); Motorola had a director seat for OSDL (before its bailout) and now has one for the Linux Foundation.
  • CE Linux Forum, the group intended to commoditize MontaVista Linux.
  • Gnome Mobile initiative, the group trying to adapt GNOME and GTK for mobile phones (with support from Intel, Nokia and others)
The one that is missing is the Linux Phone Standards Forum (LiPS), another group trying to establish phone-specific Linux standards.

On the other hand, what’s most interesting is that Motorola is actually going to be a real open source company — like say an IBM and not like most of the companies using embedded Linux (such as TiVo or Linksys). Rather than testing the letter of the law as to the GPL and embedded Linux, Motorola has decided to comply with the spirit.

It has created its own portal where it hosts open source projects. One of the first things posted was the user interface for the Z6:
ROKR Z6 Open Source Components Released - ROKRZ6
Motorola is pleased to announce the release of the Open Source packages for the ROKR Z6 phone, as required by the terms of the GNU Public License. This release represents the first distribution of open source code used in our next generation Linux-Java mobile phone platform.
Guy Martin - 06/25/2007 2:17 PM CDT
As with any firm-sponsored open source effort, many questions remain, both about Motorola’s intentions for open source and how successful they will be.

Is Motorola just throwing the code over the wall, or does it expect to share development (and decision-making) with outside partners? Does it expect others to use the technology or is this merely just complying with the terms of the GPL (or being a good OSS corporate citizen)? Even though an open source implementation is the most open form of standardization, telling the world “this is an open standard” is unlikely to be enough.

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Friday, August 10, 2007

2nd label goes for DRM-free

Friday, Universal Music announced that it, too, was going to try DRM-free music downloads. This follows EMI’s April announcement of its premium priced DRM-free downloads on the iTunes Store, that became available on May 30.

Interestingly, Universal is trying an experiment both for DRM and alternate sales channels. As Forbes reported:

Universal is shutting out Apple's iTunes Store from its trial run. Why? Because it wants to use iTunes as a control group against which to compare its sale of DRM-free downloads elsewhere.

Among the online vendors participating in Universal's test run will be, Wal-Mart, Google, Best Buy, Rhapsody from RealNetworks, Trans World Entertainment, Passalong Networks and Puretracks.
This is more than just a DRM experiment — Universal is trying how much traffic it can steer away from the iTunes Store, which accounts for about 70% of US downloads. And perhaps trying to get Apple’s attention. Of course, if it doesn’t dramatically shift traffic away from the iTunes Store, then Universal will have proven how dependent it is on Apple.

Meanwhile, at LinuxWorld, the FSFanatics were handing out stickers promoting their “Defective by Design” anti-DRM slogan. If DRM is so awful, then don’t buy it. But what gives a bunch of activists the right to ban a voluntary choice between content owners and their distribution channel?

Graphic credit: Free Software Foundation via Flickr.

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Mobile LinuxWorld: Moblin

At LinuxWorld Expo on Thursday, I had a chance to meet Andrew Wilson of Intel. Andrew is formerly the head of the carrier grade Linux initiative of the OSDL (now Linux Foundation). Wilson is now heading up evangelizing Intel’s Moblin efforts.

Intel’s Moblin, like Nokia’s Maemo, is about making some sort of mobile Internet device that’s somewhere today’s (postage stamp screen) cell phones and a full-fledged laptop. (The two experiments started long before the intro of the iPhone, which tries to address that demand using a standard phone form factor).

[Maemo arch] With Maemo, Nokia ported various Linux components to run on a mobile device. But, most importantly of all, they created a new Linux user interface they call “Hildon” that solves many of the Linux/Unix UI usability problems. Ironically, Hildon was initially developed by Psion (the forerunner of Symbian) for Nokia’s Communicator family of Symbian-based cellphones. No word on how (or if) the Psion Hildon code ended up in a Nokia product that competes with Symbian.

Nokia-N800-ThumbNokia has so far shipped two products based on Maemo, both of which used Wi-Fi but had no GSM connection. The initial Nokia 770 Internet Tablet (released in May 2005) had many problems, but this January it released the Nokia N800 Internet Tablet corrected many problems.

Mobilin adapted the Maemo code (including taking Hildon), and also added other other code such as a Firefox-based mobile browser. Some say the Moblin UI is iPhone-like, but that may just be pretty icons. Both want to commoditize operating systems, but Nokia wants to sell devices and Intel wants to replace ARM chips with Intel chips.

Many had speculated whether Intel was stealing from Nokia, cooperating with Nokia or even helping Nokia’s efforts, and similarly how Nokia would react. Wilson said that Moblin has attracted several Nokia contributors, and is hoping to have many firms besides Intel actively involved in developing code at Moblin. There seems to be no public support by Nokia (i.e., at the press release level) but that does not preclude Nokia engineers from joining and monitoring the technical effort.

Nokia is offering Hildon to the GNOME Mobile initiative, née GMAE (GNOME Mobile & Embedded initiative), which seeks to make GNOME and GTK relevant for mobile devices. Both Intel and Nokia are sponsors of the GNOME Foundation. So at both the strategic and technical level, the two companies are working to achieve some of the same goals.

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