May 28, 2016
Someone called me to alert me to Hewlett Packard Enterprise was doing the mitosis approach to financial goodness. As you recall, gentle reader, Hewlett Packard chopped itself in half, emulating Solomon’s approach to shared custody. One part was printers and ink. The other part was everything not part of the printers and ink deal.
The resulting non ink outfit was dubbed Hewlett Packard Enterprise. The solution to HP’s revenue problems was to create two companies, make bankers happy, and ponder what to do next. The answer according to “Hewlett Packard Enterprise Surges on Move to Merge Services Unit with CSC,” is to create an HP outfit and a spinoff/merger deal.
The write up states:
The union will create a “a pure-play, global IT services powerhouse,” said HP Enterprise in a statement.
The HPE entity will sell hardware. The HP-CSC entity which seems to be called Spinco. Spinco suggests spin off or spin out and reminds me of PR spin. HPE is now free to become a big dog because the annoying little puppies like printers and ink and the thrilling EDS operation are at a minimum an arm’s length away.
I recall a series of MBA type paragraphs published by ZDNet. Hey, a listicle dragged out over six weeks is ideal for the mobile phone researcher. Navigate to ”Worst Tech Mergers and Acquisitions.” Number one with a bullet was HP and Compaq. HP also made the list at Number four with its purchase of Autonomy. Not bad 40 percent of the top five worst deals of all time in the eyes of the really expert ZDNet researchers.
I once tracked Autonomy closely. I have included information about IDOL in the forthcoming Palantir Notebook we are finalizing. In the last couple of years, Autonomy faded from my radar. Obviously it is not a giant blip on the HPE control room either.
Several questions/observations are warranted:
- Is it now time for the top brass at HPE to withdraw from the field of battle now that the corporate aircraft carrier has been refitted and once again sea worthy?
- What happens to those luck licensees of various Autonomy technologies?
- Will HPE continue to grow its revenues and once again hit the $100 billion in revenue mark?
- Will People Magazine cover the party the legal eagles, accountants, and financial institutions which worked on the deal will hold at the La Quinta in South San Francisco?
From my vantage point in Harrod’s Creek, Kentucky, I am not sure that the newly painted HPE will be able to match the performance of other, more modern money machines.
Stephen E Arnold, May 28, 2016
May 24, 2016
I read “Palantir To Buy Up To $225 Million Of Stock From Employees.” I am not too interested in a company trying to provide cash to workers who have to buy food in Sillycon Valley. The main point of the write up from my vantage point in wide open Harrod’s Creek is that the source of the information is a memo. I assume that outfits providing certain government agencies with services some are not supposed to know about or talk about are water tight.
Here’s the passage I highlighted in “loose lips sink ships” red:
The so-called “liquidity event” will be held at a price of $7.40 per share, Palantir said in a memo to staff that was obtained by BuzzFeed News.
Yo, dudes, passive voice. How? Some color, please. Also, who exactly is leaking or hacking what? Was this an encrypted message, a clear text message on a password protected system? Was the message sent using a special “channel”, available to some government contractors.
Several questions fluttered through my mind this fine May morning:
- What is Palantir doing which allows memos to find their way into the outside world?
- What about the security for some of the projects which Palantir pursues for certain government agencies?
- If Palantir itself is leaking information into Sillycon Valley channels, what’s up with the firm’s management?
- Is governance an issue at Palantir post i2 and post HBGary?
I have a compendium of 100 pages of Palantir information I have compiled from open sources. I cannot recall an internal document in my collection of research. I may offer this round up of Palantirist factoids and opinion in a for fee Cliff’s Notes-type of PDF. Want a copy? Write firstname.lastname@example.org, please.
What’s changed at Palantir Technologies, home of the Hobbits, keeper of the seeing stone. Perhaps the seeing stone cannot perceive security issues as well as some assert. The situation reminds me of my comments to the Google about the flow of information about its projects which found its way into open source channels. The Googler with whom I spoke seemed indifferent to the issue. I concluded, “Hey, that stuff does not happen to Google.”
Stephen E Arnold, May 24, 2016
May 16, 2016
Google is innovating again. Perhaps the company will boost its revenues with a new line of T shirts. An outfit like Tauck Tours might pay to show the well heeled traveler real data center art?
My thought is to reduce overhead and concentrate on products and services which generate meaningful revenue. Will other cloud centric outfits spring for wraps or pimping their industrial facilities?
Stephen E Arnold, May 16, 2016
May 13, 2016
I love the Google. Sorry. I love the Alphabet Google thing. I read the Google invention explaining how I could have a computer implanted in my eye. The Alphabet Google thing has sufficient time, talent, and money to move beyond Dr. Babak Amir Parviz’s contact lens invention. Amir Parviz or Amirparviz has left the Google building and the problem of cooling a computer in an eye for others to solve.
Alphabet Google can solve some problems; for example, Loon balloon drifting and making it difficult for me to locate information directly relevant to a query I pass to the Google search systems. Management glitches? No problem. Solve them with personnel shifts and reorganization.
From my perspective, the search giant turned Leonardo can envision with the best mankind has offered. The challenge seems to be finding a way to keep the online advertising machine pumping money.
I read “Is the Online Advertising Bubble Finally Starting to Pop?” This is an interesting question. The write up presents some data which make clear that Google is generating less revenue per click than it did in 2014. I looked at a chart which shows a decline in the “cost of ad space per dollar of revenue.
If the data are accurate, erosion of Google’s ad revenue is now a problem for Google to solve. The write up opined:
We estimate that the online advertising market has been artificially inflated since the end of 2013, and is much more mature than its pundits are claiming. 90% of Google’s revenues come from advertising. We expect Alphabet’s share price to go down by 75%…
The article concludes with a list of other sources which suggest that Google’s ad revenue is “crumbling to the ground.”
My reaction is that Alphabet Google’s business model pivots on the Overture/GoTo.com pay to play model. Google and now Alphabet have tried for decades to find another source of revenue which would prove that Steve Ballmer’s “one trick pony” observation was not accurate.
How have those revenue initiatives worked out? Google remains dependent on online advertising for the bulk of its revenue. The desktop search approach is not the principal method of obtaining answers to questions for most mobile users. Facebook, it appears, is more successful in providing must have information to users who will put up with Facebook’s revenue methods. Amazon, despite its woeful search systems, generates money from a couple of talented ponies, not one.
What’s going on? Here’s my view:
- Google’s vision was to build a better Alta Vista and generate revenue with online ads. That model is the foundation of the Alphabet Google thing and a digital straitjacket which Google-dini cannot escape
- Alphabet Google is a combination of science club projects and me-too innovation. Without something “new,” the GOOG is a bit of an artifact for many users. Convenience is one thing, and revenue is slightly different. A mismatch perhaps?
- Google is distracted. There are legal hassles. There are staffing hassles. There are competitive hassles. Is the pony addled by crowd noise in the online circus ring?
The Google is not going away quickly. Messrs. Brin and Page need to find the imitative magic that created a better Alta Vista. Then that “new” thing has to produce sufficient revenue to add some meaningful revenue to the company’s financials.
Is Google “feeling lucky”?
Stephen E Arnold, May 13, 2016
April 30, 2016
It looks like Paris Hilton might have a new sibling, although the conversations at family gatherings will be lackluster. No, the hotel-chain family has not adopted Watson, instead a version of the artificial intelligence will work as a concierge. Ars Technica informs us that “IBM Watson Now Powers A Hilton Hotel Robot Concierge.”
The Hilton McLean hotel in Virginia now has a now concierge dubbed Connie, after Conrad Hilton the chain’s founder. Connie is housed in a Nao, a French-made android that is an affordable customer relations platform. Its brain is based on Watson’s program and answers verbal queries from a WayBlazer database. The little robot assists guests by explaining how to navigate the hotel, find restaurants, and tourist attractions. It is unable to check in guests yet, but when the concierge station is busy, you do not want to pull out your smartphone, or have any human interaction it is a good substitute.
” ‘This project with Hilton and WayBlazer represents an important shift in human-machine interaction, enabled by the embodiment of Watson’s cognitive computing,’ Rob High, chief technology officer of Watson said in a statement. ‘Watson helps Connie understand and respond naturally to the needs and interests of Hilton’s guests—which is an experience that’s particularly powerful in a hospitality setting, where it can lead to deeper guest engagement.’”
Asia already uses robots in service industries such as hotels and restaurants. It is worrying that Connie-like robots could replace people in these jobs. Robots are supposed to augment human life instead of taking jobs away from it. While Connie-like robots will have a major impact on the industry, there is something to be said for genuine human interaction, which usually is the preference over artificial intelligence. Maybe team the robots with humans in the service industries for the best all around care?
April 25, 2016
In the heady world of the unicorn, there are not too many search and content processing companies. I do read open source information about Palantir Technologies. Heck, I might even wrap up my notes about Palantir Gotham and make them available to someone with a yen to know more about a company which embraces secrecy but has a YouTube channel explaining how its system works.
I was poking around for open source information about how Palantir ensures that a person with a secret clearance does not “see” information classified at a higher level of access. From what I have read, the magic is in time stamps, open source content management, and some middleware. I took a break from reading the revelations from a person in the UK who idled away commute time writing about Palantir and noted “On the Road to Recap: Why the Unicorn Financing Market Just Became Dangerous for All Involved.”
I enjoy “all” type write ups. As I worked through the 5,600 word write up, I decided not to poke fun at the logic of “all” and jotted down the points which struck me as new information and the comments which I thought might be germane to Palantir, a company which (as I document in my Palantir Notebook) has successfully fast cycles of financing between 2003 and 2015 when the pace appears to have slowed.
There is no direct connection between the On the Road to Recap article and Palantir, and I certainly don’t want to draw explicit parallels. In this blog post, let me highlight some of the passages from the source article and emphasize that you might want to read the original article. If you are interested in search and content processing vendors like Attivio, Coveo, Sinequa, Smartlogic, and others of their ilk, some of the “pressures” identified in the source article are likely to apply. If the write up is on the money, I am certainly delighted to be in rural Kentucky thinking about what to have for lunch.
The first point I noted was new information to me. You, gentle reader, may be MBAized and conversant with the notion of understanding the lay of the land; to wit:
most participants in the ecosystem have exposure to and responsibility for specific company performance, which is exactly why the changing landscape is important to understand.
Ah, reality. I know that many search and content processing vendors operate without taking a big picture view. The focus is on what I call “what can we say to close a deal right now” type thinking. The write up roasts that business school chestnut of understanding life as it is, not as a marketer believes it to be.
I noted this statement in the source article:
Late 2015 also brought the arrival of “mutual fund markdowns.” Many Unicorns had taken private fundraising dollars from mutual funds. These mutual funds “mark-to-market” every day, and fund managers are compensated periodically on this performance. As a result, most firms have independent internal groups that periodically analyze valuations. With the public markets down, these groups began writing down Unicorn valuations. Once more, the fantasy began to come apart. The last round is not the permanent price, and being private does not mean you get a free pass on scrutiny.
Write downs, to me, mean one might lose one’s money.
I then learned a new term, dirty term sheets. Here’s the definition I highlighted in a bilious yellow marker hue:
“Dirty” or structured term sheets are proposed investments where the majority of the economic gains for the investor come not from the headline valuation, but rather through a series of dirty terms that are hidden deeper in the document. This allows the Shark to meet the valuation “ask” of the entrepreneur and VC board member, all the while knowing that they will make excellent returns, even at exits that are far below the cover valuation. Examples of dirty terms include guaranteed IPO returns, ratchets, PIK Dividends, series-based M&A vetoes, and superior preferences or liquidity rights. The typical Silicon Valley term sheet does not include such terms. The reason these terms can produce returns by themselves is that they set the stage for a rejiggering of the capitalization table at some point in the future. This is why the founder and their VC BOD member can still hold onto the illusion that everything is fine. The adjustment does not happen now, it will happen later.
I like rejiggering. I have experienced used car sales professionals rejiggering numbers for a person who once worked for me. Not a good experience as I recall.
I then circled this passage:
One of the shocking realities that is present in many of these “investment opportunities” is a relative absence of pertinent financial information. One would think that these opportunities which are often sold as “pre-IPO” rounds would have something close to the data you might see in an S-1. But often, the financial information is quite limited. And when it is included, it may be presented in a way that is inconsistent with GAAP standards. As an example, most Unicorn CEOs still have no idea that discounts, coupons, and subsidies are contra-revenue.
So what’s this have to do in my addled brain with Palantir? I had three thoughts, which are my opinion, and you may ignore them. In fact, why not stop reading now.
- Palantir is a unicorn and it may be experiencing increased pressure to generate a right now pay out to its stakeholders. One way Palantir can do this is to split its “secret” business from its Metropolitan business for banks. The “secret” business remains private, and the Metropolitan business becomes an IPO play. The idea is to get some money to keep those who pumped more than $700 million into the company since 2003 sort of happy.
- Palantir has to find a way to thwart those in its “secret” work from squeezing Palantir into a niche and then marginalizing the company. There are some outfits who would enjoy becoming the go-to solution for near real time operational intelligence analysis. Some outfits are big (Oracle and IBM), and others are much, much smaller (Digital Reasoning and Modus Operandi). If Palantir pulls off this play, then the government contract cash can be used to provide a sugar boost to those who want some fungible evidence of a big, big pay day.
- Palantir has to amp up its marketing, contain overhead, and expand its revenue from non government licenses and consulting.
Is Palantir’s management up to this task? The good news is that Palantir has not done the “let’s hire a Google wizard” to run the company. The bad news is that Palantir had an interesting run of management actions which resulted in a bit of a legal hassle with i2 Group before IBM bought it.
I will continue looking for information about Gotham’s security system and method. In the back of my mind will be the information and comments in On the Road to Recap.
Stephen E Arnold, April 25, 2016
March 28, 2016
I read a whizzy MBA-in-Silicon-Valley type analysis of the GOOG, which is now Alphabet. After working through the write up, I focused on one statement as interesting:
One way to understand Alphabet is as a vehicle to build essential physical infrastructure in the real world. What if you were to build a next-generation GE today?
GE had Neutron Jack, whom I had the pleasure of meeting. My employer (which shall remain nameless) screwed up a project and GE refused to pay a six figure bill. My boss took me to a meeting to learn how to get the bill paid AND to sell more work to Neutron Jack. To cut to the cob, my boss sold a $1 million job and got the unpaid bill settled in full.
What’s the difference between the new Google as described in “Learning Larry Page’s Alphabet”?
The answer is not Neutron Jack, although he was a canny manager. The answer is, “My boss.”
The Alphabet Google thing is riding high. It has more money in the bank than the current president of the University of Louisville. (Keep trying, Dr. Ramsey. Keep trying.)
For Alphabet Google to become more than an online advertising outfit, the company is going to have to do more than cook up science club projects. A person who can look adversity in the eye (Neutron Jack) and then manage the situation into a big payday has to have his or her hands on the steering wheel. Sorry, an autonomous auto kill switch won’t do the job.
The article pivots on the assumption that many motor boats can maneuver more quickly than an aircraft carrier. How has that worked out at Google. After more than 15 years of effort, Alphabet Google’s stallion remains saddled with Steve Ballmer’s insight:
Google is a one trick pony.
I noted this passage in the write up:
Here’s another way to view the company’s costly moonshot habit: as a marketing expense.
Isn’t that evidence for the one trick pony observation by a person who owns a basketball team?
What’s the strategic vision? I highlighted this passage as a possible answer to the question:
This is why Alphabet is more than just a spectacular corporate reengineering. Page picked the perfect time to reset his company—at the very moment that analysts were heralding Peak Google. He knew that traditional corporate structure limits innovation at the pace he wants and needs. He broke his business into smaller pieces to make them simpler and focused them more narrowly to discourage drift and distraction, while trying to maintain the advantages of scale and resources and a compelling culture to recruit talent. Page isn’t ready to settle for status quo. He wants to make the world a better place—with electric cars and smart cities and universal Internet access and no more disease—and also find lucrative new businesses that keep the company part of the present and future. He wants everything, from A to Z.
The friction building in the Alphabet Google machine may cause the rocket ship to veer off course. Alphabet Google has to traverse the air space of the EC, Russia, and China. The US does not have a “no fly zone” in place to bedevil Google…yet. And there is the pesky annoyances doing business as Amazon and Facebook.
Stephen E Arnold, March 28, 2016
March 23, 2016
I read “Attack! Run. WTF? A Decade of Enterprise Class Fear and Uncertainty with AWS.” I am not sure if Amazon’s Web Services’ business is being praised or criticized. Nevertheless, the write up has some interesting factoids. I highlighted these statements:
IBM’s Cloud Services
- IBM, … was so flabbergasted [when Amazon won a US government contract] that the Blue Shirts of Armonk decided on the old-school route to victory and filed a legal complaint asking the government to re-evaluate IBM’s deal against that of Amazon, which Big Blue later withdrew.
- Famed for re-inventing itself around software in the 1990s under Lou Gerstner, the majority of IBM’s focus for the 2000s was devoted to unloading the PC and the server businesses on China. The firm is now trapped in a maelstrom of transition, restructuring and layoffs. Like Microsoft, IBM seems to have believed AWS couldn’t happen to it, that what the world needed was the same server software and services. It was nearly seven years after AWS that IBM realized something was afoot – probably when it lost both the CIA deal and got slapped about its attempts to make the CIA love it – that Big Blue said it would spend $2bn buying computing player SoftLayer and in 2014 throw $1.2bn into a massive data centre expansion to host your data and compute.
Microsoft Cloud Services
- Azure succumbed to classic innovator’s dilemma: how to sell a new platform as a package and at a price to maximize revenue without cannibalizing the company’s actual main money-makers – PC and server software. After delayed starts under Ray Ozzie and Bob Muglia, the technology roadmap only really clicked under new CEO Satya Nadella and executive software nerd Scott Guthrie. One brought the CEO-level commitment, the other made Azure work for developers.
- Gartner today regards Azure as number two, behind AWS, and yet… According to Gartner’s incumbent Cloud Queen Lydia Leong, Azure lacks the polish of AWS.
Oracle Cloud Services
- Oracle, which bought Sun, preferred to play a Game of Thrones that was corporate M&A to hold onto its position in IT. Sadly, it chose wrong; Oracle spent $8.5bn on Sun but ultimately discontinued the company’s fledgling utility computing service. Hardware and Java was what Oracle wanted.
- Today, Oracle’s resultant hardware business makes just half the revenue of AWS and is is shrinking – falling 13 per cent to $1.1bn – versus AWS’s 69 per cent growth last quarter to $2.4bn. That past complacency of Oracle’s CEO on cloud has put Oracle firmly in a pack of also rans behind AWS on platform cloud, with Oracle now throwing PR at a problem to convince Wall St it is credible as a provider of IT as a service.
And what about Amazon? The write up points out:
- AWS is still attacking – growing at a phenomenal rate, 71 per cent in its recent quarter to $2.4bn and 69 per cent for the year to $7.88bn. The appetite among enterprises for AWS’s style of technology and model of delivery clearly hasn’t yet been satiated.
- …the truth is AWS now has its fences across so much of the cloud, removing them isn’t an option. The big question then for AWS at the age of 10 is this: when will the old men of IT regain their wind? How big will be their counter-attack and will it be concerted? Will it pose a tangible threat and how would AWS respond?
I noted that Apple has shifted some of its cloud business to the Google from AWS. I assume the Board of Directors’ excitement is now behind the kids from Cupertino. What’s clear is that IBM and Oracle seem to face an uphill slog if I understand the write up. Read the original and decide for yourself. I love the WTF. Some stakeholders may be asking this question too.
Stephen E Arnold, March 23, 2016
March 22, 2016
I read “New BI Platform Focuses on Collaboration, Analytics.” What struck me about this explanation of a new version of YellowFin is that the company is adding the type of features long considered standard in law enforcement and intelligence. The idea is that visualizations and collaboration are components of a commercial business intelligence solution.
I noted this paragraph:
Other BI vendors have tried to push data preparation and analysis responsibilities onto business users “because it’s easier to adapt what they have to fulfill that goal.” But Yellowfin “isn’t a BI tool attempting to make the business user a techie. It is about presenting data to users in an attractive visual representation, backed-up with some of the most sophisticated collaboration tools embedded into a BI platform on the market.”
The reason for analyst involvement in the loading of data is a way to eliminate the issue of content ownership, indexing, and knowledge of what is in the system’s repository. I am not confident that any system which allows the user to whack away at whatever data have been processed by the system is ready for prime time. Sure, Google can win at Go, but the self driving auto ran into a bus.
The write up, which strikes me as New Age public relations, seems to want me to remember what’s new with YellowFin with this mnemonic example: Curated. Baffled? Here’s what curated means:
- Consistent: Governed, centralized and managed
- Usable: by any business to consume analytics
- Relevant: connected to all the data users need to do their jobs well
- Accurate: data quality is paramount
- Timely: Provide real time data and agile content development
- Engaging: Offer a social or collaborative component
- Deployed: widely across the organization.
Business intelligence is the new “enterprise search.” I am not sure the use of notions like curated and adding useful functions delivers the impact that some marketers promise. Remember that self driving car. Pesky humans.
Stephen E Arnold, March 23, 2016
March 16, 2016
Short honk: I read “HPE Launches Machine-Learning-As-a-Service on Microsoft Azure.” The hook for me was the pricing for a new cloud search and content processing service. I did not understand the approach; for example, what the heck is an “API unit”?
But what caused me to jot down this note was this list of HPE Haven OnDemand functions. Here’s the list I circled:
- Advanced Text Analysis, which pulls concepts and sentiment from text.
- Format conversion, which converts data wherever it lives.
- Search tools across on-premises or cloud data.
- Image recognition and face detection.
- Knowledge graph analysis.
- Pattern and speech recognition.
Based on my sketchy knowledge about Autonomy IDOL, this list seems to be a summary of Autonomy’s integrated data operating features. Most of these were added to the IDOL platform in the years before HP paid $11 billion for the 1998 system which, to be fair, had been upgraded in the intervening years.
The list also reminded me of some of the functions I associated with “augmented intelligence,” a niche currently occupied by outfits like Palantir and IBM i2.
In terms of pricing, the Palantir Hobbits charge for a license, training, support, and some other goodies. But the pricing is not variable. The IBM i2 folks deliver a collection of options and each option has a price tag.
HPE’s pricing is a bit of a mystery. How many API units fit on the head of Big Data project? Whittling down that $11 billion investment suggests that the API units may be more expensive than the monthly fees suggest; for example, the introductory offer offers 50,000 API units and 15 Resource Units for [the] first three months for all paid plans.” What’s a “Resource Unit”?
The write up raises more questions than it answers in my opinion. I wonder how Autonomy IDOL will look in fall fashions?
Stephen E Arnold, March 16, 2016