Owlin Pivots Attracts Funding

June 21, 2019

Financial-tech startup Owlin is bound to be celebrating—TechCrunch announces, “Owlin, the Text and News Analytics Platform for Financial Institutions, Raises $3.5M Series A.” This is especially good news, considering the company lost ground when its original backer went bankrupt; that twist cost the company two founders, we’re told. Now, though, Velocity Capital is leading this round of funding. Writer Steve O’Hear reports:

“The fundraise follows the fintech company’s pivot from a real-time news alert service to a more comprehensive ‘AI-based’ text and news analytics platform to help financial institutions assess risk. … This is seeing Owlin enable 15,000 counter-party risk managers worldwide to track risk events that are not captured by traditional credit risk metrics. ‘We are adding news and unstructured data to their risk monitoring. In the end, our clients don’t just gain insights, they also gain time,’ adds the Owlin CEO.”

Apparently, the platform is unusually successful at augmenting certain types of data, making for more accurate risk models. Regulators love that, we’re reminded. Founded in 2012, Owlin is based in Amsterdam Some of the companies global clients are Deutsche Bank, ING, Fitch Ratings, Adyen, and KPMG.

Cynthia Murrell, June 21, 2019

Palantir Salary Information

June 17, 2019

What does an engineer at Palantir Technologies earn? The question can be difficult to pin down. Team Blind ran a post which provided some insight. Keep in mind that these numbers may be horse feathers:

  • Engineer with three years of experience and a Master’s degree: $175,000 base salary, 30,000 shares over five years, and a $50,000 signing bonus
  • Engineer with three years of experience : $165,000 base, 50,000 shares over five years.

Stephen E Arnold, June 17, 2019

HP-Autonomy and the KPMG Due Diligence Document

June 15, 2019

I noted this article in The Register, a UK online publication: “HP CFO Cathie Lesjak Didn’t Even Read KPMG’s Autonomy Due Diligence Before $11bn Biz Gobble.” The write up reports that Hewlett Packard professionals did not read a report about Autonomy prepared by the accounting and consulting services firm KPMG. DarkCyber finds the information in the article interesting. We noted this statement in the Register’s write up:

Barrister Robert Miles QC asked her: “I think you didn’t, yourself, read a due diligence report prepared by KPMG, is that right?” Lesjak replied: “I did not.”

As intriguing as this exchange between Autonomy’s attorney and an HP executive involved in the astounding $11 billion purchase, the Register provides a link to the “confidential” and “draft” report about the finances of Autonomy.

Image result for buyer beware

The document is available at this link. Note: that confidential documents can be removed from public access at any time. DarkCyber, an organization with more time but fewer resources than HP, read the document online.

DarkCyber’s conclusion is that HP’s failure to read the KPMG draft deprived the HP executives of information germane to the purchase price of $11 billion.

Other items of interest to DarkCyber in the KPMG document dated August 9, 2011, were:

  • KPMG itself lacked access to certain information; for example, certain details related to Autonomy’s income taxes
  • Autonomy’s financials (top line revenue and profits) were softening after the $870 million in revenue reported in FY2010
  • Autonomy used a method known as “Tower” in order to achieve certain financial objectives; namely, obtain maximum financial benefits from its activities such as loans.

The KPMG report is a “draft” and its authors presented sufficient information (even though that information is incomplete) to call into question the purchase of Autonomy for $11 billion.

The deal did not work out for either HP or Autonomy. HP lost traction with its shareholders. Autonomy found itself mired in an unpleasant and highly visible legal battle.

DarkCyber’s view is that companies engaged in search, retrieval, content processing, and allied disciplines have an unusual track record. For example, a number of little known companies simply failed to meet their revenue objectives and went out of business. Examples include Delphes (Canada), Entopia (Israel), InQuire, and others.

Other firms engaged in Autonomy-type software and services sought buyers in order to avoid financial problems. Examples include Exalead (acquired by Dassault), Vivisimo (acquired by IBM), and others.

Convera and Fast Search & Transfer are examples of enterprise search and Autonomy-type services caught in the same business quagmire as Autonomy; that is, robust promises about technology, difficulties generating sustainable revenue, problems in satisfying customers, and problems controlling infrastructure, R&D, and customer support costs. Convera (once Excalibur) was rescued by Allen & Company but was unable to deliver satisfactory solutions to information processing needs at Intel and the NBA. Fast Search & Transfer was involved in a financial investigation related to the company’s balance sheets. Microsoft stepped in and bought Fast Search in 2008.

Most of these problems with Autonomy-type companies stemmed from a combination of these miscalculations, errors in judgment, or over optimistic marketing:

  1. Search and retrieval is difficult to define; therefore, whatever system is installed at an organization will disappoint most of a system’s users. For this reason, large companies have a specialized system for legal, one for bench chemists, one for marketing, etc. Due to disenchantment, competitors can make a sale only to face clamors for engineering fixes or termination of the contract. Sustainable revenues are, therefore, a characteristic of Autonomy-type companies. (The KPMG report makes clear that Autonomy relied on acquisitions to increase its top line revenue.)
  2. Enterprise search vendors typically over promise and under deliver. Sales professionals and marketers glibly explain the value of unlocking the hidden value of an organization’s data. The reality is that the costs of determining what data are available, who can view certain data, cleansing and validating that data, indexing the data, and then keeping the indexes up to date and in line with access privileges is a significant burden. The cost of “unlocking’ exceed the available resources and appetite for investment in many licensees of Autonomy-type search systems. (The KPMG rolls these costs into undifferentiated line items, a serious omission. These costs help explain the “you can’t get there from here” problem inherent in Autonomy-type software.)
  3. Autonomy-type systems from the period covered in the KPMG report were mostly proprietary code. Over time, these code bases became increasingly complex and at the same time more fragile. As a result, the costs of standing up a system, fine tuning it, and then tailoring it to the needs of the licensee grew over time. Like the content preparation work in item 2, the ongoing costs of the Autonomy-type system added another set of hard to control costs. (The KPMG report does not provide detail related to the costs of triage engineering to fix urgent problems, on-going fixes, and work needed to keep the foundation system current with competitors’ innovations.)

There are other issues with the KPMG which DarkCyber noticed.

Net net: KPMG did a good job making clear that the deal was likely to be a difficult one due to the tax methods, the intra company financial processes, and the mechanisms used to allow Autonomy to demonstrate growth and reasonable margins over the period of time covered by the KPMG professionals.

HP seemed oblivious to the issues “enterprise search” posed; specifically, enterprise search is a niche business delivering expensive, proprietary solutions which rarely satisfy its users regardless of the vendor involved.

HP wanted to buy and buy big and fast. Autonomy appeared to be the solution to HP’s problems. KPMG identified the issues. Impulse buy? Maybe. Uninformed buy? Looks like it. Did Autonomy buff its show car software? Of course, getting the customer to buy is the objective.

Profiles of selected Autonomy-type software vendors are available without charge at the Xenky.com Vendors Web page. You can find that collection of vendor profiles at this link.

Stephen E Arnold, June 15, 2019

Silicon Valley Digital Protest: Another Challenge to Modern Management Methods?

May 24, 2019

One thing you never want to do, and I highly stress never, is anger a tech savvy individual. One famous example is Seth Rogen’s 2011 film, The Interview. The film was about an American talk show host tasked with assassinating North Korean dictator Kim Jong Un. North Koran was not happy about The Interview. Although they denied involvement, North Korea hackers were the alleged culprits hacking the inventor of the Walkman.

Gizmodo tells another allegedly true story in the article, “Palantir’s Github Page Is The New Battleground In The Fight Against ICE.” Tech activists support hot button issues, such as immigration, global warming, and abortion. Palantir has garnered tech activists’ attention, because mom activities dubbed nefarious. Under the Freedom of Information Act, tech activists have learned that the Immigration and Customs Enforcement (ICE) used Palantir’s technology. Many people do not like ICE, among them are tech activists.

Palantir’s case management app was used by ICE on apprehended people at the Mexican-US border. Tech activists want Palantir employees to be aware of how there products are used. We noted this statement:

“Raising an issue on the collaborative software repositories of Github is an option open to any user, and is usually for the purpose of reporting a bug or requesting a feature. ‘The issue we are planning to raise is obvious a moral issue and an ethical issue with Palantir’s ties to ICE,’ TWC’s Noah Gordon told Gizmodo. ‘This is an appeal from tech workers to tech workers to take a principled stand against family separation and deportation.’

And we circled this passage as well:

‘We believe Palantir has certain policies when it comes to maintenance of their open-source repositories, so Palantir employees will have to manually review these issues,’ Gordon continued, ‘Our belief is if we put the honest facts of the situation directly in the face of Palantir workers they will follow up by making the right decision at work and organizing against ICE.’”

Does tech activism does work. Its impact may be increased when an initial public offering is the subject of speculation. Worth monitoring this particular example of employee action and Palantir management’s response.

Whitney Grace, May 24, 2019

IBM Revenue by Country

May 1, 2019

DarkCyber spotted an interesting graph generated by DazeInfo. “IBM Revenue by Country” illustrates some of the economic consequences of IBM’s billion dollar bets. First, the US accounted for 37 percent of IBM’s revenue. Surprisingly, Japan generated about 11 percent of the company’s 2018 revenue. In 2004 IBM’s revenue from Japan amount to $12.3 billion. At the end of 2018, revenue from Japan was about $8.5 billion. International revenue in the last three years is also stagnant or declining. Watson, what can be done to remediate these declines? Watson, Watson, are you there? Can you hear me? Are you in a meeting with James Holzhauer, the professional sports gambler, who is winning on Jeopardy. You won once too. Do you remember Charles Van Doren?

Stephen E Arnold,  May 1, 2019

Facebook and Digital Money

March 4, 2019

Digital currency like Bitcoin is often associated with cyber crime. Rightly or wrongly, Bitcoin evokes images of Dark Web markets selling drugs, an association reinforced by the Silk Road bust.

Facebook, on the other hand, evokes smiles from grandmothers, but a UK investigative body characterized Facebook is more negative terms. My recollection is that the British government sees Facebook as an example of Wild West capitalism which intentionally or unintentionally enables outfits like the now defunct Cambridge Analytica.

I thought about these associations when I worked my way through “Regarding Facebook’s Cryptocurerncy.” The write up asserted:

just because Facebook launches a stablecoin cryptocurrency for peer-to-peer payments doesn’t mean people will actually use it.

Facebook’s possible angle is getting money. The write up points out:

Remittances are the obvious target market here. And it would be huge, and important, and wonderful, if Facebook were to make remittances 10x cheaper and faster … but that would require much more than fast international stablecoin transfers, because, again, those stablecoins are not legal tender at their destination, and I don’t know if you’ve noticed but businesses tend to have this whole thing about receiving legal tender.

The fix is for Facebook to find ways to get organizations to accept Facecoins.

The other angle is:

for Facebook to establish relationships with cryptocurrency exchanges worldwide, or — even more dramatically — become or sponsor exchanges themselves.

The write up is interesting, but it left me with several questions zipping through my admittedly limited brain:

  1. How could bad actors make use of Facecoin?
  2. Will Facebook provide these digital currency data to government authorities?
  3. What third party services will Facebook enable through an existing or new API?
  4. What audit mechanisms are in place?
  5. What if Facebook’s presumed digital currency is used for illegal activities?

I would suggest that when digital currency becomes part of an organization which the British government views in a less than positive manner, regulatory authorities may be sitting on the sidelines.

Stephen E Arnold, March 4, 2019

When Free Fails the Doers, the Dreamers, and the Disillusioned

February 17, 2019

My team and I worked for several “open source software companies,” before I decide to hang up my Delta Million Mile Club name tag. (Weird red tags those puppies are.)

I read “Free Labor of Open Source Developers. Is That Sustainable?” The question caused me to chuckle. The answer is fairly straightforward.

Nope. Not for individuals. For outfits like Amazon, yep.

Under specific conditions, open source software does “work”. Now “does work” translates as “makes money, delivers fame, and/or makes those participating [a] happy, [b] feel like the effort is sticking it to the “man”, [c] proves that a person can actually write code which mostly works, and/or [d] builds a psychic bond with a community.

Some big companies do the open source “give back” and “contribution” and “support” dance. For these outfits, open source software is a part of a business model. Usually the practitioners of this type of marketing and sales offer for-fee widgets, add ins, and digital gizmos. Then the customer who downloads and uses the open source code has the opportunity to use the software and [a] buy engineering services, [b] buy training, [c] pay for “enhanced support,” and/or [d] attend conferences for insiders. I find Microsoft’s embrace of open source amusing.

For individuals, a pet project can provide satisfaction and a job maybe.

The write up does a good job of explaining the idealistic roots of open source software. I must admit, however, that I do not drink alcohol, so the analogy “like free beer” does not make any sense to me. The roots of open source software seem to be anchored in a desire to have software which did not [a] cost money to use, [b] could be modified; that is, not put the users in handcuffs, and [c] was updated on a calendar often wildly out of sync with the needs of the licensees. Proprietary software meant “bad” and the new open source software meant good with hints of revolution and “I just can’t take proprietary software anymore.”

The write up reviews a popular paper about the economics of open source software. I did not spot a reference to a later study which suggested that large companies were the biggest adopters of open source.* If that research were correct, the reason boils down to [a] big companies want to trim their costs for proprietary software’s license fees, mandatory upgrades, mandatory maintenance, and contractual limits on what changes a licensee of proprietary software can make. The researchers pointed out that large companies had [a] the staff and [b] the money to make open source software work for their use cases.

Flash forward to 2016. The Ford Foundation’s Roads and Bridges** makes clear that software development performed for free has a built in flaw. Developers can quit. Dead end? Maybe. Large companies can step in and embrace the project and, of course, the community. Outfits using this method range from the Amazons to the smaller firms which allow employees to work on projects. The open source approach can be overwhelmed or a victim of abandonment.

I am not sure I am convinced that the open source community exists. There are factions and many of them are at war. Consider Lucene/Solr’s contentious history. I also am not keen on the simile comparing open source to a religious community. Once again there are fanatics, and there are those whom the fanatics would like to either [a] imagine roasting in hell or [b] actually burning alive after a presentation at an open source meet up.

Net net: Amazon has crafted a new chapter in the lock in playbook. The approach borrows from IBM’s FUD to the more New Age methods of being famous and getting a “real” job.

If you are tracking the world of open source software, the write up is a useful addition to one’s library of analyses. One suggestion: Keep in mind that “free” open source software is a lure in certain circumstances. Think of it as a form of digital phishing, particularly for marketing oriented outfits.

Stephen E Arnold, February 17, 2019

——–

Note:

* Diomidis Spinellis and Vaggelis Giannikas, “Organizational Adoption of Open Source Software,” Journal of Systems and Software, March 2012, page 666-682, and Stephen E Arnold’s The New Landscape of Search, June 2011.

** See https://www.fordfoundation.org/about/library/reports-and-studies/roads-and-bridges-the-unseen-labor-behind-our-digital-infrastructure

Google: Just Like a Colonizing Force?

February 15, 2019

Can a company cross over into the monetization methods of a country? I read “Google’s Sidewalk Labs Plans Massive Expansion to Waterfront Vision” and formulated this company-country question.

If accurate the Star’s report seems to outline a way for a commercial enterprise, based in the US, to monetize or “cost recover” via methods usually associated with a nation state. The techniques may be more gentle than those early colonizers of Peru, but the goal seems to be similar.

I learned:

Google’s futuristic development on the eastern waterfront, Quayside, is only the first step in an expansive and ambitious plan to build new neighborhoods — and new transit — throughout the entire Port Lands, the Star has learned. In return for its investment in this vision, Sidewalk Labs wants a share of the property taxes, development fees and increased value of city land that would normally go to city coffers.

The source of this monetization method comes from “internal documents.” Like Bloomberg’s revelations about fiddled motherboards, the information could be viewed with skepticism.

google toronto

Let’s assume that the story is spot on. The revenue from this technology revitalization effort is characterized in the article:

These future revenues, based on the anticipated increase in land value once homes and offices are built on the derelict Port Lands, are estimated to be $6 billion over the next 30 years. Even a small portion of this could amount to a large, recurring revenue stream diverted from the city into private hands.

The money generated from what is usually described as “development” by property professionals would flow to the government entities. These in turn would repair roads, provide services, and educate children. Google, I assume, would use these funds to further its commercial interests and continue its efforts to solve death, develop more sophisticated online advertising methods, and rekindle the Google Glass technology, among other high value endeavors.

There are upsides. The area would become more valuable to the city and its residents.

Nevertheless, the coupling of funding methods commonly associated with nation states and governmental agencies with Google is interesting.

Perhaps the same approach would work for Google in China and Russia? But leaders in those countries may not entertain Google’s 21st century approach to a public private partnership.

In Louisville, Kentucky, Google pulled out of its high speed access project. That’s just one risk of cutting deals with commercial enterprises. Google, in particular, can change its mind. Like Amazon, companies wield real power. New York City and environs are waking up to the reality of Amazon’s bidding the Big Apple farewell.

What happens if Google becomes disenchanted with Toronto? A pull out could have significant financial consequences.

But the idea is interesting, and certainly worthy of Francisco Pizarro’s advisers.

Stephen E Arnold, February 15, 2019

Stephen E Arnold

Palantir Technologies and KT4 Partners: Information Decision

February 14, 2019

If you follow Palantir Technologies, there is a dust up between KT4 Partners and the producer of intelware; that is, software designed to provide intelligence solutions to licensees.

Like Palantir’s dispute with the original i2 Ltd., the details are difficult to discern due to the legal processes themselves, the desire of those involved to remain out of the spotlight, and the time lag between events.

If you do follow the legal machinations, you will want to read “Delaware Court Provides Guidance for Books and Records Demands to Limit Producing Electronic Data to Stockholders.”

I am not a lawyer and lawyers in general make me nervous; however, it appears that KT4 will be able to access certain documents to which Palantir has denied access.

Why’s this important?

Palantir and KT4 know that money is at stake. Expensive settlements may have an impact on Palantir’s IPO. Furthermore, documents may contain interesting information which could find its way into the media.

Worth monitoring this matter.

Stephen E Arnold, February 14, 2019

Google News: Not So Much News As Control and Passive Aggressive Offense

February 12, 2019

I read “One Analyst’s Attempts to Demystify the Types of Traffic Google Sends Publishers.” The write up explains some of the clever ways Google manages its traffic and any related data linked to the traffic and content objects.

To put it another way, Google is continuing its effort to control content for its own purposes, not the publishers’, not the users’ or the advertisers’ goals.

The article makes it clear that Google is adapting in a passive aggressive manner to the shift from desktop boat anchor search to the more popular mobile device approach to search.

Users want information and no longer are troubled with thinking up a query, deciding what service to use, or questioning the provenance of the information.

The write up takes a bit of time to figure out. There are acronyms, Googley lingo, and data which may be unfamiliar to most readers. Spend a few minutes and AMP up your understanding of what Google is doing to help out — wait for it — itself.

Surprise, right?

The downstream implications of this approach are interesting. Perhaps an analyst will tackle the issues related to:

  • Time disconnects between event and inclusion of “news”
  • Ability to “route” and “filter” from within the Google walled garden
  • Implications of inserting “relevant” ads into what may be shaped streams so that ad inventory can be whittled down.

Interesting and just the tip of the Google content management iceberg.

Stephen E Arnold, February 12, 2019

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