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The Google Cloud: Low Ceiling, Visibility Limited

June 30, 2015

I read “Google Cloud Platform: Google Execs Speak.” I highlighted one passage. In response to a question about recent Google cloud service price cuts, the Googler Brian Stevens said:

Our [pricing] is, to be honest, completely driven by measurable infrastructure improvements. So the numbers that you’re seeing aren’t even looking at the competition. They’re looking at the efficiencies. We actually can cost out all of our ongoing infrastructure for our platform, which we actually charge back to the group… We actually modeled those [costs]. We built our plans for next year. We have a set of goals around infrastructure efficiencies that we’re going to drive next year as well. Those [costs] are mapped right back into further and further discounts. So the model, for us, will continue.

I assume that Amazon will remain competitive with Google as both companies try to create value adding services. How low will Google cloud prices go? The suggestion that Google pays little attention to the actions of its competitors strikes me as interesting. I am sensitive to the words “honest” and “actually.”

Stephen E Arnold, June 30, 2015

Palantir: A Unicorn on Steroids

June 24, 2015

Whoa. I read “Palantir Valued At $20 Billion In New Funding Round.” Palantir is not exactly pumping out the marketing collateral. The company is making sales to those who want to squeeze “nuggets” from the hydraulic flow of digital information. What’s remarkable is that the company is selling into a sector which wants to buy, yet Palantir continues to collect money from funding sources.

Is the company in the business of processing data or in the business of making presentations to venture types with open checkbooks?

According to the write up:

Palantir is raising up to $500 million in new capital at a valuation of $20 billion, people briefed on the matter told BuzzFeed News, insisting on anonymity to discuss the confidential deal. The 11-year-old company previously raised money late last year at a $15 billion valuation. The new round of funding, which has not been previously disclosed, reflects investors’ eagerness to gain access to a startup seen as one of the most successful in the world. Little is known about the details of Palantir’s business, beyond reports about its data-processing software being used to fight terror and catch financial criminals.

A couple of observations:

First, the amount of money is impressive, even by Sillycon Valley standards. The investment makes outfits like Digital Reasoning look like paupers.

Second, compared to search centric outfits like Attivio, Coveo, and others working to deliver traditional Fast Search type services, Palantir is in a different league. Attivio and Coveo combined has attracted less than $70 million or so. This amount probably is equivalent to the fees assessed on Palantir’s inflows of cash.

Third, Palantir is a bit like Google with a twist of paranoia. There are unreturned phone calls and unanswered emails. There are legal dust ups sealed away, presumably forever. There are secrets, lots of secrets.

In short, Palantir makes other content processing outfits green with envy. Green. The color of money. With a unicorn on steroids the question becomes, “Will the joints hold up?”

Stephen E Arnold, June 24, 2015

Is Time Running Out for Non Performing, Venture Funded Enterprise Search Vendors?

June 12, 2015

Gee, impatient venture capital firms, grousing partners hungry for a payday, and agitated stakeholders, are these usually cheerful folks worrying about getting their money back with a hefty profit? My hunch is that some who wrote checks might be thinking about a vacation at WalMart instead of a couple of weeks bouncing around Europe or looking at animals in Africa from a Land Rover.

Navigate to “Something Is Rotting under Silicon Valley.” The point of the write up is that the sunshine and unicorn crowd may be getting nervous. The write up points out:

Only seven VC-backed tech companies have gone public so far this year, with just one more (Fitbit) currently on the pricing calendar for June. At this rate, 2015 could go down as the slowest year for VC-backed tech IPOs since the throes of the financial crisis. Moreover, there have been only two strategic sales of VC-backed tech companies valued at over $1 billion (Lynda.com to LinkedIn and Virtustream to EMC).

Forget training (online and walking around the parking lot). The worry may be that some outfits which have sucked in tens of millions of dollars may have — gasp! — liquidity issues and a downward valuation.

The article states:

A less charitable rationale is that too few of these companies [VC bets] have imposed the tough internal discipline — particularly in terms of burn rate — that public equity investors demand. Either way, limited partners in VC funds aren’t getting paid.

What about search? With the implosion of the proprietary search sector and the vaporization of substantive news reports about bubbling sales and profits, the enterprise search sector looks like a The Man with No Man desert scene. The LinkedIn enterprise search groups are somewhat low key. Hello, is anyone there? The automated Paper.Li enterprise search paper is stuffed with information about Big Data. More importantly, Attivio has pivoted… again. Coveo whips the customer support thing. Lucidworks is promising to have a mission. The European enterprise search vendors are making little noise. When did you hear about Exalead, Intrafind, or the stub of Fast deep in the folds of Microsoftland?

My hunch is that this Fortune Magazine article has identified what may be a “Houston, we have a problem” moment for venture funded search vendors. Is there a fix? Nah, just use Elastic or another open source solution. Good news for those who need utility search. Bad news for the bankish MBAs who bet that certain investments would just spin cash.

Here’s another passage I noted in the article:

If I’m a venture capitalist, it might be time to stop staring at the sun and take a peek at the darkening clouds.

Yep, might be time to check out the actual weather, not the pretend environment in those PowerPoints.

Stephen E Arnold, June 12, 2015

MarkLogic: Now a Unicorn in Database Land

May 12, 2015

I read “Database Vendor MarkLogic Joins Billion Dollar Club with New Funding.” The main point for me is that MarkLogic is described as a “database vendor.” MarkLogic has been working hard to explain that it is an enterprise search vendor, a business intelligence vendor, and an XML publishing system appropriate for finance, health care, and publishing. There is MarkLogic DNA in Autonomy.

The headline brushes these assertions away, clearing the path for the unicorn to charge directly in the face of Oracle and maybe IBM.

According to the write up:

MarkLogic in the last few years has gained several new database rivals–including Cloudera Inc., last valued at $4.1 billion; MongoDB Inc., last valued at $1.6 billion; MapR Technologies Inc.; and Datastax Inc.–in addition to traditional competitors Oracle, Microsoft Corp. and International Business Machines Corp. MarkLogic customers include Dow Jones & Co., which publishes VentureWire and The Wall Street Journal. The company said the new money would be used to expand globally across Europe, Japan and Asia and invested in MarkLogic partners and in research and development.

Is this what MarkLogic will do with the money? I thought some of it would be allocated to purchase other firms; for example, companies which allegedly shore up MarkLogic’s content processing gaps. Concept Searching, Content Analyst, Smartlogic? Also, there may be some long suffering investors who want a payback for the millions pumped into the company. I noticed that the lead investor was Wellington Management with some help from Arrowpoint Partners.

Before the current president, I was working for some of the nifty outfits in Sillycon Valley. I learned that MarkLogic had missed some important financial targets. A spin of the revolving door put some new faces in familiar positions.

If one looks for MarkLogic today, the company is findable, but it maintains a comparatively low profile. I dropped the blog from my useful source list. I can’t recall the last time I saw a substantive link to the company in Twitter. I don’t see the company at some of the conferences I attend, but, hey, I attend some very specialized information centric hoe downs.

Several observations:

Oracle may expand on its”we’re a better XML database white paper which you can find here. An earlier paper called “Mark Logic XML Server 4.1” points out some issues which Oracle perceived in the MarkLogic approach. In a shoot out with Oracle, the bullets will fly. Does MarkLogic have the arsenal to deal with Oracle’s cache of armaments?

Will proprietary NoSQL data management systems be able to generate a billion in revenue in the next six or eight quarters? Outfits like Lucid Imagination (Really?) have been running into headwinds, and I think a similar weather system may turn MarkLogic’s sunny skies into a cloudy day. I understand that the Wall Street Journal is a MarkLogic believer? How many more can MarkLogic bring to its picnic? The assumption, I assume, is a lot.

MarkLogic’s core technology dates from 2001. Like many companies from this time period, MarkLogic has to find a way to get that old time start up excitement back. Companies which are 14 years old often continue along the same trajectory in my experience.

This will be interesting and maybe a big payday for the increasingly strapped owners of companies with technology which can caulk some leaks in the MarkLogic lake raft.

Stephen E Arnold, May 12, 2015

HP Autonomy Dust Up: Details, Details

May 11, 2015

I read belatedly yet another analysis of the HP lawsuit against Autonomy. “Details of HP Lawsuit against Autonomy Executives” The write up reports that HP is taking “direct legal action against Lynch.” There is nothing like a personal legal action to keep the legal eagles circling in search of money.

The HP position is that Lynch (the founder of Autonomy) and Sushovan Hussain (former Autonomy CFO) overstated Autonomy’s growth and profits. My reaction is “Yeah, but didn’t you guys review the numbers before you wrote a check for $7 or $8 billion?”

Details, details.

The article states:

The acquisition has been seen as a disaster for HP since the tech giant was forced to write down $8.8 billion from the deal in 2012. The $5.1 billion legal claim is one of the largest ever brought against an individual in Britain. HP bases the claim on a $4.6 billion charge linked to the alleged financial misconduct, roughly $400 million connected to shares given to Lynch and Hussain and a further $100 million loss associated with Autonomy that was suspected of being caused by the former executives’ activities, according to the British court documents.

HP may not be a tech leader or even a C student in acquisition analyses, but it is the leader in the magnitude of the claim it is making against Dr. Lynch. If he is found guilty of selling something to HP who analyzed the deal and then decided to buy the company, he will have to pay $5.1 billion.

I don’t have a dog in this fight. But it seems to me that HP reviewed Qatalyst Partners’ financial presentation about Autonomy. Then HP analyzed the numbers. Then HP involved third parties in the review of the numbers. Then HP decided to buy Autonomy. Then HP bought the company. Then HP found that Autonomy is not exactly a product like a tube of Colgate Total toothpaste. Then HP fired, forced, or tasered Lynch and others out of the HP carpet land. Then HP tried to convert the technology into some sort of cloud based toolkit. And finally HP decided to go after Dr. Lynch. You don’t have to like him, but he is a bit of a celebrity in the Silicon Fen, holds an Order of the British Empire, and he is quite intelligent, maybe brilliant, and in my experience, not into dorks, fools, goof balls, losers, or dopey managers. Your mileage may vary, of course.

I am sufficiently experienced to know that when a buyer wants a product, service, or company, craving—nay, lust and craziness—kick in. “Yo, we’re 17 years old again. Let’s do it” scream the adrenaline charged experts. This is a slam dunk. We can take Autonomy waaaay beyond the place it is today. Rah, rah, rah. Get ‘em, team.”

Autonomy’s management and its advisors knows that PowerPoint dust can close deals. The blend of blood frenzy and the feeling of power one gets when taking ownership of a new La Ferrari is what business is about, dog. Smiles and PowerPointing from Autonomy played a part, but HP made the decision and wrote the check. Caveat emptor is good advice.

Frankly I see HP as the ideal candidate for a marvelous business school case. The HP Autonomy story is better than the Yahoo track record of blunders and blind luck. The management of HP believed something that has never ever ever been done: Generate billions of dollars in new revenue quickly. Google generates billions from advertising. Autonomy generated hundreds of millions in revenues from the licensing of dozens of products. HP got its wires crossed in reasoning which does not line up with the history of  the search and content processing industry.

Billions do not flow from content processing and search technology. Investors can pump big money into a content processing company like Palantir. Will these investors get their money back? Don’t know. But to spend billions for a search and content processing company and then project that a $600 million or $800 million per year outfit would produce a gusher of billions is a big, but quite incorrect, thought.

Never has happened. Never will. It took Autonomy 15 years, good management, intelligent acquisitions, and lots of adaptation to hit the $600-$700  million plus in annual revenue it generated. Only energy drinking MBAs with Excel fever can convert 15 years and multiple revenue streams from dozens of quite different products into one giant multi billion dollar business in a couple of years. The scale is out of whack. When I visited the store in Manhattan with the big crazy pencil and the other giant products I could see the difference between my pencil and the big pencil. HP, I assume, would see the two pencils as identical. HP, if it purchased a big pencil, would sue the shop in Manhattan because the big pencil would not fit into a Panasonic desktop pencil sharpener. Scale of thinking, accuracy of perception—They matter to me. HP? Hmm.

This is not bad business on HP’s part. This is not flawed acquisition analysis on HP’s part. This is not HP’s inability to ask the right questions. This is medieval lunacy with managers dancing on the grass under a full moon. Isn’t HP that company which has floundered, investigated its own Board of Directors, chased good managers from one office in Silicon Valley into the arms of a competitor based on the old Sea World property? Maybe. Maybe HP is a fully stocked fishing pond, not a water deficient stream in Palo Alto?

My personal view is that HP has itself, its Board of Directors, and its advisors to blame. I find it very difficult to believe that as talented as Dr. Lynch is that he could spoof HP’s Board, HP’s financial professionals, HP’s advisors, HP’s lawyer, and HP’s Meg Whitman. Hey, the guy is talented, but he is not Houdini.

Well, we have a show, gentle reader. We have a really big show. Where is Ed Sullivan when we need an announcer?

Stephen E Arnold, May 11, 2015

IBM and SAP: More Power Delivered for Big Data

May 5, 2015

I read “IBM Creates Power Systems Servers for Big Data Crunching in SAP HANA.” The story line is easy to grasp: Struggling IBM has purpose built fast servers for the IBM like SAP. According to the write up:

BM has expanded its partnership with SAP by creating Power Systems server configurations specifically designed to enhance the way SAP HANA is deployed for big data projects.

IBM said its Power Systems Solution Editions for SAP HANA will allow users of IBM’s Power8 systems to deploy the in-memory database management platform faster and in a more cost-effective manner.

What’s interesting is that both companies have compute intensive content processing systems. The challenge of making sense of structured and unstructured information is a need IBM and SAP customers have.

The fix is big iron. Crunching large volumes of data in real time appears to be an issue both IBM and SAP wish to resolve.

The implication is that cloud services like those available from Amazon and HP are not up to the task. The tie up sounds good. The article references content processing as well:

Powering big data analytics and database management appears to be a major part of IBM’s strategy. The company recently entered the healthcare big data market by creating Watson Health after snapping up big data and cloud startups. Big Blue is also teaming up with Twitter to analyze big data harvested from the social network.

One minor point: Will customers be able to realize cost savings? Are IBM and a company with IBM’s DNA cost effective? “Cost savings” are easy to say and sometimes difficult to deliver. I assume one can ask Watson.

Stephen E Arnold, May 5, 2015

Amazon: The Digital Cost Cutting Quest

April 30, 2015

Nope, Amazon is not playing games. With its cloud services getting some love, the company wants to wallow in affection. I read “Amazon Pays $20M-$50M for ClusterK, the Startup That Can Run Apps on AWS at 10% of the Regular Price.” Who knows if the 10 percent figure is fudge.

Who cares?

I believe that Amazon’s cloud competitors will perk up. Hewlett Packard, IBM, and Microsoft have big cloud plans. Microsoft advertises a cloud that endures tough weather. Okay.

But the issue is cost. Microsoft gives stuff away. HP does the mitosis thing. IBM pumps out PR for Watson authored cookbooks AND quantum computing chips.

Amazon, on the other hand, continues to push for the undisputed crown as the digital Wal-Mart. My hunch is that price competition may be more important than the cloud prices its competitors are offering. Perception is important. Do you want lower costs or free Word, two HPs, and one collection of IBM financial reports. I go with lower costs.

Stephen E Arnold, April 30, 2015

Tweet Storm: Ah, Social Media Mavens at Work

April 29, 2015

I think we tweet stories posted to this blog. Don’t know. Don’t care. A while back someone sent me an email pointing out that I was promoting a naked Miley Cyrus. Odd. I write about online information and content processing. Not much about naked. Not much about Miley Cyrus, a Disney confection, right? When I think of Disney, I recall a conversation with one of that outfit’s senior managers. The message conveyed to me was that Infoseek was the greatest thing since sliced bread. My analysis was different. Fortunately I think the invoice cleared. Maybe not. Disney is not an IT outfit at its core. But Twitter somehow had connected Beyond Search with the aforementioned Miley person. I think we had to call some folks we knew. Even then, Twitter required several weeks to figure out how Miley and me became digitally connected. Shudder.

I read with considerable amusement “How One Tweet Wiped $8bn Off Twitter’s Value.” Compared to other high tech issues, the single tweet thing is indicative of the importance of a single action. According to the write up, Twitter did something. Nasdaq did something. A filtering outfit did something. Bingo. Stock goes down. The write up stated:

It has all left Twitter, which did not have great news to share with investors anyway, somewhat red-faced.

Yep, Twitter seemed concerned that whatever happened was not so good. Twitter did not demonstrate the same concern and alacrity when Beyond Search and Miley were exchanging bits. Why am I not surprised. A single tweet is really important when it costs Twitter money. Other misconnects in the Twitter system are not quite as important in my experience.

Stephen E Arnold, April 29, 2015

Google and Its New Best Buds in Europe from Publishing

April 28, 2015

I read “Google Offers Cash Support to Europe’s News Groups.” The idea is that Google will invest $163 million in journalism start ups. The write up points out that “The Financial Times, the Guardian, Spain’s El Pais and Germany’s Die Zeit are among those backing the initiative.”

The BBC, an organization with some experience in conflicts, points out:

Google has also pledged to:

  • work with European publishers to discuss ways to boost revenues via the use of ads, apps, paywalls and analytics data
  • pay for three of its own workers – based in Paris, Hamburg and London – to provide digital skills training to journalists
  • fund research to investigate how people consume news and find new techniques to crowdsource information

Is there any connection between Google’s European challenges and this action? Google set up a similar program in France. Google and France have an interesting relationship with regard to digital information and services. Like Google’s new patent purchase service, there is probably some other motive operating other than helping out start ups. I will leave it to you, gentle reader, to speculate on the “value” of strategic investments.

Stephen E Arnold, April 28, 2015

Digital Economy Growth Engines Lose RPMs

April 24, 2015

Short honk: I read several articles about the financial reports of Facebook, Google, and Yahoo. I enjoyed the explanations about the revenues and profits. Here are the write ups open on my desktop monitor at this moment:

Is there a message to be decrypted from these data? Yep.

Stephen E Arnold, April 24, 2015

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