December 8, 2013
I do work for hire. The idea, as I implement it, requires someone to pay me; for example, a publisher like Galatea, IDC, or Pandia Press. I then submit written information for that money. The publisher can do with the information whatever the purchaser wants. Some publishers have spotty records of payment, but after working for “real” journalism and publishing outfits for years, slow pay or in some cases no pay is more common than I thought. I like to reflect on my naive understanding of the information business in 1954 when I wrote for money “Burger Boat Drive In” for the St Louis Post Dispatch. Think of it: That time span covers 60 years.
I read “Academia.edu Slammed with Takedown Notices from Journal Publisher Elsevier.” I found the write up amusing. I thought that “real” publishers had cracked down on tricky PhDs and “experts” who posted their research on their blogs or on silly academic or public-service-type Web sites a long time ago.
I was dead wrong. It seems that Elsevier, a renowned scientific and technical publisher, was asleep at the switch. Elsevier owns part of Reed Elsevier, another top flight information outfit. If anyone could locate duplicate content, it would be the experts at Elsevier. After all, at their fingertips were duplicate busting online search tools like LexisNexis text mining and search systems. A mouse click away is Google’s outstanding search system. For the more sophisticated investigator, Elsevier can use tools from Dassault or Yandex to locate improper use of content Elsevier owns.
A happy quack to Wikipedia at http://bit.ly/1d3pH7l
The write up tells me:
“In the past, Elsevier has sent out one or two DMCAs a week,” Price [Academia.edu’s top dog] wrote. “Then, a few weeks ago, Elsevier started sending Academia.edu DMCA take-down notices in batches of a thousand for papers that academics had uploaded to the site. This is what has caused the recent outcry in the blogosphere and Twitter.”
So what’s the big deal?
The article tries to answer my question:
Still, Elsevier’s ramping up of take-down requests is reminiscent of the shake-up happening as a result of the rise of massively open online courses, which have enabled millions to learn at a high level — for free. It could be that the basic premise of Academia.edu will throw things off kilter for publishers and cause them to react. And it even has a bit of the flavor of Aaron Swartz’s efforts to liberate academic papers from the premium site JSTOR.
I am not sure but I don’t think Mr. Swartz weathered the “free content” storm particularly well.
December 4, 2013
An article on ZDNet titled Splunk Shares Rise After Hours Thanks to Q3 Revenue Surge, Strong Outlook explains the progress of the San Francisco based software corporation Splunk. After upsetting estimates of losses on shares with the news of a record third quarter, Splunk announced the addition of 450 new customers, making the total 6400 customers internationally.
The article quotes Godfrey Sullivan, CEO of Splunk:
“ “More customers are adopting Splunk software as their enterprise standard. We expanded our product portfolio this quarter with the release of Splunk Enterprise6, Splunk Cloud and Hunk: Splunk Analytics for Hadoop, providing more power, functionality and flexibility for our customers.” For the fourth quarter, analysts were expecting Splunk to deliver non-GAAP earnings of six cents a share on revenue of $86.12 million. Splunk responded with revenue guidance of $88 million and $90 million.”
The upgrades Sullivan mentioned only skim the surface of the increased potential of the latest software. Splunk claims that the Enterprise 6 is 1,000 times faster than old versions. Quarter 3 also included the acquisition of BugSense Inc. and an expanded partnership with Amazon Web Services. Internal changes were also made, with Stephen Sorkin made chief strategy officer and Todd Papaioannou as chief tech officer for C-level appointments.
Chelsea Kerwin, December 04, 2013
November 27, 2013
I read “HP’s Meg Whitman Ordered to Face Autonomy Charges.” Hard on the heels of Hewlett Packard’s quarterly results, the company has to explain to one disgruntled shareholder why the Autonomy deal went south.
The write up states:
In the latest $1 billion (£647m) lawsuit, HP shareholders accused HP’s management team of ignoring warnings before it bought Autonomy for $11.3 billion (£7.3bn) in 2011 and that the company’s financial numbers had been exaggerated. It is also claimed that HP tried to get out of the deal before it closed. The company later took a nearly $9 billion write-down largely connected with the purchase.
The deal put a burr under some digital cowpokes’ saddles. HP paid $11 billion for Autonomy. At the time of the deal, Autonomy was an $800 to $900 million a year company. Some months after the deal closed, the canny HP management took an $8 billion write down on the Autonomy deal.
According to the Tech Week Europe article:
The investors allege that HP’s management was negligent because of the $8.8 billion (£5.7bn) write-down on the deal HP announced in November 2012. HP officials blamed ‘accounting irregularities’ by Autonomy executives in the months leading up to the deal. The investors allege that the resulting drop in HP’s stock price effectively wiped billions of dollars from the company’s market value. The FBI are said to be investigating the allegations, as is the UK’s Serious Fraud Office (SFO).
In the meantime, the HP deal has not generated the big time payoff that someone at HP assumed would result from the deal. HP, like many other search vendor buyers, seems to be learning that:
- Search is an expensive business to fund. Those marketing, research, and support costs are brutal. Most of the failed search vendors ran into financial trouble despite the ministrations of different CEOs. Maybe Autonomy was managed better? Interesting question.
- Search, by itself, is not a compelling product or service to many potential customers. As a result, search is no longer search. Search embraces dozens of functions from text mining to the ubiquitous and fuzzy Big Data. HP is now trying to market lots of search related products and services. My hunch is that this is a bigger job than trying to sell $11 billion worth of key word search licenses.
- Companies that are not really software centric do not understand the oddities of the enterprise search sector. My view is that MBAs at outfits like HP assume that their Swiss Army knife budgeting and managing skills are going to “fix up” an outfit like Autonomy. Billions will flow as a result of the MBA approach. Who needs a PhD with an aptitude for math to run a mere search company. HP is coming to grips with its own shortcomings in the vision and motivation departments of Autonomy.
An ironic twist to the tale is that HP licensed the hugely complex, expensive, and cumbersome Verity system. With the purchase of Autonomy, HP became the owner of Verity’s technology. The six figure license deal for Verity is now free when viewed one way. On the other hand, that Verity technology cost HP billions of dollars.
And what about the founder of Autonomy? Dr. Michael Lynch has set up an investment company called invoke capital. The company took an interest in Darktrace, a security firm. Dr. Lynch, according to the Financial Times,
…is also a defendant in a suit by HP’s shareholders relating to the acquisition. A court in San Francisco this month gave HP a deadline of January to complete an internal audit, a decision welcomed by Mr Lynch.
The year 2014 may hold more fodder for business school case studies about Hewlett Packard and Autonomy. I am eager.
Stephen E Arnold, November 27, 2013
November 26, 2013
We aren’t exactly economics experts around here, so we’re not sure we understand this fully, but it may explain why search vendors are stuck on a merry-go-round. In “M.C. Escher and the Impossibility of the Establishment Economic View,” Zero Hedge explores the fallibility of official financial forecasts.
Writer F.F. Wiley supplies evidence rich with statistical details and a wealth of graphs to support the assertion that we cannot depend on predictions from the Federal Reserve and the Congressional Budget Office. See the article for those details, which this theatre major will not attempt to interpret here.
“In a word, the CBO’s projections are preposterous. They ignore effects that are clear in the data and obvious in real life. But the charts reveal more than just forecasting flaws at a single governmental institution. More broadly, the assumption of a smooth and lasting return to normality is standard practice for mainstream economists, particularly those at the Fed.
Essentially, economists are hardwired to focus on the near-term effects of policy stimulus, while dismissing long-term effects that are often far more important. Standard models fail to account for either natural cyclicality or the payback seen in Charts 4 to 6. Although establishment economists often speak about sustainable growth, they really mean any growth that restores GDP to where they believe it should be. They don’t seriously contemplate the unsustainable growth that occurs when the economy is over-stimulated through credit and financial asset channels.”
Wiley believes this all boils down to an “Escher” economy, where we will go round in circles getting nowhere until the existing system falls apart. Afterward, another could (should) be constructed with better policy, but what are we to do in the meantime? Have the folks stuffing their mattresses with gold been right all along?
Cynthia Murrell, November 26, 2013
November 9, 2013
Good news for those with Tableau Software stock, the company is showing record growth. GeekWire focuses on the company’s current success in, “Tableau Posts 90% Revenue Gain And Tops 1,000 Staffers, Files For $540 Million Secondary Offering.” Despite the growth, Tableau is seeing red due to a $2.5 million net loss. That does not stop people buying in or Tableau filing for a $450 million secondary offering.
How do the numbers stack up? Tableau saw a $61.1. million profit, which is a 90% increase from the same time last year. It can be surmised that Tableau will use the monies to cover the net loss.
What about stock options?
“Tableau went public in May at $31 per share, and since then the stock has been on the rise. Shares are now trading at $68.99 in after hours trading, up nearly 10 percent. The company’s market value stands at $3.74 billion, and it now employs 1,039 full-time employees worldwide. That’s up from 188 in December 2010 and 749 in December 2012.”
The investors who bought stoke in May are very happy right now. Where will the company invest its money and go next? Do we expect to see a rise and fall in the stock price? Yes, the real question is how long will it continue to trend upwards.
Whitney Grace, November 09, 2013
October 30, 2013
I spoke with a former publishing executive last week about what he called “easy cost cutting.” Publishers like Thomson Reuters, Wolters Kluwers, and Pearson have been tightening their WalMart belts for some time. Chasing down expensive off site meetings and taking close looks at senior executives authorized expenditures is good business management.
Publishing companies have been struggling to get back to the good old days of William Randolph Hearst. But the cost of paper, pesky worker demands, the sky rocketing cost of buying advanced systems and then paying to try and get the systems to work so old fashioned work processes can be streamlined, upstarts like former middle school teachers who start a blog and give away the content for free, Amazon and its silly “anybody can publish” approach to content, environmental costs associated with ink and disposal of unsold printed matter, and the lousy outlook for law, accounting, library, and other high value materials are making life tough.
Well, the story “Thomson Reuters to Cut 3,000 Jobs in Second Layoff Round This Year” suggests life is getting pretty tough. Now that the easy cuts are gone, heads have to go away. Thomson Reuters is interesting because it has had some senior management turnover in the past two years. The article pointed out:
Third-quarter net income attributable to common shareholders fell 39 per cent to $271 million, or 33 cents a share, from $441 million, or 53 cents, a year earlier. Operating profit, which excludes one-time items and businesses that have closed, declined 15 per cent to $316 million in the period.
Thomson Reuters is revenue and profit oriented. So, the decline is worrisome.
However, set aside the serious problems at Thomson Reuters. Let’s ask a larger question, “What about Thomson Reuters as a flagship outfit?”
My view is that Thomson Reuters, particularly when headed by Michael Brown, was a pretty well managed outfit. Now the company seems to be signaling that the ship is listing. Thomson Reuters is not lying on the bottom of the Mediterranean Sea, but the company has got to make some changes that return the company to its former posture. Growth requires more than acquisitions in Argentina. Leadership requires more than a new crew in the pilot house.
Many publishing companies are in a similarly precarious position. The private companies do not have to report their financial woes, but they are evident if one pokes into specific markets; for example, the library sector. Libraries are not rolling in cash. The companies dependent on libraries for revenue are going to have to shop at the WalMart belt display too. Newspaper publishers are interesting. Perhaps Jeff Bezos knows how to make the Washington Post the Miley Cyrus of the dailies? Book publishers are trying to figure out what to do with the 300,000 to 600,000 self published books likely to be generated this year. Most are no good, but the sheer volume underscores the challenge the folks in London and New York face from an unemployed Webmaster with an Amazon account or Apple’s publishing software.
Will more layoffs occur? I hope not. Thomson Reuters once was the leader of the publishing pack. Is it now the leader in the headcount reduction derby? Worth monitoring.
Stephen E Arnold, October 30, 2013
October 27, 2013
I read “Amazon and the Profitless Business Model Fallacy.” The article was the work of a person who once worked at Amazon, departing in 2004. I assume that some of Amazon’s processes are unchanged, but nine years is a long time, even for an addled 70-year-old goose like me.
The main point of the write up is that many people assume that Amazon is a charity. Amazon, the article points out, is “a classic fixed cost business model.” The company uses the Internet:
to get maximum leverage out of its fixed assets, and once it achieves enough volume of sales, the sum total of profits from all those sales exceed its fixed cost base, and it turns a profit. It already has exceeded this hurdle in its past.
Get your T shirt from Zazzle at http://goo.gl/GTm71a
The article asks:
Does Amazon lose money on sales of some individual items? For sure. The first Kindle ebooks that were priced at $9.99 when Amazon had to pay more than that per copy to publisher were one example. Giant, heavy electronics items that Amazon sometimes ships for free when the shipping cost is clearly non-trivial and cost more than the usual thin margins on such goods are another.
The Bezos brilliance takes this approach:
Amazon has decided to continue to invest to arm itself for a much larger scale of business. If it were purely a software business, its fixed cost investments for this journey would be lower, but the amount of capital required to grow a business that has to ship millions of packages to customers all over the world quickly is something only a handful of companies in the world could even afford.
On the subject of Amazon’s interesting financial report, the article states what is obvious to most analysts who have tried to figure out where the money comes from and where the money goes:
The irony of all this is that while Amazon’s public financial statements make it extremely difficult to parse out its various businesses, it is extremely forthright and honest about its business plans and strategy. It’s the reason Jeff continues to reprint its first ever letter to shareholders from 1997 in its annual report every year. The plan is right there before our eyes, but so many continue to refuse to take it at face value. As a reporter, it must be so boring to parrot the same thing from Jeff and his team year after year, so different narratives must be spun when the overall plan has not changed.
The former employee then offers this observation or is it a threat?
If I were an Amazon competitor, I’d actually regard Amazon’s current run of quarterly losses as a terrifying signal. It means Amazon is arming itself to take the contest to higher ground. The retail game is about to become more, not less, punishing.
Amazon is a giant company with customers, cash, and clout. Those who try to get in its way find out that the Amazon business model is not much less forgiving than Google’s. Google has made little headway in online shopping and that suggests some bright folks have bumped into one or two of Amazon’s pointy parts.
Second, price cutting is a great business tactic. Once the competition is gone, then it is pretty easy to move forward. A number of moguls figured this out decades ago. In today’s regulation-soft environment, commercial enterprisers are functioning more or less like nation states. Different economic rules apply to nation states. Individuals who shop at the company store have fewer options.
Third, Amazon is one of the firms developing a monoculture for its customers. Once one gets into the Prime, one-click, personalization approach to online activities, an old adage kicks in:
Like a soft bed, a bad habit is easy to get into and hard to get out of.
Now my interest—now a hobby, not a job—is search and retrieval. How does the Amazon approach work in search. Amazon offers what I call “corset search.” If you want to get into the darned thing, be prepared to experience some push and pull. If you want a cloud based search system, Amazon is, as I wrote in one of my for-fee columns, a “search lazy Susan.” Just dial up an alternative running on the Amazon system.
Easy. Cheap at least at the outset. Mostly reliable. What more could a vendor want? What more would a user want?
That in my view is the problem with the WalMart approach to technology. Amazon is one of the manifestations of the deep divides that continue to fracture behaviors. I am okay with making my way through an increasingly medieval landscape.
I suppose Wall Street is learning that what look like losses may be something else. We have entered the Dimonization Era. Money is not what it seems perhaps?
Stephen E Arnold, October 27, 2013
October 24, 2013
Generalizations are terrible. Generalization can be useful. I read “Why Being a Thinker Means Pocketing Your Smartphone.” The story appeared on the CNN Web site. I find this amusing, since CNN is associated in my mind with content delivery for those with some sort of dependence on TV filtered information. The key point in the write up struck me as:
“You can’t make headway without thinking about a problem for a long time, in collaboration with smart researchers from different fields, as well as reading a lot,” says epidemiologist Caroline Buckee, one of CNN’s 10 Thinkers for 2013. “But sometimes that hard work reaches fruition or comes together at a random time once you have let thoughts settle down.” We know this — as surely as that 20th-century magnate knew it — and yet we regularly ignore the advice. We surf the Web; we scan news on our phones; we keep our minds digitally occupied in a million ways. When we have a few minutes of down time now, we pull out our mobile devices instead of daydreaming.
The statement is only partially correct. Let me narrow the focus to behavior influenced by uncertainty about what actions to take and the insecurity generated by not having a product or service that people want to pay for.,
Think about your last interaction with a vendor of search, content processing, and analytics. How did the interaction flow? I have noticed since the summer vacations ended and management of search vendors focused on making money that two words characterize many behaviors of the senior management of search and content processing companies. The two words?
Frazzled and Scared
What do I mean?
Here are some recent example:
- Information promised on a specific date has not been provided six weeks later. The fact that the information was needed for a potential investor adds to the spice of the incident.
- A statement “We will meet at the X conference” became three weeks later, “We are traveling outside the United States”
- An assurance that customer support would provide an activation key to a search system generated four additional assurances. But no key arrived.
At a recent conference, I noticed:
- A vendor who beamed when a colleague and I approached the booth. The vendor launched into a series of questions about budget, decision time, and internal staffing capabilities. When I pointed out that I did analyses for my clients, the vendor turned off the charm and moved to another “fish”
- Four vendors in four consecutive presentations said, “We do real time content processing of all information.”
- One company president had beads of perspiration on his forehead as he talked on his mobile phone in a corner of the booth. He looked fearful.
Based on the information in our Overflight system, a number of search and content processing vendors are no longer updating their blogs with regular posts of a substantive nature. The flow of emails about free webinars and new products is on the rise. I received a half dozen on Wednesday, October 23, 2013. For example:
Might you have a few minutes for a call with Mike Schmitt, Senior Director of Product Management for Astute Networks, to discuss the paper and its findings? It is interesting how even today, smart IT executives are still thinking about storage cost only in terms of the device, vs. the extended consequence it has across performance and productivity, as well as business flexibility and agility.
The “paper” is one of those azure chip, toot toot things. Sigh.
I also am inundated with messages about the “crisis” in search, the lack of traffic to search vendors’ Web sites, and the death of “leads”.
Perhaps the search and content processing companies should step back, take a deep breath, and consider the impact of wild and crazy statements, odd duck behavior at trade shows, and a panhandler’s approach to revenue generation.
October 21, 2013
I will be giving my last public talk in 2013 at the upcoming Search Summit. I am revealing some data about the trajectory of commercial search versus free and open source search. My focus is not just on costs. I will address the elephant in the room that few of the sleek search poobahs elect to ignore—management.
As part of my preparation, I read an interesting public relations and positioning white paper from Oracle. The essay is “The Department of Defense (DoD) and Open Source Software.” You should be able to locate a copy at the Oracle Middleware Web page. But maybe not. Well, take that up with Oracle, Google, and whoever indexes public Web pages.
The argument in the white paper is that open source is useful within the context of commercial software. The premise is that a commercial company develops robust products like Oracle’s database and then rigorously engineers that product to meet the tough standards imposed by the US government. Then, canny engineers will integrate some open source software into that commercial solution. The client—in this case the Microsoft loving Department of Defense—will be able to get the support it needs to handle the demands of global war fighting.
There are three fascinating rhetorical flourishes in the white paper. These are directly germane to the direction some of the discussions of commercial and proprietary versus free and open source software have been moving. I will give a couple of case examples in my talk in early November 2013, and I assume that the slide deck for my talk will find its way into one or more indexing services. I won’t plow that ground again. Below are some new thoughts.
First, the notion that commercial and proprietary software is better than open source software is amusing. I think that any enterprise software is rife with bugs and problems that can never be fixed because there is neither time, money, or appetite to ameliorate the problems. I was at a meeting at the world’s largest software company when one executive said, “There are a couple thousand bugs in Word. Numbering is one issue. We will maybe get around to fixing the problem.” That was six years ago. Guess what? Numbering is still an interesting challenge in a long document. Is Oracle like the world’s largest software company? Oracle has some interesting features in its products? Check out this sample page. Make your own decision. Software has been, is, and will be complicated stuff. The fact that people correlate clicking a hot link with “simple” just adds impetus to the “this is easy” view of modern systems. No software is better. Some works within specific parameters. Push outside the parameters and you find darned exciting things.
Second, the idea that a large bureaucracy can make decisions based on cost benefits is crazy. Worldwide bean counters and lawyers work to nail down assumptions and statements of work that are designed to minimize costs and deliver specific functionality. How is that working out? If I read one more after the fact analysis of the flawed heath insurance Web site, I may unplug my computer and revert to paper and printed books. I did a major study of a government site in 2007. Guess what? The system did not work and still does not work. Are there analyses, reports, and Web pages explaining the issue? Sure. What’s the fix? People either go to a government office and talk to a human or make a phone call in the hope that the human on the other end of the line can address the issue. The computer system? Unchanged. My report? Probably still in a drawer somewhere.
Third, the idea that a publicly traded company cares about open source is amusing. Open source is simply a vehicle to reduce costs to the publicly traded company and generate consulting revenue. The fact is that most of the folks who embrace open source need some help from firms specializing in that open source product. I can name two companies, each with more than $30 million in venture funding, that have a business model built on selling proprietary software, consulting, and engineering services. Open source sure looks like a Trojan horse to me. Why does IBM embrace Lucene yet sell branded products and services? Maybe to eliminate some software acquisition costs and sell consulting.
A happy quack to http://goo.gl/lxKb6I
On one hand, Oracle is correct in pointing out that free and open source software looks cheaper than commercial and proprietary software in terms of licensing fees. Oracle is also correct that the major cost of software has little to do with the license fee.
On the other hand, Oracle adds some mist to the fog surrounding open source. When open source vendors have to generate revenue to pay back investors or build out their commercial business, the costs are likely to be high.
Open source software begins as a public spirited effort, a way to demonstrate programming skills, and a marketing effort. There are other reasons as well. But in today’s world, software is the weak link in most businesses. Systems are getting less reliable, despite the long string of nines that some companies use to prove their systems are wonderful. But like the optical character recognition program that is 99 percent accurate, the more content pushed through these system, the more the errors mount. Xerox continues to struggle with error rates in a technology that was supposed to be a slam dunk.
Net net: Read the Oracle white paper. Then when you work out a budget, focus less on the sizzle of open source and more on the basic management skills it takes to make something work on time and on budget. Remember. Publicly traded companies and open source companies that have taken money from venture capitalists have to generate a profit or they disappear.
The basics are important. The Oracle white paper skips over some of these in its effort to put open source in perspective. Any software project requires attention to detail, pragmatism, technical expertise, and money.
Stephen E Arnold, October 21, 2013
October 16, 2013
Sometimes 5 minutes can seem like an eternity, but how about 5 milliseconds? Most of us probably do not notice that fragment of a second, but computers certainly do. And in the world of finance, their end users following stocks quickly rising and falling do too. Popular Mechanics discusses this topic in light of a once-in-a-decade type of event: “New Transatlantic Cable Built to Shave 5 Milliseconds off Stock Trades.”
The last transatlantic cable was laid ten years ago and in the past, those cables have carried voice or internet data. Since most trades are conducted automatically where algorithms execute sales and purchases, those 5 milliseconds really matter.
There are some that say finance may be running at too fast of a speed. The article states:
“But there is one big bump in the road: Information and transactions now move so quickly that some regulators worry it’s too fast. Congress became leery of automated trading after its lightning-fast trades helped stoke the May 6, 2010 “flash crash” that dropped the Dow Jones Industrial Average more than about 1000 points. The market recovered within minutes, but the incident alarmed regulators.”
Unfortunately, the article did not disclose the cost of this effort. Needless to say, the price of real-time is not cheap.
Megan Feil, October 16, 2013