Meanwhile.....
The police find something useful to do. Looks like someone stopped paying for protection.
Narco Cops Smoking Out Weed Ware
01 September 2004
28 August 2004
Vonage and VoIP
Vonage's latest infusion equity led to this first from Bill Burnham followed by this from Om Malik. As I know nothing about the online equity trading business I'll not add to sum of human wisdom being imparted in the similarities.
I had hoped that a comment that the company was cash flow positive before customer acquisition cost might inspire a Sage of Omaha type put down. Here's mine; my car costs nothing to run before petrol (gas), insurance, servicing and depreciation. If your business involves acquiring customers then stripping out the cost is at best duplicitous. Surely it is the job of the blogging community to point out such monstrous bullshit. Let the mainline press quote verbatim from press releases without thinking.
Anyway that was not the main point of the post. In my evolving thinking about sessions over IP my recent trip to Nizhny Novgorod, the centre of Russia's telecom technology industry, has taken me a step further. I am not smart enough to determine whether Vonage or Skype will be good investments. I am fairly sure that they won't be great companies.
This recent piece from the VON round up about BT becoming the European centre for VoIP interop testing would suggest that VoIP is not only not ready for prime time but that we have some time to wait before they are. The company that I was visiting in Nizhny's value proposition is building products that allow Nortel IP PBX's speak to Avaya etc. How can you expect to have an industry when there are no standards and no interoperability.
So I posit that there will be a crisis before we see the sessions over IP winners. If the owners of Skype and Vonage have cashed out before the crisis then great investments. I also posit that SIP will not spawn the winner; it's too large a signaling package and thinks like traditional telephony. Lets call this phase of the transition IP over TDM or new telephony like old telephony. The truly disruptive phase has not yet started and we don't yet know what it will look like - but keep reading Isenberg if you are looking for a clue.
I had hoped that a comment that the company was cash flow positive before customer acquisition cost might inspire a Sage of Omaha type put down. Here's mine; my car costs nothing to run before petrol (gas), insurance, servicing and depreciation. If your business involves acquiring customers then stripping out the cost is at best duplicitous. Surely it is the job of the blogging community to point out such monstrous bullshit. Let the mainline press quote verbatim from press releases without thinking.
Anyway that was not the main point of the post. In my evolving thinking about sessions over IP my recent trip to Nizhny Novgorod, the centre of Russia's telecom technology industry, has taken me a step further. I am not smart enough to determine whether Vonage or Skype will be good investments. I am fairly sure that they won't be great companies.
This recent piece from the VON round up about BT becoming the European centre for VoIP interop testing would suggest that VoIP is not only not ready for prime time but that we have some time to wait before they are. The company that I was visiting in Nizhny's value proposition is building products that allow Nortel IP PBX's speak to Avaya etc. How can you expect to have an industry when there are no standards and no interoperability.
So I posit that there will be a crisis before we see the sessions over IP winners. If the owners of Skype and Vonage have cashed out before the crisis then great investments. I also posit that SIP will not spawn the winner; it's too large a signaling package and thinks like traditional telephony. Lets call this phase of the transition IP over TDM or new telephony like old telephony. The truly disruptive phase has not yet started and we don't yet know what it will look like - but keep reading Isenberg if you are looking for a clue.
27 August 2004
Fly Russia
The day after two Tupolev's, a Tu154 and a Tu134 were (allegedly) blown out of the air I found myself aboard a Yak 40 bound for Nizhny Novgorod. Two things struck me at the time; firstly nobody should ever have to pay money to get on to a Yak. Secondly that at the time I got on the plane I believed that the crashes had been caused by negligence or poor fuel. With a little rational thought it would have been clear that neither poor fuel nor negligence makes planes disappear from the radar screen. Nonetheless, my primary thought was negligence.
The FSB (successor to the KGB) was also hoping that it was negligence as they have told Putin that Chechen terrorism is under control.
Scanning the pages of the Komsomolskaya Pravda, a third rate producer of newsprint that does not justify the title newspaper, there was a picture of a sniffer dog at Domodeydovo Airport (the take off point for the two aircraft) with the caption "Sniffer dogs are better because they cannot be bought."
Entirely disabused of the negligence excuse, it struck me that the Chechen / fundamentalists will always be able to strike wherever and whenever they like because someone in uniform will always sell them a way around whatever security has been put in place to stop the terrorists - and will do so without any conscience.
The day after two Tupolev's, a Tu154 and a Tu134 were (allegedly) blown out of the air I found myself aboard a Yak 40 bound for Nizhny Novgorod. Two things struck me at the time; firstly nobody should ever have to pay money to get on to a Yak. Secondly that at the time I got on the plane I believed that the crashes had been caused by negligence or poor fuel. With a little rational thought it would have been clear that neither poor fuel nor negligence makes planes disappear from the radar screen. Nonetheless, my primary thought was negligence.
The FSB (successor to the KGB) was also hoping that it was negligence as they have told Putin that Chechen terrorism is under control.
Scanning the pages of the Komsomolskaya Pravda, a third rate producer of newsprint that does not justify the title newspaper, there was a picture of a sniffer dog at Domodeydovo Airport (the take off point for the two aircraft) with the caption "Sniffer dogs are better because they cannot be bought."
Entirely disabused of the negligence excuse, it struck me that the Chechen / fundamentalists will always be able to strike wherever and whenever they like because someone in uniform will always sell them a way around whatever security has been put in place to stop the terrorists - and will do so without any conscience.
19 August 2004
Sessions Over IP - Update
More on my previous post. Dan Dearing, VP Marketing at NexTone, another player in the border session controller space, believes that Carrier-to-residential (C2R) will amount to only 20% of the total revenue per port spend (from this article at Light Reading - Networking the Telecom Industry via Andy Abramson.
I sometimes get the feeling that conversations about the future of sessions-over-IP are held in two different planes. The "voice-will-be-free" crew are talking about residential voice. Those who see value in BSC's and feature servers in NGNs are more interested in enterprise sessions.
I sometimes get the feeling that conversations about the future of sessions-over-IP are held in two different planes. The "voice-will-be-free" crew are talking about residential voice. Those who see value in BSC's and feature servers in NGNs are more interested in enterprise sessions.
Telecom Quality / IT Ease of Use
VoIP for early adopters has been viewed overly simplistically. It works pretty much all the time, it�s free as long as you don�t need to talk via a telephony network. So if it�s not working no great hassle, and pretty much all of us have a back up of some kind, even if we have junked our PSTN line. However, Vonage has had a couple of outages in the last two weeks that have caused some angst. Om Malik�s suggestion that this is The End of the Honeymoon seems to me right on the money. Someone, somewhere commented that he could remember the number of times that his (switched) phone system went down. On the flip side; whilst his telecom network never went down, his video conferencing never went up. Mercer Management Consulting forecasts (via The Register) that consumers will be happy to move to VoIP � provided that the quality is as good as their telephone line. It would be a good assumption that enterprise requirements are more demanding than those of consumers.
We backed a start-up in 2002 jNETx who built a next generation intelligent networking platform, or Open Convergent Feature Server based around a JAIN SLEE and OSA/Parlay that bridges the evolution from 2G to 3G mobile, and of course fixed platforms. Ensuring that the OCFS is a carrier grade product has required all the brilliance that a large room full of maths and science PhD�s can offer. Douglas Tait from Sun and the founder of the JAIN initiative posts here on the complexity of writing SS7/Voice signaling-to-IP gateways. (For more on the Service Delivery Platforms, JAIN SLEE�s etc I encourage you to read this 512 page, 16MB report from the Moriana Group. This link takes you to the download.)
Niklas Zennstrom CEO of Skype, a DFJ investment, has recently blazed a trail for the freeness of VoIP. Emphasizing the fact that Telephony is Just Software, which I blogged here. Rohan Mahy�s response covered here in The Register, has a go at the proprietary solutions such as Skype and begins to explain why SIP is a better solution � in the long term. Albeit that SIP has some issues that IAX may handle better.
In my immediate pipeline at the moment are two companies in the border session controller space and one in CPE / soft phone space. Both of them sit in so much of the pie covered by soft switches that definitions becomes difficult, if not meaningless. So this is not just an issue of connecting legacy networks to IP networks. To my mind the issue is ensuring that the mission critical data application otherwise known as voice is always available. One of the BSC companies spent considerable time educating me as to the very considerable issues running enterprise-quality voice over the Internet. I�m not there yet � let�s just say the problem won�t be solved tomorrow.
So what was the point of this link fest? I think that the point was to say;
It was cold, cold, cold in Moscow this weekend and dropped 22mm of rain on Saturday alone. The good news was that it allowed me to sit in a corner of my study and re-read a number of core think pieces including David Isenberg�s The Rise of the Stupid Network and his subsequent piece with David Weinberger, The Paradox of the Best Network. The end of the telecom company as we know them, as David Isenberg correctly identifies in this article for IEEE�s Spectrum Magazine The End of the Middle, is nigh. What comes next, and why, is significantly harder to fathom. Once you get beyond the �one sentence will cover it� CNN simplistic answers there remains substantial complexity. The good news is that in an industry undergoing significant tectonic shifts is the opportunity to invest in start ups that can become household names.
VoIP for early adopters has been viewed overly simplistically. It works pretty much all the time, it�s free as long as you don�t need to talk via a telephony network. So if it�s not working no great hassle, and pretty much all of us have a back up of some kind, even if we have junked our PSTN line. However, Vonage has had a couple of outages in the last two weeks that have caused some angst. Om Malik�s suggestion that this is The End of the Honeymoon seems to me right on the money. Someone, somewhere commented that he could remember the number of times that his (switched) phone system went down. On the flip side; whilst his telecom network never went down, his video conferencing never went up. Mercer Management Consulting forecasts (via The Register) that consumers will be happy to move to VoIP � provided that the quality is as good as their telephone line. It would be a good assumption that enterprise requirements are more demanding than those of consumers.
We backed a start-up in 2002 jNETx who built a next generation intelligent networking platform, or Open Convergent Feature Server based around a JAIN SLEE and OSA/Parlay that bridges the evolution from 2G to 3G mobile, and of course fixed platforms. Ensuring that the OCFS is a carrier grade product has required all the brilliance that a large room full of maths and science PhD�s can offer. Douglas Tait from Sun and the founder of the JAIN initiative posts here on the complexity of writing SS7/Voice signaling-to-IP gateways. (For more on the Service Delivery Platforms, JAIN SLEE�s etc I encourage you to read this 512 page, 16MB report from the Moriana Group. This link takes you to the download.)
Niklas Zennstrom CEO of Skype, a DFJ investment, has recently blazed a trail for the freeness of VoIP. Emphasizing the fact that Telephony is Just Software, which I blogged here. Rohan Mahy�s response covered here in The Register, has a go at the proprietary solutions such as Skype and begins to explain why SIP is a better solution � in the long term. Albeit that SIP has some issues that IAX may handle better.
In my immediate pipeline at the moment are two companies in the border session controller space and one in CPE / soft phone space. Both of them sit in so much of the pie covered by soft switches that definitions becomes difficult, if not meaningless. So this is not just an issue of connecting legacy networks to IP networks. To my mind the issue is ensuring that the mission critical data application otherwise known as voice is always available. One of the BSC companies spent considerable time educating me as to the very considerable issues running enterprise-quality voice over the Internet. I�m not there yet � let�s just say the problem won�t be solved tomorrow.
So what was the point of this link fest? I think that the point was to say;
- The end of fixed line switched copper-based telephony is upon us � that much is clear.
- It�s not a given that you can jump from there to free calls/sessions. Let me be specific; voice may be free but that does not mean that you won�t be paying for it somewhere, especially if you require quality of service. Video conferencing will not be a bundled all you can consume package for [10] years.
- There will never be a global utility called The Internet.
- Building networks and intelligence to provide enterprise quality mission critical applications requires significant tinkering with the Internet � it won�t come for free.
- What the meaningful difference between soft switches, border session controllers, feature servers will be is unclear. It should mean the death of stovepipe applications but we are not there yet.
- IBM GS is a more likely winner than Ericsson Services (or whatever they call themselves) because of their enterprise knowledge.
- And don�t even begin to bring mobility in to this until we have clear answers to all of the above.
18 August 2004
VC Skills
One post below is Bill Burnham on the skills needed to make a VC. His argument synthesized; if a VC is deep in a company they have made a bad investment. A good investment is getting all the parts right up front. Fred Wilson posts in my same assault on NewsGator about the value that a VC brings to the board, and the resulting discount in the next deal The Discount and the Work.
My take is the difference is one of emphasis not of substance. Getting involved beyond reading board papers is clearly massively important; but it should be at the strategic level. And management should be able to distill the advice - some good some bad, and act on it.
One post below is Bill Burnham on the skills needed to make a VC. His argument synthesized; if a VC is deep in a company they have made a bad investment. A good investment is getting all the parts right up front. Fred Wilson posts in my same assault on NewsGator about the value that a VC brings to the board, and the resulting discount in the next deal The Discount and the Work.
My take is the difference is one of emphasis not of substance. Getting involved beyond reading board papers is clearly massively important; but it should be at the strategic level. And management should be able to distill the advice - some good some bad, and act on it.
Operator vs Finance
Bill Burnham on what makes the The Perfect VC: Operator or Investor?
There's not much to argue with here, though I tend to believe that a good mix of skills across a Partnership is as important as the right skills in anyone person.
Bill Burnham on what makes the The Perfect VC: Operator or Investor?
There's not much to argue with here, though I tend to believe that a good mix of skills across a Partnership is as important as the right skills in anyone person.
13 August 2004
VOIP Sub-Critical Dependency
This from Om Malik was going to be just another VoIP's not quite ready for prime time story's and was about to enter file 13 when I picked a comment from Andy Abramson "Outages like Vonage is having are to be expected, but not appreciated. With growth comes growing pains. Experience in a carrier is what one needs to look for, and a network that is fully redundant, fault tolerant. One has to ask, does your voip carrier have that?"
Andy then blogsOm's post w/o his comment. The post is not wrong, a very Russian way of putting things, but the comment is more correct. If, as Om says, he wants a form of communication that works all the time then VoIP's not there because the carrier network was designed to be best efforts only. To get fault tolerant VoIP we will have to pay a carrier who will give our voice carrying data packages QoS preference over the porn surfers. And that will carry a cost.
Whilst I believe in disruptive technologies and business models, it's part of the DFJ faith, fully fault tolerant VoIP is not as cheap and "free" as currently touted. Yes its an order of magnitude cheaper than circuit switched calls but it's not free. Free as a marketing trick in Russia does not work. Russians don't believe that something that's free is worth having - it's a communism thing. Now a shed load of Russians use cheap VoIP calling cards etc to call Israel and the US, but they expect the QoS that they get.
Bottom line; enterprise-VoIP will save companies a lot of cash - it won't be for free.
This from Om Malik was going to be just another VoIP's not quite ready for prime time story's and was about to enter file 13 when I picked a comment from Andy Abramson "Outages like Vonage is having are to be expected, but not appreciated. With growth comes growing pains. Experience in a carrier is what one needs to look for, and a network that is fully redundant, fault tolerant. One has to ask, does your voip carrier have that?"
Andy then blogsOm's post w/o his comment. The post is not wrong, a very Russian way of putting things, but the comment is more correct. If, as Om says, he wants a form of communication that works all the time then VoIP's not there because the carrier network was designed to be best efforts only. To get fault tolerant VoIP we will have to pay a carrier who will give our voice carrying data packages QoS preference over the porn surfers. And that will carry a cost.
Whilst I believe in disruptive technologies and business models, it's part of the DFJ faith, fully fault tolerant VoIP is not as cheap and "free" as currently touted. Yes its an order of magnitude cheaper than circuit switched calls but it's not free. Free as a marketing trick in Russia does not work. Russians don't believe that something that's free is worth having - it's a communism thing. Now a shed load of Russians use cheap VoIP calling cards etc to call Israel and the US, but they expect the QoS that they get.
Bottom line; enterprise-VoIP will save companies a lot of cash - it won't be for free.
06 August 2004
Mmmmm
I want one of these, no camera, just a phone with Blackberry software. Siemens touts Blackberry-based business phone | The Register
I want one of these, no camera, just a phone with Blackberry software. Siemens touts Blackberry-based business phone | The Register
Stupid Network; Intelligent Client; Stupid User
I believe in the first statement. The rise of the Stupid Network has happened and is happening. As processor power improves more and more intelligence is being moved to the client. The question is how much, and how much does it rely on an intelligent user. The early adopters are mostly intelligent enough to work through the issues. The mass market won't happen until the how the f*** do I make this work issues are ironed out.
So, my question for now; how much intelligence ends up in the client and how much stays at the edge?
So, my question for now; how much intelligence ends up in the client and how much stays at the edge?
Russia
Yesterday in the FT (subscription required) was a very good piece on the path that is being taken by Russia. Among the people heavily quoted is Al Breach, Brunswick UBS' (a leading investment bank) economist and a big Russia bull. The other, respected, huge Russia bull eating his words is Eric Kraus in this piece The Summer of Our Discontent. You may struggle to hear the munching as the words are masticated - I assure you that they are there.
The long and short of the pieces is that the Silovki (people of power - i.e. the ex-KGB and Putin's friends) have taken control of the economy. Their underlying reasoning is correct What happened during Yeltsin's time was mayhem - it was fun, but it was mayhem. They want in a strong state and a lack of mayhem - oh and substantial bank accounts (their own.) However, as they have taken control of the reigns of power the country has moved from an imperfect quasi-liberal economy to a corrupt natural resource economy. And it has done so in less than a year. KGB school seemingly teaches control for controls sake and fails to go on to explain consequences.
Lets consider the right of the Silovki (ex-KGB) to run Russia. Since the death of Brezhnev in the mid-80's the head of the Central Committee of the Communist Party were two septuagenarian ex-heads of the KGB, followed rapidly by Gorbachev. The septuagenarians died pretty rapidly - they were pretty-much figure heads anyway. As an aside, Gorbachev is revered in the West for his reformist tendencies that lead to the end of the Cold War. Actually he did not have a clue what he was doing - it all happened without his input. Crucially though, it was the hard liners in the Politburo - the Silovki - who hastened the collapse through their complete lack of understanding of what was happening in country that they believed that they ruled and controlled. The actual event was the 1992 coup. My take on the legacy of the Soviet Union after the death of Stalin and the removal of Kruschev is that it was a state run by the KGB. Brezhnev was allowed to stay in power long after he was officially useless because he was a puppet of the guys who thought that they ran the country - the KGB. They replaced him with two of their own; only for them to die. Gorbachev was the chosen successor because he was deemed to be controllable (southern town hick without a power base.)
The Soviet Union had some fantastic achievements during its 70-odd years of existence. It also had some fairly miserable failures. You can directly attribute the failures to the KGB. In particular Brezhnev's era is best remembered for it's economic stagnation. Almost complete control, almost complete stagnation. This legacy of success is what qualifies them to run Russia.
Fourteen years later, the successors to that legacy of failure have emerged from the hole that they had to hide in after the 1992 coup. Since their re-emergence Russia has suffered the Yukos crisis, a manufactured banking crisis, the return of capital flight (hint - buy real estate in desirable and warm places. Russians are exporting their money from Russia again and they believe in real estate, and football clubs) a stalling of reform and a very badly bungled withdrawal of social security from pensioners and veterans whilst increasing them for bureaucrats. It would appear that during their 10+ years in the wilderness they failed to read any Adam Smith.
What next? There is no opposition, the Silovki can fix elections, so there is no one to provide an alternative view of the facts. I previously believed that Putin would step down at the end of his second term to preserve his place in history. His place in history will be as the President who undid all that was working in Russia - so not stepping down pretty much cements that position.
It's also increasingly clear that he is not in charge. I have previously written that he is primus inter pares of a group of like-minded people. It would appear that he no longer holds that position. German Gref, the reformist Minister of the Economy, has made a number of very critical remarks recently. Putin will be loathe to fire him. It removes the pretence that he is trying to undertake liberal reforms. Loyalty to the party line is pretty much Silovki 1.01 so I would expect that he will be taking a long holiday somewhere warm this winter.
So after that bout of happiness I am heading to my dacha to enjoy Russia's summer and swim in the Moscow river.
Update; even previously loyal members of the Duma are speaking out.
Yesterday in the FT (subscription required) was a very good piece on the path that is being taken by Russia. Among the people heavily quoted is Al Breach, Brunswick UBS' (a leading investment bank) economist and a big Russia bull. The other, respected, huge Russia bull eating his words is Eric Kraus in this piece The Summer of Our Discontent. You may struggle to hear the munching as the words are masticated - I assure you that they are there.
The long and short of the pieces is that the Silovki (people of power - i.e. the ex-KGB and Putin's friends) have taken control of the economy. Their underlying reasoning is correct What happened during Yeltsin's time was mayhem - it was fun, but it was mayhem. They want in a strong state and a lack of mayhem - oh and substantial bank accounts (their own.) However, as they have taken control of the reigns of power the country has moved from an imperfect quasi-liberal economy to a corrupt natural resource economy. And it has done so in less than a year. KGB school seemingly teaches control for controls sake and fails to go on to explain consequences.
Lets consider the right of the Silovki (ex-KGB) to run Russia. Since the death of Brezhnev in the mid-80's the head of the Central Committee of the Communist Party were two septuagenarian ex-heads of the KGB, followed rapidly by Gorbachev. The septuagenarians died pretty rapidly - they were pretty-much figure heads anyway. As an aside, Gorbachev is revered in the West for his reformist tendencies that lead to the end of the Cold War. Actually he did not have a clue what he was doing - it all happened without his input. Crucially though, it was the hard liners in the Politburo - the Silovki - who hastened the collapse through their complete lack of understanding of what was happening in country that they believed that they ruled and controlled. The actual event was the 1992 coup. My take on the legacy of the Soviet Union after the death of Stalin and the removal of Kruschev is that it was a state run by the KGB. Brezhnev was allowed to stay in power long after he was officially useless because he was a puppet of the guys who thought that they ran the country - the KGB. They replaced him with two of their own; only for them to die. Gorbachev was the chosen successor because he was deemed to be controllable (southern town hick without a power base.)
The Soviet Union had some fantastic achievements during its 70-odd years of existence. It also had some fairly miserable failures. You can directly attribute the failures to the KGB. In particular Brezhnev's era is best remembered for it's economic stagnation. Almost complete control, almost complete stagnation. This legacy of success is what qualifies them to run Russia.
Fourteen years later, the successors to that legacy of failure have emerged from the hole that they had to hide in after the 1992 coup. Since their re-emergence Russia has suffered the Yukos crisis, a manufactured banking crisis, the return of capital flight (hint - buy real estate in desirable and warm places. Russians are exporting their money from Russia again and they believe in real estate, and football clubs) a stalling of reform and a very badly bungled withdrawal of social security from pensioners and veterans whilst increasing them for bureaucrats. It would appear that during their 10+ years in the wilderness they failed to read any Adam Smith.
What next? There is no opposition, the Silovki can fix elections, so there is no one to provide an alternative view of the facts. I previously believed that Putin would step down at the end of his second term to preserve his place in history. His place in history will be as the President who undid all that was working in Russia - so not stepping down pretty much cements that position.
It's also increasingly clear that he is not in charge. I have previously written that he is primus inter pares of a group of like-minded people. It would appear that he no longer holds that position. German Gref, the reformist Minister of the Economy, has made a number of very critical remarks recently. Putin will be loathe to fire him. It removes the pretence that he is trying to undertake liberal reforms. Loyalty to the party line is pretty much Silovki 1.01 so I would expect that he will be taking a long holiday somewhere warm this winter.
So after that bout of happiness I am heading to my dacha to enjoy Russia's summer and swim in the Moscow river.
Update; even previously loyal members of the Duma are speaking out.
04 August 2004
Vonage Outed or IT & Telecom Converges
Andy Abramson blogs Vonage's Outage which may or may not have been caused by Global Crossing. In an attempt to get through some 1,000 unread blog's courtesy of much loved NewsGator sitting in the inbox I skim read, deleted and then brought it back and started writing here;
We have an investment in a next generation IN / feature sever play jNETx which is putting in a replacement IN system in to an Irish mobile provider - when the system was launched with a new HLR and various other bits and pieces the whole system went down for 3 hours. I'm pleased to say it was not jNETx that caused it but it was A BIG DEAL with as many expletives as you want to add.
I am not saying that Vonage's outage was or is the cause of calling the end of VoIP - it's not; Vonage et al will continue to take business from PSTN's. However, service includes being available nearly all the time. Is that 99.999 or some lesser number - no idea. What seems logical is that enterprises will demand the same service levels from a full VoIP sytem as they got from the PSTN's, and that is built around 99.999% availability. So whilst Vonage is principally a retail / SoHo play a few hours spent at the beach is OK. To go mainstream it's not.
Whilst I am here a link to a previous post Go South Young VoIP'ers. Yesterday I was in a meeting with a company that claims to have solved the feature issues caused by SIP passing through IPPBX's passing through border session controllers (my middle name is esoteric.)
Andy makes the point that the S. American governments are trying to protect their local PSTN's by regulating out VoIP providers. Same thing happened here in Russia. In an attempt to get the highest price for Svyazinvest, the all controlling super-telco, they force all long-distance to pass through Rostelecom - the long distance carrier. Thus a number of local enterprise CLEC's wanted to move their clients on to full VoIP systems however, they found that when a VoIP call was made via SIP that passed through a BSC and then via an IP PBX (100% of legitimate enterprise VoIP traffic) they lost the features of the call when the IP PBX diverted the call / session to an internal "number". The call went through it just lost any "intelligence" - call forwarding, voicemail (?). Thus the Russian government's desire to protect revenues caused a Russian technology company to overcome a global problem. The law of unintended consequences strikes again.
Andy Abramson blogs Vonage's Outage which may or may not have been caused by Global Crossing. In an attempt to get through some 1,000 unread blog's courtesy of much loved NewsGator sitting in the inbox I skim read, deleted and then brought it back and started writing here;
We have an investment in a next generation IN / feature sever play jNETx which is putting in a replacement IN system in to an Irish mobile provider - when the system was launched with a new HLR and various other bits and pieces the whole system went down for 3 hours. I'm pleased to say it was not jNETx that caused it but it was A BIG DEAL with as many expletives as you want to add.
I am not saying that Vonage's outage was or is the cause of calling the end of VoIP - it's not; Vonage et al will continue to take business from PSTN's. However, service includes being available nearly all the time. Is that 99.999 or some lesser number - no idea. What seems logical is that enterprises will demand the same service levels from a full VoIP sytem as they got from the PSTN's, and that is built around 99.999% availability. So whilst Vonage is principally a retail / SoHo play a few hours spent at the beach is OK. To go mainstream it's not.
Whilst I am here a link to a previous post Go South Young VoIP'ers. Yesterday I was in a meeting with a company that claims to have solved the feature issues caused by SIP passing through IPPBX's passing through border session controllers (my middle name is esoteric.)
Andy makes the point that the S. American governments are trying to protect their local PSTN's by regulating out VoIP providers. Same thing happened here in Russia. In an attempt to get the highest price for Svyazinvest, the all controlling super-telco, they force all long-distance to pass through Rostelecom - the long distance carrier. Thus a number of local enterprise CLEC's wanted to move their clients on to full VoIP systems however, they found that when a VoIP call was made via SIP that passed through a BSC and then via an IP PBX (100% of legitimate enterprise VoIP traffic) they lost the features of the call when the IP PBX diverted the call / session to an internal "number". The call went through it just lost any "intelligence" - call forwarding, voicemail (?). Thus the Russian government's desire to protect revenues caused a Russian technology company to overcome a global problem. The law of unintended consequences strikes again.
08 July 2004
Yukos and the Banks
Politics are not my normal terrain, and to be clear both Yukos and the Banks are about politics.
For ever and a day the Investment Banking analysts have been telling us that the Yukos affair is about humbling Khordokhovsky and not about taking Yukos to bankruptcy. Well its effectively bankrupt and the only way that it's not going to be bankrupt is politics. That way the portfolio investors can maintain their navel gazing shortsightedness and pretend they did not lose too badly.
The banking crisis is an oxymoron - to have a crisis you need a banking sector. Anyhow it too has been driven by politics. I have on my desk (somewhere) the banking blacklist. It comprises 38 banks including 2 of the 4 leading non-state owned banks. That I can get my hands on it somewhat goes to prove that its meant to be seen. And causing a run on the banks who you can't control is a pretty good way to get them to come in to line.
It might amuse you to know that there was a queue outside Citibank's branch yesterday. So strong is the public's faith in private banks.
The Russian menatlity is stronly zero-sum-game; and it is now being played out in front of our eyes for all to see. I am afraid to say that Putin's government has gone from partial reform to failed authoritarianism.
Politics are not my normal terrain, and to be clear both Yukos and the Banks are about politics.
For ever and a day the Investment Banking analysts have been telling us that the Yukos affair is about humbling Khordokhovsky and not about taking Yukos to bankruptcy. Well its effectively bankrupt and the only way that it's not going to be bankrupt is politics. That way the portfolio investors can maintain their navel gazing shortsightedness and pretend they did not lose too badly.
The banking crisis is an oxymoron - to have a crisis you need a banking sector. Anyhow it too has been driven by politics. I have on my desk (somewhere) the banking blacklist. It comprises 38 banks including 2 of the 4 leading non-state owned banks. That I can get my hands on it somewhat goes to prove that its meant to be seen. And causing a run on the banks who you can't control is a pretty good way to get them to come in to line.
It might amuse you to know that there was a queue outside Citibank's branch yesterday. So strong is the public's faith in private banks.
The Russian menatlity is stronly zero-sum-game; and it is now being played out in front of our eyes for all to see. I am afraid to say that Putin's government has gone from partial reform to failed authoritarianism.
Valuation
Two good posts on valuing an early stage deal. First from Fred Wilson which is philospohical here. The second from Brad Feld on deal algebra here Feld Thoughts: Venture Capital Deal Algebra.
What the second post does not go on to say is that by the time you factor in a. liquidation preferences (VC's get there money out first and sometimes in a multiple of what they invested) b. potentially a coupon on the preferred stock c. penny warrants etc. that the implied pre / post-money valuation is a lot different from the headline number. To borrow some algebra from Brad Feld:
Implied post-money = (invested amount)/(return to investors / total return). For the implied pre-money subtract the amount initially invested.
Thus if you invested $2mn at $3mn pre-money (assuming no further dilution) you would expect the investor to receive 40% of the proceeds of a sale. Actually the % of the return that an investor gets after liquidation preference et al can be a lot higher.
As Brad Feld points out many serial entrepreneurs don't always follow the math - try this on a whole nation of first time entrepreneurs. Add to it the national characteristic that lawyers don't matter its the handshake agreement and you are open for all sorts of interesting discussions.
Two good posts on valuing an early stage deal. First from Fred Wilson which is philospohical here. The second from Brad Feld on deal algebra here Feld Thoughts: Venture Capital Deal Algebra.
What the second post does not go on to say is that by the time you factor in a. liquidation preferences (VC's get there money out first and sometimes in a multiple of what they invested) b. potentially a coupon on the preferred stock c. penny warrants etc. that the implied pre / post-money valuation is a lot different from the headline number. To borrow some algebra from Brad Feld:
Implied post-money = (invested amount)/(return to investors / total return). For the implied pre-money subtract the amount initially invested.
Thus if you invested $2mn at $3mn pre-money (assuming no further dilution) you would expect the investor to receive 40% of the proceeds of a sale. Actually the % of the return that an investor gets after liquidation preference et al can be a lot higher.
As Brad Feld points out many serial entrepreneurs don't always follow the math - try this on a whole nation of first time entrepreneurs. Add to it the national characteristic that lawyers don't matter its the handshake agreement and you are open for all sorts of interesting discussions.
02 July 2004
Skype Under Attack
A much more cogently argued piece from The Register on what is wrong with Skype via David Isen than my rant yesterday. Isen argues that David Mahy is demonstrating "bellheadedness" and goes on to say "the "industry" that will bring VoIP to most of us is the Internet Industry."
I am not entirely sure that the two are disagreeing. The article's introduction says "and focused on the difference between the instantaneous gratification of Skype for private individuals and the safe and efficient enterprise wide VoIP implementations, reliant mostly on the SIP protocol." We are all very happy to pay nothing for personal or small-business calls. Can't see IBM doing the same.
Skype's business model is based on selling VAS. As Mahy points out that is very unlikely "That's missing the point, don't you think? Say a Skype user in India wants to communicate with me in California on a SIP network. He can make a basic call through 2 gateways with international toll charges. Its unlikely that I will see his correct caller ID, and dead certain that we can't exchange IM, video, presence status, or do file transfers. A pair of implementations using SIP could do this for free over the public Internet."
And then we return to the security issue - which has some legs but may be as much about the easy line for journalists as any real concern.
I have seen a number of recent firewall implementations that ban cross-firewall p2p sessions - I think it will be a standard feature in 2005 enterprise releases.
A much more cogently argued piece from The Register on what is wrong with Skype via David Isen than my rant yesterday. Isen argues that David Mahy is demonstrating "bellheadedness" and goes on to say "the "industry" that will bring VoIP to most of us is the Internet Industry."
I am not entirely sure that the two are disagreeing. The article's introduction says "and focused on the difference between the instantaneous gratification of Skype for private individuals and the safe and efficient enterprise wide VoIP implementations, reliant mostly on the SIP protocol." We are all very happy to pay nothing for personal or small-business calls. Can't see IBM doing the same.
Skype's business model is based on selling VAS. As Mahy points out that is very unlikely "That's missing the point, don't you think? Say a Skype user in India wants to communicate with me in California on a SIP network. He can make a basic call through 2 gateways with international toll charges. Its unlikely that I will see his correct caller ID, and dead certain that we can't exchange IM, video, presence status, or do file transfers. A pair of implementations using SIP could do this for free over the public Internet."
And then we return to the security issue - which has some legs but may be as much about the easy line for journalists as any real concern.
I have seen a number of recent firewall implementations that ban cross-firewall p2p sessions - I think it will be a standard feature in 2005 enterprise releases.
Ridiculous
ITunes has finally launched in the UK - hurrah. If you don't have a US registered credit card you can't buy ITunes from the US website.
However, my wife tells me that a song in the UK costs 75 pence. At the current exchange rate that's $1.42. Which is just plain ridiculous. Did the Apple execs think that we would not notice?
ITunes has finally launched in the UK - hurrah. If you don't have a US registered credit card you can't buy ITunes from the US website.
However, my wife tells me that a song in the UK costs 75 pence. At the current exchange rate that's $1.42. Which is just plain ridiculous. Did the Apple execs think that we would not notice?
The Bizarre
I rarely blog the bizarre Russian happenings but here's one. From about 5a.m. this morning a car alarm from what could only be a very small car went off incessantly. It was still going when I headed off to work. Only it (it being a badly-parked Nissan Micra) was now surrounded by 6 Militsia (policemen.) Who had succeeded in opening its passenger door - but clearly not in turning the alarm off.
Usually you only see 6 policemen together when there are some Azerbaijani, Armenian, Georgian etc., market traders to be beaten up.
Q. Why do the Militsia travel in threes. One who can read, one who can write and one to guard the two dangerous intellectuals.
I rarely blog the bizarre Russian happenings but here's one. From about 5a.m. this morning a car alarm from what could only be a very small car went off incessantly. It was still going when I headed off to work. Only it (it being a badly-parked Nissan Micra) was now surrounded by 6 Militsia (policemen.) Who had succeeded in opening its passenger door - but clearly not in turning the alarm off.
Usually you only see 6 policemen together when there are some Azerbaijani, Armenian, Georgian etc., market traders to be beaten up.
Q. Why do the Militsia travel in threes. One who can read, one who can write and one to guard the two dangerous intellectuals.
30 June 2004
RSS
Link via A VC to a RSS wishlist at therssweblog.
Tech bloggers are all a little self-involved (it's a stat thing) but this and Brad Feld's blog on why he invested in NewsGator makes it a big RSS day.
Link via A VC to a RSS wishlist at therssweblog.
Tech bloggers are all a little self-involved (it's a stat thing) but this and Brad Feld's blog on why he invested in NewsGator makes it a big RSS day.
Telephony Software
Niklas Zennstrom on the emerging realization that telephony is just software; a fact that anyone in the telephony world cottoned on to at least 5 years ago - its just taken the software world a while to catch up with the practice. Link via A VC. As with any recent convert they have a habit of skipping over inconvenient facts and making statements that are not based in reality. Or at least in any reality that we are likely to face in this investment cycle.
The main thesis of his argument is accurate, provided that we stick to fixed-line networks.
"One key factor is that when telephony becomes a software application, it will live on the edges of a network. There will be no centralized control. Telephony development cycles are still very long. But their carriers' services are very much commodities, and there isn't much differentiation.
When we can change telephony to an application, we'll be able to change the economics of it. That will increase software innovation, new products, services, features. And that will be in the hand of small, nimble, software development companies. There will be higher competition, and the services will live on the Internet."
Hoever, he overstates his case. In this generation of telephony software, JAIN SLEE-based advanced intelligent networking, it takes less than a month to build and deploy an enterprise VPN. It takes less than one day to build a SMS marketing app, or location-based service; i.e. if you are watching Euro 2004 / the Yankees etc live from their stadium then you can get free calls over such-and-such network. These services are available today with some mobile providers in Europe, none in the US (albeit one fixed-line provider could if it had a marketing department worthy of the name,) and increasingly across Asia. Becasue the mobile operator is capable of gathering information from its network they are able to provide considerably more intelligence in an application.
The Internet is the ultimate stupid network. Client-side software cannot completely replace IN and that "information from the network is needed to provide new applications. And its the new applications that are supposed to pay for giving voice (still the killer app) away for free. Without which Skype and the like remain disruptive tecchnologies and not disruptive business models. I continue to believe that network ownership provides the information that is required to provide really innovative applications.
The article goes down hill a little after that:
"There will also be increased robustness. If you have a switch go down or a gatekeeper, that's not a problem to the end user. They can go to the Internet and find another route of communication. That will not be a problem for a decentralized network."
Unless of course the switch / node etc happens to be the one to which you are connected. The quality of service difference between my ISP and my mobile provider is the difference in call completion between 80% (ISP) and mid-90's (Vimpelcom). Move that quality differential to Europe where Vodafone et al really does buy equipment with 99.999% relaibility and any piece of network software has to have the same reliability. He also continues to believe that existing networks are centralized - they are not as decentralized as the Internet - but intelligence is increasingly at the edge and controlled by the same software of which he talks.
He goes on to make some good points about the commoditization of voice. Which as an overall point even the FCC gets. However, to Skype, voice is just another form of data, albeit one that the "higher quality" Internet can cope with, whereas video is, as yet, not enterprise standard. I suspect his emphasis on the death of voice is poorly masked marketing. As is the plea not to be regulated. VoIP should not be regulated, not because its not a monopoly. His desire not to be regulated is because Skype, and others, do not want to have to guarantee connections for emergency calls. It's business model precludes it from taking responsibility, but it also won't take responsibility becasue their QoS is not good enough.
My bet stays with the cable companies, the telco's that are willing to innovate quickly and Vonage - in that order. And that's before we start talking about Skype security issues.
Niklas Zennstrom on the emerging realization that telephony is just software; a fact that anyone in the telephony world cottoned on to at least 5 years ago - its just taken the software world a while to catch up with the practice. Link via A VC. As with any recent convert they have a habit of skipping over inconvenient facts and making statements that are not based in reality. Or at least in any reality that we are likely to face in this investment cycle.
The main thesis of his argument is accurate, provided that we stick to fixed-line networks.
"One key factor is that when telephony becomes a software application, it will live on the edges of a network. There will be no centralized control. Telephony development cycles are still very long. But their carriers' services are very much commodities, and there isn't much differentiation.
When we can change telephony to an application, we'll be able to change the economics of it. That will increase software innovation, new products, services, features. And that will be in the hand of small, nimble, software development companies. There will be higher competition, and the services will live on the Internet."
Hoever, he overstates his case. In this generation of telephony software, JAIN SLEE-based advanced intelligent networking, it takes less than a month to build and deploy an enterprise VPN. It takes less than one day to build a SMS marketing app, or location-based service; i.e. if you are watching Euro 2004 / the Yankees etc live from their stadium then you can get free calls over such-and-such network. These services are available today with some mobile providers in Europe, none in the US (albeit one fixed-line provider could if it had a marketing department worthy of the name,) and increasingly across Asia. Becasue the mobile operator is capable of gathering information from its network they are able to provide considerably more intelligence in an application.
The Internet is the ultimate stupid network. Client-side software cannot completely replace IN and that "information from the network is needed to provide new applications. And its the new applications that are supposed to pay for giving voice (still the killer app) away for free. Without which Skype and the like remain disruptive tecchnologies and not disruptive business models. I continue to believe that network ownership provides the information that is required to provide really innovative applications.
The article goes down hill a little after that:
"There will also be increased robustness. If you have a switch go down or a gatekeeper, that's not a problem to the end user. They can go to the Internet and find another route of communication. That will not be a problem for a decentralized network."
Unless of course the switch / node etc happens to be the one to which you are connected. The quality of service difference between my ISP and my mobile provider is the difference in call completion between 80% (ISP) and mid-90's (Vimpelcom). Move that quality differential to Europe where Vodafone et al really does buy equipment with 99.999% relaibility and any piece of network software has to have the same reliability. He also continues to believe that existing networks are centralized - they are not as decentralized as the Internet - but intelligence is increasingly at the edge and controlled by the same software of which he talks.
He goes on to make some good points about the commoditization of voice. Which as an overall point even the FCC gets. However, to Skype, voice is just another form of data, albeit one that the "higher quality" Internet can cope with, whereas video is, as yet, not enterprise standard. I suspect his emphasis on the death of voice is poorly masked marketing. As is the plea not to be regulated. VoIP should not be regulated, not because its not a monopoly. His desire not to be regulated is because Skype, and others, do not want to have to guarantee connections for emergency calls. It's business model precludes it from taking responsibility, but it also won't take responsibility becasue their QoS is not good enough.
My bet stays with the cable companies, the telco's that are willing to innovate quickly and Vonage - in that order. And that's before we start talking about Skype security issues.
23 June 2004
Pitch Me This
From Brad Feld on what questions a pitch to a VC / me should include and why PowerPoint is so badly used. Feld Thoughts: The Torturous World of Powerpoint.
Please, please, please if you are pitching read this first.
From Brad Feld on what questions a pitch to a VC / me should include and why PowerPoint is so badly used. Feld Thoughts: The Torturous World of Powerpoint.
Please, please, please if you are pitching read this first.
22 June 2004
Stock Options
A leader in the FT of 21 June on the cash flow impact of options. The title Will reform pull the plug on technology profits? (requires subscription) might give you a hint as to the writers initial leanings.
The net transfer of wealth diagrams at the bottom of the page are instructive. The article suggests that the furore over options is a back lash against the expose of how much value is being transferred from owners to employees. Over-stated I would imagine. A buy-side analyst worth his pay packet will already have factored in the dilutive/cash-flow impact of stock options. The greater issue is their ability to align interests all the time, not just when things are going well. Not being particularly well versed in motivations in large companies, my comments will be limited to start-ups (though they are inherently the same for people who value their work rather than their ability to climb the corporate ladder.)
When do start-up founders / employees worry about stock options?
a. When things are going well
b. The day they join
c. Every new financing round
When do start-up founders / employees worry about cash remuneration?
The rest of the time.
In particular stock options have almost no impact on employee behaviour when life gets difficult (sweat equity yes, options no.) As the article points out there is a growing feeling that options are a poor way to incentivize employees.
Not that I am trying to do away with options altogether. Better a stock option than cash, especially when the cash is limited. But lets not pretend that a talented sales guy is tied to the company (aligns his interest with yours) through stock options. Not being seen to fail is a better incentive.
Which leads to the follow on question. With what do you replace stock options? Maybe like democracy they are the worst system we have; except for all the others.
A leader in the FT of 21 June on the cash flow impact of options. The title Will reform pull the plug on technology profits? (requires subscription) might give you a hint as to the writers initial leanings.
The net transfer of wealth diagrams at the bottom of the page are instructive. The article suggests that the furore over options is a back lash against the expose of how much value is being transferred from owners to employees. Over-stated I would imagine. A buy-side analyst worth his pay packet will already have factored in the dilutive/cash-flow impact of stock options. The greater issue is their ability to align interests all the time, not just when things are going well. Not being particularly well versed in motivations in large companies, my comments will be limited to start-ups (though they are inherently the same for people who value their work rather than their ability to climb the corporate ladder.)
When do start-up founders / employees worry about stock options?
a. When things are going well
b. The day they join
c. Every new financing round
When do start-up founders / employees worry about cash remuneration?
The rest of the time.
In particular stock options have almost no impact on employee behaviour when life gets difficult (sweat equity yes, options no.) As the article points out there is a growing feeling that options are a poor way to incentivize employees.
Not that I am trying to do away with options altogether. Better a stock option than cash, especially when the cash is limited. But lets not pretend that a talented sales guy is tied to the company (aligns his interest with yours) through stock options. Not being seen to fail is a better incentive.
Which leads to the follow on question. With what do you replace stock options? Maybe like democracy they are the worst system we have; except for all the others.
RSS and email
A good post here from Many-to-Many on ID and push versus pull communication models. Because I am looking at a deal that crosses in to this space (P2P information updating; this time push versus pull) the post touches upon a number of the areas that I think about.
I think that both Ross and I exist outside the big company way of doing things ("behind the firewall) and therefore think about email in a different way from an IBM'er. Michael Sippey comment makes the point better than I can. He concludes; "We�?re doomed to a life of infoglut, push or pull!"
Maybe the question we need to be asking is not trusted versus untrusted, push versus pull; but restoring quality of information. Is it really better if a meeting note is posted to a corporate blog-site or mailed to the everyone who might want to know about this. The same information has different meanings to different people. Since I started pondering corporate information networks I cannot count the number of times that I have been told that the seemingly useless dissemination of information (cc; all) has resulted in a bad decision not being made byforcingg someone to turn up to a meeting with additional information.
Whether the information is pushed or pulled matters not. We have to read an enormous amount and discard 99% of it so as not to miss something.
With one of our companies (a $5mn+ 2nd year start-up) they are blogging the softer elements of sales/marketing meetings. I receive the RSS feed more as an experiment in communication than trying to play a role in product marketing. The writers are all "trusted" emailers and the VP sales, a founder and board member, will regularly email me as well. He'll get in to my inbox whether he pushes or I pull. However, I rarely get informational email from the company, instead I get actionable email. I pay more attention to the actionable email when that has to be dealt with because they want me to pay attention. And when I set aside time to be informed I get more out of that. Better quality information.
You could argue that if I managed my time better I would achieve the same purpose.
A good post here from Many-to-Many on ID and push versus pull communication models. Because I am looking at a deal that crosses in to this space (P2P information updating; this time push versus pull) the post touches upon a number of the areas that I think about.
I think that both Ross and I exist outside the big company way of doing things ("behind the firewall) and therefore think about email in a different way from an IBM'er. Michael Sippey comment makes the point better than I can. He concludes; "We�?re doomed to a life of infoglut, push or pull!"
Maybe the question we need to be asking is not trusted versus untrusted, push versus pull; but restoring quality of information. Is it really better if a meeting note is posted to a corporate blog-site or mailed to the everyone who might want to know about this. The same information has different meanings to different people. Since I started pondering corporate information networks I cannot count the number of times that I have been told that the seemingly useless dissemination of information (cc; all) has resulted in a bad decision not being made byforcingg someone to turn up to a meeting with additional information.
Whether the information is pushed or pulled matters not. We have to read an enormous amount and discard 99% of it so as not to miss something.
With one of our companies (a $5mn+ 2nd year start-up) they are blogging the softer elements of sales/marketing meetings. I receive the RSS feed more as an experiment in communication than trying to play a role in product marketing. The writers are all "trusted" emailers and the VP sales, a founder and board member, will regularly email me as well. He'll get in to my inbox whether he pushes or I pull. However, I rarely get informational email from the company, instead I get actionable email. I pay more attention to the actionable email when that has to be dealt with because they want me to pay attention. And when I set aside time to be informed I get more out of that. Better quality information.
You could argue that if I managed my time better I would achieve the same purpose.
07 June 2004
More On Mobile
Earlier today I had a mini-rant on the US not getting mobile services then via Om Malik comes this super rant from Russell Beattie Where's the Mobility? It took me a while to get through the comments so I have not had a chance to get the rest of his blog but I agree with the theme of what he says if not all the content.
First of all the means of communication is (relatively) unimportant. There are great things to be said for CDMA2000 versus W-CDMA v's WiFI, WiMax and on and on. In short there are inherently better ways of delivering bandwidth to the place and time that it is required; some suffer from poor economics others from integration issues, others still from pure stupidity by carriers. However, the issue is not the means of connectivity but the services that can be provided by connectivity. Just because a person's connectivity is limited to a desk top PC does not reduce the communication services that he can access via SIP (to his machine) and via SS7 to other communications devices.
It is the services that matter; these used to be called apps. To build them quickly and to utilize all the services that may be required to make them easy to deploy and easy to market you rapidly move in to the great convergence that is rarely covered; networks and IT. Some quick definitions; what do I mean by services? Parlay does a pretty good job of defining them but here they are anyway;
Generic Call Control
User Interaction
Mobility
Terminal Capabilities
Data Session Control
Generic Messaging
Connectivity
Account Management
Charging
PAM
Policy Management
A mobile operator looking to build an app on a 2.5 - 3G network needs to use some or all of these capabilities in different mixes depending on the nature of the service; a PAM app requires PAM, location, terminal capabilities, call control, charging. A video call requires call control, charging and data session control. Just think of the charging capabilities required - do you charge per mb, or for the type of the call at the time of day? Imagine if a filewas transferred during a video call - how would that be charged. Ask a Bell-head what chance of developing these services in an AIN environment. And yet as I mildly ranted earlier US operators are building services using stovepipe solutions that don't allow these services to be easily offered and easily changed.
From hosted-PBX to VoIP services over any network the convergence of networks and IT (as well as object oriented programming) has fundamentally changed the way that services can be provided over networks of any kind.
I would be remiss not to acknowledge that there are issues, substantial issues, in provisioning data for different devices; securing enterprise data; marketing the need to enterprises and on and on. However, it strikes me that these are implementation issues not technology issues.
So I conclude its not just mobility, its mostly mobility but its about services over any network.
Earlier today I had a mini-rant on the US not getting mobile services then via Om Malik comes this super rant from Russell Beattie Where's the Mobility? It took me a while to get through the comments so I have not had a chance to get the rest of his blog but I agree with the theme of what he says if not all the content.
First of all the means of communication is (relatively) unimportant. There are great things to be said for CDMA2000 versus W-CDMA v's WiFI, WiMax and on and on. In short there are inherently better ways of delivering bandwidth to the place and time that it is required; some suffer from poor economics others from integration issues, others still from pure stupidity by carriers. However, the issue is not the means of connectivity but the services that can be provided by connectivity. Just because a person's connectivity is limited to a desk top PC does not reduce the communication services that he can access via SIP (to his machine) and via SS7 to other communications devices.
It is the services that matter; these used to be called apps. To build them quickly and to utilize all the services that may be required to make them easy to deploy and easy to market you rapidly move in to the great convergence that is rarely covered; networks and IT. Some quick definitions; what do I mean by services? Parlay does a pretty good job of defining them but here they are anyway;
Generic Call Control
User Interaction
Mobility
Terminal Capabilities
Data Session Control
Generic Messaging
Connectivity
Account Management
Charging
PAM
Policy Management
A mobile operator looking to build an app on a 2.5 - 3G network needs to use some or all of these capabilities in different mixes depending on the nature of the service; a PAM app requires PAM, location, terminal capabilities, call control, charging. A video call requires call control, charging and data session control. Just think of the charging capabilities required - do you charge per mb, or for the type of the call at the time of day? Imagine if a filewas transferred during a video call - how would that be charged. Ask a Bell-head what chance of developing these services in an AIN environment. And yet as I mildly ranted earlier US operators are building services using stovepipe solutions that don't allow these services to be easily offered and easily changed.
From hosted-PBX to VoIP services over any network the convergence of networks and IT (as well as object oriented programming) has fundamentally changed the way that services can be provided over networks of any kind.
I would be remiss not to acknowledge that there are issues, substantial issues, in provisioning data for different devices; securing enterprise data; marketing the need to enterprises and on and on. However, it strikes me that these are implementation issues not technology issues.
So I conclude its not just mobility, its mostly mobility but its about services over any network.
Venture Over Funding
A great post here from Bill Burnham via Fred's A VC's blog on massive overfunding in the mobile application space.
I am not going to add to the comments on over-funding of hot companies; but actually rubbish the technology and then take a poke at technology acquisition. Seven is a great example of a stove-pipe solution. Great if you want to add just the ability to send and receive mobile email, but once a network operator wants to add other services / applications and charging capabilities with slightly greater sophistication than $x per mb, or per email then the system integrators get to rub their hands and put their hands back in to the cookie jar. All these cool apps, are just that apps. They aren't technologically advanced, they aren't future proof and they are difficult to integrate.
A semi-literate Java programmer could replicate Seven's technology in about a week using this generation open standard; if you don't believe me go to the Parlay org's website or Sun Microsystems JAIN (Java for advanced intelligent networks) JSLEE websites and think about how much more these two technologies can offer than Seven.
So why has Seven raised a chunk and the ISV's that form Parlay and JAIN / JSLEE next to nothing. Superior marketing may have something to do with it but there is also a trend in the US to keep on acquiring stove-pipe solutions - and then complain that they don't do the job advertised. It has been suggested that as US carriers, in particular, have cut back on R&D they have lost the ability to spot technical bullshit in the marketing blurb.
Somewhere between the US super-charged attitude and the European ultra-cautious approach would make sense for everyone.
A great post here from Bill Burnham via Fred's A VC's blog on massive overfunding in the mobile application space.
I am not going to add to the comments on over-funding of hot companies; but actually rubbish the technology and then take a poke at technology acquisition. Seven is a great example of a stove-pipe solution. Great if you want to add just the ability to send and receive mobile email, but once a network operator wants to add other services / applications and charging capabilities with slightly greater sophistication than $x per mb, or per email then the system integrators get to rub their hands and put their hands back in to the cookie jar. All these cool apps, are just that apps. They aren't technologically advanced, they aren't future proof and they are difficult to integrate.
A semi-literate Java programmer could replicate Seven's technology in about a week using this generation open standard; if you don't believe me go to the Parlay org's website or Sun Microsystems JAIN (Java for advanced intelligent networks) JSLEE websites and think about how much more these two technologies can offer than Seven.
So why has Seven raised a chunk and the ISV's that form Parlay and JAIN / JSLEE next to nothing. Superior marketing may have something to do with it but there is also a trend in the US to keep on acquiring stove-pipe solutions - and then complain that they don't do the job advertised. It has been suggested that as US carriers, in particular, have cut back on R&D they have lost the ability to spot technical bullshit in the marketing blurb.
Somewhere between the US super-charged attitude and the European ultra-cautious approach would make sense for everyone.
01 June 2004
Energy Conservation
Flipping marvellous post from Jeff Nolan on the downside of depending upon gas guzzlers for your means of transportation Dependent on Gas. Not exactly SAP stuff but isn't that the point anyway. Anyway I am sure that he will be delighted to hear that I support one of the main tenants of his piece. Namely that electricty driven motors are the most obvious solution; provided that I remember the physics that I was once taught. If we had finished capital raising I would have backed a very smart brushed-electric motor. Instead its got Russian money and risks heading to oblivion.
Just got to find a way to create cheap electricity!! That will do for the next challenge.
Flipping marvellous post from Jeff Nolan on the downside of depending upon gas guzzlers for your means of transportation Dependent on Gas. Not exactly SAP stuff but isn't that the point anyway. Anyway I am sure that he will be delighted to hear that I support one of the main tenants of his piece. Namely that electricty driven motors are the most obvious solution; provided that I remember the physics that I was once taught. If we had finished capital raising I would have backed a very smart brushed-electric motor. Instead its got Russian money and risks heading to oblivion.
Just got to find a way to create cheap electricity!! That will do for the next challenge.
RAISING CAPITAL
I am on the road raising capital for our next fund � DFJ Nexus. As an affiliate of DFJ we are targeting globally applicable Russian technology. This is now my third time doing this; cannot say that it gets any better but I get the feeling that this may be a sweet spot in the VC capital raising cycle. Yes LP�s are focused on performance, terms (transparency) and fit. As an emerging manager targeting a truly novel space we should command attention. But this far up the value chain?
All that being said I truly hate the process. Skepticism, is high among the skills that I bring to the table as an early stage VC. LP�s, Gatekeepers and the like should not be listening to me because of my ability to pitch but my ability to be intelligently skeptical. We are all intelligent people but the rules are written in favor of snake oil merchants.
BTW � I am totally in favor of transparency. I would be willing to omit an LP if they did not understand the J-curve; not because they wanted to publish the figures.
I am on the road raising capital for our next fund � DFJ Nexus. As an affiliate of DFJ we are targeting globally applicable Russian technology. This is now my third time doing this; cannot say that it gets any better but I get the feeling that this may be a sweet spot in the VC capital raising cycle. Yes LP�s are focused on performance, terms (transparency) and fit. As an emerging manager targeting a truly novel space we should command attention. But this far up the value chain?
All that being said I truly hate the process. Skepticism, is high among the skills that I bring to the table as an early stage VC. LP�s, Gatekeepers and the like should not be listening to me because of my ability to pitch but my ability to be intelligently skeptical. We are all intelligent people but the rules are written in favor of snake oil merchants.
BTW � I am totally in favor of transparency. I would be willing to omit an LP if they did not understand the J-curve; not because they wanted to publish the figures.
TRAVEL
I am coming to the end of one month of travel. Which included 16 separate flights, 2 train journeys and 1 long car drive. Some of observations: US major carriers will go out of business. I have flown Jet Blue, South Western and ATA over the last few weeks. Jet Blue is the clear winner. In all of them the service was better than the established airlines, the prices were cheaper and we landed on time and they were FULL. My international travel on American Airlines was scandalous. It was low cost travel at high cost prices. The US and EU have to come to an agreement on open skies as soon as possible. However I assume that national carriers, which includes Delta, AA and United, control over landing slots will preclude this and leave us all subject to cartel pricing.
The winner however is rail journeys. I write this on board Eurostar from London to Brussels � not cheap but comfortable. The same is true for the Acela (?) from DC to NY. Travel, waiting, check-in (try travelling around the US with an Uzbek, Ukrainian and Turkmen visa pasted in your passport � more security officials have had a close up of my feet than is good for an individual) are completed in 5 minutes. There is real space on the train and the wine is not bad. My next trip to the NE of the US will be done exclusively by train.
I am coming to the end of one month of travel. Which included 16 separate flights, 2 train journeys and 1 long car drive. Some of observations: US major carriers will go out of business. I have flown Jet Blue, South Western and ATA over the last few weeks. Jet Blue is the clear winner. In all of them the service was better than the established airlines, the prices were cheaper and we landed on time and they were FULL. My international travel on American Airlines was scandalous. It was low cost travel at high cost prices. The US and EU have to come to an agreement on open skies as soon as possible. However I assume that national carriers, which includes Delta, AA and United, control over landing slots will preclude this and leave us all subject to cartel pricing.
The winner however is rail journeys. I write this on board Eurostar from London to Brussels � not cheap but comfortable. The same is true for the Acela (?) from DC to NY. Travel, waiting, check-in (try travelling around the US with an Uzbek, Ukrainian and Turkmen visa pasted in your passport � more security officials have had a close up of my feet than is good for an individual) are completed in 5 minutes. There is real space on the train and the wine is not bad. My next trip to the NE of the US will be done exclusively by train.
ECONOMIST RUSSIA SURVEY
It�s rare to openly praise journalists in a blog, much less those you have never met, albeit he taught my wife to salsa whilst I was traveling. However, I have to unreservedly recommend the Economist�s Russia survey to anyone even slightly interested in Russia.
Gideon Lichfield, the Economist�s Russia correspondent, has done a fantastic job of presenting a readable, accurate and balanced account of Russia today. In particular the section on the Silovki (the men of power; the ex-KGB) is as good an article as could be written by a reporter � as opposed to an interested commentator. In his Yahoo Group�s commentary he apologizes for his �inability to understand the place.� Actually his balanced, nuanced approach shows far greater understanding than his predecessor who was both a Slavophile and phobe, sometimes in the same sentence. Anyway if we understood the place what would we spend the weekend at the Dacha discussing?
I have criticisms of omission; which could be equally blamed on editors as on Gideon. The first is that he is absolutely correct to emphasize the paltry nature of real reform. That is reform that is actually implemented by the bureaucracy. But the nature of the reform deserves more praise. Without letting on how much tax I paid in 2003 the Government has agreed to pay back $6,000 of it as a result of me buying an apartment. The income tax rate is 13%. This is an intelligent policy to bring the populace into the �white� economy.
The second criticism relates to the one-sided nature of the sausage factory story. Small and medium-sized business is booming. Fredrik Ekman, my partner at Mint Capital founded Oriflame in the FSU. Oriflame is an Avon-style cosmetics business. Earlier this year it went public on the Stockholm Stock Exchange. Some 30% of its revenues and 40% of its net income is derived from the FSU, principally Russia. The numbers made good reading for its owners bank managers.
Mint�s investments in the local-economy are booming and our interaction with organized crime is zero. I have my reservations over Russia�s medium-term viability but if we can get out before Putin becomes a lame duck (which maybe a western term with no meaning in a non-liberal democracy) they will return substantially over our risked cost-of-capital.
It�s rare to openly praise journalists in a blog, much less those you have never met, albeit he taught my wife to salsa whilst I was traveling. However, I have to unreservedly recommend the Economist�s Russia survey to anyone even slightly interested in Russia.
Gideon Lichfield, the Economist�s Russia correspondent, has done a fantastic job of presenting a readable, accurate and balanced account of Russia today. In particular the section on the Silovki (the men of power; the ex-KGB) is as good an article as could be written by a reporter � as opposed to an interested commentator. In his Yahoo Group�s commentary he apologizes for his �inability to understand the place.� Actually his balanced, nuanced approach shows far greater understanding than his predecessor who was both a Slavophile and phobe, sometimes in the same sentence. Anyway if we understood the place what would we spend the weekend at the Dacha discussing?
I have criticisms of omission; which could be equally blamed on editors as on Gideon. The first is that he is absolutely correct to emphasize the paltry nature of real reform. That is reform that is actually implemented by the bureaucracy. But the nature of the reform deserves more praise. Without letting on how much tax I paid in 2003 the Government has agreed to pay back $6,000 of it as a result of me buying an apartment. The income tax rate is 13%. This is an intelligent policy to bring the populace into the �white� economy.
The second criticism relates to the one-sided nature of the sausage factory story. Small and medium-sized business is booming. Fredrik Ekman, my partner at Mint Capital founded Oriflame in the FSU. Oriflame is an Avon-style cosmetics business. Earlier this year it went public on the Stockholm Stock Exchange. Some 30% of its revenues and 40% of its net income is derived from the FSU, principally Russia. The numbers made good reading for its owners bank managers.
Mint�s investments in the local-economy are booming and our interaction with organized crime is zero. I have my reservations over Russia�s medium-term viability but if we can get out before Putin becomes a lame duck (which maybe a western term with no meaning in a non-liberal democracy) they will return substantially over our risked cost-of-capital.
23 May 2004
VOIP
An interesting piece entitled Broadband Wireless: BWIA VOIP = New Generation Phone Company from Steve Stroh. That's precisely what my provider in Moscow gives me and its the most reliable broadband I have used anywhere - and it's voice product is cheaper than Vonage's.
An interesting piece entitled Broadband Wireless: BWIA VOIP = New Generation Phone Company from Steve Stroh. That's precisely what my provider in Moscow gives me and its the most reliable broadband I have used anywhere - and it's voice product is cheaper than Vonage's.
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01 September 2004
Meanwhile.....
The police find something useful to do. Looks like someone stopped paying for protection.
Narco Cops Smoking Out Weed Ware
28 August 2004
Vonage and VoIP
Vonage's latest infusion equity led to this first from Bill Burnham followed by this from Om Malik. As I know nothing about the online equity trading business I'll not add to sum of human wisdom being imparted in the similarities.
I had hoped that a comment that the company was cash flow positive before customer acquisition cost might inspire a Sage of Omaha type put down. Here's mine; my car costs nothing to run before petrol (gas), insurance, servicing and depreciation. If your business involves acquiring customers then stripping out the cost is at best duplicitous. Surely it is the job of the blogging community to point out such monstrous bullshit. Let the mainline press quote verbatim from press releases without thinking.
Anyway that was not the main point of the post. In my evolving thinking about sessions over IP my recent trip to Nizhny Novgorod, the centre of Russia's telecom technology industry, has taken me a step further. I am not smart enough to determine whether Vonage or Skype will be good investments. I am fairly sure that they won't be great companies.
This recent piece from the VON round up about BT becoming the European centre for VoIP interop testing would suggest that VoIP is not only not ready for prime time but that we have some time to wait before they are. The company that I was visiting in Nizhny's value proposition is building products that allow Nortel IP PBX's speak to Avaya etc. How can you expect to have an industry when there are no standards and no interoperability.
So I posit that there will be a crisis before we see the sessions over IP winners. If the owners of Skype and Vonage have cashed out before the crisis then great investments. I also posit that SIP will not spawn the winner; it's too large a signaling package and thinks like traditional telephony. Lets call this phase of the transition IP over TDM or new telephony like old telephony. The truly disruptive phase has not yet started and we don't yet know what it will look like - but keep reading Isenberg if you are looking for a clue.
I had hoped that a comment that the company was cash flow positive before customer acquisition cost might inspire a Sage of Omaha type put down. Here's mine; my car costs nothing to run before petrol (gas), insurance, servicing and depreciation. If your business involves acquiring customers then stripping out the cost is at best duplicitous. Surely it is the job of the blogging community to point out such monstrous bullshit. Let the mainline press quote verbatim from press releases without thinking.
Anyway that was not the main point of the post. In my evolving thinking about sessions over IP my recent trip to Nizhny Novgorod, the centre of Russia's telecom technology industry, has taken me a step further. I am not smart enough to determine whether Vonage or Skype will be good investments. I am fairly sure that they won't be great companies.
This recent piece from the VON round up about BT becoming the European centre for VoIP interop testing would suggest that VoIP is not only not ready for prime time but that we have some time to wait before they are. The company that I was visiting in Nizhny's value proposition is building products that allow Nortel IP PBX's speak to Avaya etc. How can you expect to have an industry when there are no standards and no interoperability.
So I posit that there will be a crisis before we see the sessions over IP winners. If the owners of Skype and Vonage have cashed out before the crisis then great investments. I also posit that SIP will not spawn the winner; it's too large a signaling package and thinks like traditional telephony. Lets call this phase of the transition IP over TDM or new telephony like old telephony. The truly disruptive phase has not yet started and we don't yet know what it will look like - but keep reading Isenberg if you are looking for a clue.
27 August 2004
Fly Russia
The day after two Tupolev's, a Tu154 and a Tu134 were (allegedly) blown out of the air I found myself aboard a Yak 40 bound for Nizhny Novgorod. Two things struck me at the time; firstly nobody should ever have to pay money to get on to a Yak. Secondly that at the time I got on the plane I believed that the crashes had been caused by negligence or poor fuel. With a little rational thought it would have been clear that neither poor fuel nor negligence makes planes disappear from the radar screen. Nonetheless, my primary thought was negligence.
The FSB (successor to the KGB) was also hoping that it was negligence as they have told Putin that Chechen terrorism is under control.
Scanning the pages of the Komsomolskaya Pravda, a third rate producer of newsprint that does not justify the title newspaper, there was a picture of a sniffer dog at Domodeydovo Airport (the take off point for the two aircraft) with the caption "Sniffer dogs are better because they cannot be bought."
Entirely disabused of the negligence excuse, it struck me that the Chechen / fundamentalists will always be able to strike wherever and whenever they like because someone in uniform will always sell them a way around whatever security has been put in place to stop the terrorists - and will do so without any conscience.
The day after two Tupolev's, a Tu154 and a Tu134 were (allegedly) blown out of the air I found myself aboard a Yak 40 bound for Nizhny Novgorod. Two things struck me at the time; firstly nobody should ever have to pay money to get on to a Yak. Secondly that at the time I got on the plane I believed that the crashes had been caused by negligence or poor fuel. With a little rational thought it would have been clear that neither poor fuel nor negligence makes planes disappear from the radar screen. Nonetheless, my primary thought was negligence.
The FSB (successor to the KGB) was also hoping that it was negligence as they have told Putin that Chechen terrorism is under control.
Scanning the pages of the Komsomolskaya Pravda, a third rate producer of newsprint that does not justify the title newspaper, there was a picture of a sniffer dog at Domodeydovo Airport (the take off point for the two aircraft) with the caption "Sniffer dogs are better because they cannot be bought."
Entirely disabused of the negligence excuse, it struck me that the Chechen / fundamentalists will always be able to strike wherever and whenever they like because someone in uniform will always sell them a way around whatever security has been put in place to stop the terrorists - and will do so without any conscience.
19 August 2004
Sessions Over IP - Update
More on my previous post. Dan Dearing, VP Marketing at NexTone, another player in the border session controller space, believes that Carrier-to-residential (C2R) will amount to only 20% of the total revenue per port spend (from this article at Light Reading - Networking the Telecom Industry via Andy Abramson.
I sometimes get the feeling that conversations about the future of sessions-over-IP are held in two different planes. The "voice-will-be-free" crew are talking about residential voice. Those who see value in BSC's and feature servers in NGNs are more interested in enterprise sessions.
I sometimes get the feeling that conversations about the future of sessions-over-IP are held in two different planes. The "voice-will-be-free" crew are talking about residential voice. Those who see value in BSC's and feature servers in NGNs are more interested in enterprise sessions.
Telecom Quality / IT Ease of Use
It was cold, cold, cold in Moscow this weekend and dropped 22mm of rain on Saturday alone. The good news was that it allowed me to sit in a corner of my study and re-read a number of core think pieces including David Isenberg�s The Rise of the Stupid Network and his subsequent piece with David Weinberger, The Paradox of the Best Network. The end of the telecom company as we know them, as David Isenberg correctly identifies in this article for IEEE�s Spectrum Magazine The End of the Middle, is nigh. What comes next, and why, is significantly harder to fathom. Once you get beyond the �one sentence will cover it� CNN simplistic answers there remains substantial complexity. The good news is that in an industry undergoing significant tectonic shifts is the opportunity to invest in start ups that can become household names.
VoIP for early adopters has been viewed overly simplistically. It works pretty much all the time, it�s free as long as you don�t need to talk via a telephony network. So if it�s not working no great hassle, and pretty much all of us have a back up of some kind, even if we have junked our PSTN line. However, Vonage has had a couple of outages in the last two weeks that have caused some angst. Om Malik�s suggestion that this is The End of the Honeymoon seems to me right on the money. Someone, somewhere commented that he could remember the number of times that his (switched) phone system went down. On the flip side; whilst his telecom network never went down, his video conferencing never went up. Mercer Management Consulting forecasts (via The Register) that consumers will be happy to move to VoIP � provided that the quality is as good as their telephone line. It would be a good assumption that enterprise requirements are more demanding than those of consumers.
We backed a start-up in 2002 jNETx who built a next generation intelligent networking platform, or Open Convergent Feature Server based around a JAIN SLEE and OSA/Parlay that bridges the evolution from 2G to 3G mobile, and of course fixed platforms. Ensuring that the OCFS is a carrier grade product has required all the brilliance that a large room full of maths and science PhD�s can offer. Douglas Tait from Sun and the founder of the JAIN initiative posts here on the complexity of writing SS7/Voice signaling-to-IP gateways. (For more on the Service Delivery Platforms, JAIN SLEE�s etc I encourage you to read this 512 page, 16MB report from the Moriana Group. This link takes you to the download.)
Niklas Zennstrom CEO of Skype, a DFJ investment, has recently blazed a trail for the freeness of VoIP. Emphasizing the fact that Telephony is Just Software, which I blogged here. Rohan Mahy�s response covered here in The Register, has a go at the proprietary solutions such as Skype and begins to explain why SIP is a better solution � in the long term. Albeit that SIP has some issues that IAX may handle better.
In my immediate pipeline at the moment are two companies in the border session controller space and one in CPE / soft phone space. Both of them sit in so much of the pie covered by soft switches that definitions becomes difficult, if not meaningless. So this is not just an issue of connecting legacy networks to IP networks. To my mind the issue is ensuring that the mission critical data application otherwise known as voice is always available. One of the BSC companies spent considerable time educating me as to the very considerable issues running enterprise-quality voice over the Internet. I�m not there yet � let�s just say the problem won�t be solved tomorrow.
So what was the point of this link fest? I think that the point was to say;
- The end of fixed line switched copper-based telephony is upon us � that much is clear.
- It�s not a given that you can jump from there to free calls/sessions. Let me be specific; voice may be free but that does not mean that you won�t be paying for it somewhere, especially if you require quality of service. Video conferencing will not be a bundled all you can consume package for [10] years.
- There will never be a global utility called The Internet.
- Building networks and intelligence to provide enterprise quality mission critical applications requires significant tinkering with the Internet � it won�t come for free.
- What the meaningful difference between soft switches, border session controllers, feature servers will be is unclear. It should mean the death of stovepipe applications but we are not there yet.
- IBM GS is a more likely winner than Ericsson Services (or whatever they call themselves) because of their enterprise knowledge.
- And don�t even begin to bring mobility in to this until we have clear answers to all of the above.
18 August 2004
VC Skills
One post below is Bill Burnham on the skills needed to make a VC. His argument synthesized; if a VC is deep in a company they have made a bad investment. A good investment is getting all the parts right up front. Fred Wilson posts in my same assault on NewsGator about the value that a VC brings to the board, and the resulting discount in the next deal The Discount and the Work.
My take is the difference is one of emphasis not of substance. Getting involved beyond reading board papers is clearly massively important; but it should be at the strategic level. And management should be able to distill the advice - some good some bad, and act on it.
Operator vs Finance
Bill Burnham on what makes the The Perfect VC: Operator or Investor?
There's not much to argue with here, though I tend to believe that a good mix of skills across a Partnership is as important as the right skills in anyone person.
13 August 2004
VOIP Sub-Critical Dependency
This from Om Malik was going to be just another VoIP's not quite ready for prime time story's and was about to enter file 13 when I picked a comment from Andy Abramson "Outages like Vonage is having are to be expected, but not appreciated. With growth comes growing pains. Experience in a carrier is what one needs to look for, and a network that is fully redundant, fault tolerant. One has to ask, does your voip carrier have that?"
Andy then blogsOm's post w/o his comment. The post is not wrong, a very Russian way of putting things, but the comment is more correct. If, as Om says, he wants a form of communication that works all the time then VoIP's not there because the carrier network was designed to be best efforts only. To get fault tolerant VoIP we will have to pay a carrier who will give our voice carrying data packages QoS preference over the porn surfers. And that will carry a cost.
Whilst I believe in disruptive technologies and business models, it's part of the DFJ faith, fully fault tolerant VoIP is not as cheap and "free" as currently touted. Yes its an order of magnitude cheaper than circuit switched calls but it's not free. Free as a marketing trick in Russia does not work. Russians don't believe that something that's free is worth having - it's a communism thing. Now a shed load of Russians use cheap VoIP calling cards etc to call Israel and the US, but they expect the QoS that they get.
Bottom line; enterprise-VoIP will save companies a lot of cash - it won't be for free.
This from Om Malik was going to be just another VoIP's not quite ready for prime time story's and was about to enter file 13 when I picked a comment from Andy Abramson "Outages like Vonage is having are to be expected, but not appreciated. With growth comes growing pains. Experience in a carrier is what one needs to look for, and a network that is fully redundant, fault tolerant. One has to ask, does your voip carrier have that?"
Andy then blogsOm's post w/o his comment. The post is not wrong, a very Russian way of putting things, but the comment is more correct. If, as Om says, he wants a form of communication that works all the time then VoIP's not there because the carrier network was designed to be best efforts only. To get fault tolerant VoIP we will have to pay a carrier who will give our voice carrying data packages QoS preference over the porn surfers. And that will carry a cost.
Whilst I believe in disruptive technologies and business models, it's part of the DFJ faith, fully fault tolerant VoIP is not as cheap and "free" as currently touted. Yes its an order of magnitude cheaper than circuit switched calls but it's not free. Free as a marketing trick in Russia does not work. Russians don't believe that something that's free is worth having - it's a communism thing. Now a shed load of Russians use cheap VoIP calling cards etc to call Israel and the US, but they expect the QoS that they get.
Bottom line; enterprise-VoIP will save companies a lot of cash - it won't be for free.
06 August 2004
Mmmmm
I want one of these, no camera, just a phone with Blackberry software. Siemens touts Blackberry-based business phone | The Register
Stupid Network; Intelligent Client; Stupid User
I believe in the first statement. The rise of the Stupid Network has happened and is happening. As processor power improves more and more intelligence is being moved to the client. The question is how much, and how much does it rely on an intelligent user. The early adopters are mostly intelligent enough to work through the issues. The mass market won't happen until the how the f*** do I make this work issues are ironed out.
So, my question for now; how much intelligence ends up in the client and how much stays at the edge?
So, my question for now; how much intelligence ends up in the client and how much stays at the edge?
Russia
Yesterday in the FT (subscription required) was a very good piece on the path that is being taken by Russia. Among the people heavily quoted is Al Breach, Brunswick UBS' (a leading investment bank) economist and a big Russia bull. The other, respected, huge Russia bull eating his words is Eric Kraus in this piece The Summer of Our Discontent. You may struggle to hear the munching as the words are masticated - I assure you that they are there.
The long and short of the pieces is that the Silovki (people of power - i.e. the ex-KGB and Putin's friends) have taken control of the economy. Their underlying reasoning is correct What happened during Yeltsin's time was mayhem - it was fun, but it was mayhem. They want in a strong state and a lack of mayhem - oh and substantial bank accounts (their own.) However, as they have taken control of the reigns of power the country has moved from an imperfect quasi-liberal economy to a corrupt natural resource economy. And it has done so in less than a year. KGB school seemingly teaches control for controls sake and fails to go on to explain consequences.
Lets consider the right of the Silovki (ex-KGB) to run Russia. Since the death of Brezhnev in the mid-80's the head of the Central Committee of the Communist Party were two septuagenarian ex-heads of the KGB, followed rapidly by Gorbachev. The septuagenarians died pretty rapidly - they were pretty-much figure heads anyway. As an aside, Gorbachev is revered in the West for his reformist tendencies that lead to the end of the Cold War. Actually he did not have a clue what he was doing - it all happened without his input. Crucially though, it was the hard liners in the Politburo - the Silovki - who hastened the collapse through their complete lack of understanding of what was happening in country that they believed that they ruled and controlled. The actual event was the 1992 coup. My take on the legacy of the Soviet Union after the death of Stalin and the removal of Kruschev is that it was a state run by the KGB. Brezhnev was allowed to stay in power long after he was officially useless because he was a puppet of the guys who thought that they ran the country - the KGB. They replaced him with two of their own; only for them to die. Gorbachev was the chosen successor because he was deemed to be controllable (southern town hick without a power base.)
The Soviet Union had some fantastic achievements during its 70-odd years of existence. It also had some fairly miserable failures. You can directly attribute the failures to the KGB. In particular Brezhnev's era is best remembered for it's economic stagnation. Almost complete control, almost complete stagnation. This legacy of success is what qualifies them to run Russia.
Fourteen years later, the successors to that legacy of failure have emerged from the hole that they had to hide in after the 1992 coup. Since their re-emergence Russia has suffered the Yukos crisis, a manufactured banking crisis, the return of capital flight (hint - buy real estate in desirable and warm places. Russians are exporting their money from Russia again and they believe in real estate, and football clubs) a stalling of reform and a very badly bungled withdrawal of social security from pensioners and veterans whilst increasing them for bureaucrats. It would appear that during their 10+ years in the wilderness they failed to read any Adam Smith.
What next? There is no opposition, the Silovki can fix elections, so there is no one to provide an alternative view of the facts. I previously believed that Putin would step down at the end of his second term to preserve his place in history. His place in history will be as the President who undid all that was working in Russia - so not stepping down pretty much cements that position.
It's also increasingly clear that he is not in charge. I have previously written that he is primus inter pares of a group of like-minded people. It would appear that he no longer holds that position. German Gref, the reformist Minister of the Economy, has made a number of very critical remarks recently. Putin will be loathe to fire him. It removes the pretence that he is trying to undertake liberal reforms. Loyalty to the party line is pretty much Silovki 1.01 so I would expect that he will be taking a long holiday somewhere warm this winter.
So after that bout of happiness I am heading to my dacha to enjoy Russia's summer and swim in the Moscow river.
Update; even previously loyal members of the Duma are speaking out.
Yesterday in the FT (subscription required) was a very good piece on the path that is being taken by Russia. Among the people heavily quoted is Al Breach, Brunswick UBS' (a leading investment bank) economist and a big Russia bull. The other, respected, huge Russia bull eating his words is Eric Kraus in this piece The Summer of Our Discontent. You may struggle to hear the munching as the words are masticated - I assure you that they are there.
The long and short of the pieces is that the Silovki (people of power - i.e. the ex-KGB and Putin's friends) have taken control of the economy. Their underlying reasoning is correct What happened during Yeltsin's time was mayhem - it was fun, but it was mayhem. They want in a strong state and a lack of mayhem - oh and substantial bank accounts (their own.) However, as they have taken control of the reigns of power the country has moved from an imperfect quasi-liberal economy to a corrupt natural resource economy. And it has done so in less than a year. KGB school seemingly teaches control for controls sake and fails to go on to explain consequences.
Lets consider the right of the Silovki (ex-KGB) to run Russia. Since the death of Brezhnev in the mid-80's the head of the Central Committee of the Communist Party were two septuagenarian ex-heads of the KGB, followed rapidly by Gorbachev. The septuagenarians died pretty rapidly - they were pretty-much figure heads anyway. As an aside, Gorbachev is revered in the West for his reformist tendencies that lead to the end of the Cold War. Actually he did not have a clue what he was doing - it all happened without his input. Crucially though, it was the hard liners in the Politburo - the Silovki - who hastened the collapse through their complete lack of understanding of what was happening in country that they believed that they ruled and controlled. The actual event was the 1992 coup. My take on the legacy of the Soviet Union after the death of Stalin and the removal of Kruschev is that it was a state run by the KGB. Brezhnev was allowed to stay in power long after he was officially useless because he was a puppet of the guys who thought that they ran the country - the KGB. They replaced him with two of their own; only for them to die. Gorbachev was the chosen successor because he was deemed to be controllable (southern town hick without a power base.)
The Soviet Union had some fantastic achievements during its 70-odd years of existence. It also had some fairly miserable failures. You can directly attribute the failures to the KGB. In particular Brezhnev's era is best remembered for it's economic stagnation. Almost complete control, almost complete stagnation. This legacy of success is what qualifies them to run Russia.
Fourteen years later, the successors to that legacy of failure have emerged from the hole that they had to hide in after the 1992 coup. Since their re-emergence Russia has suffered the Yukos crisis, a manufactured banking crisis, the return of capital flight (hint - buy real estate in desirable and warm places. Russians are exporting their money from Russia again and they believe in real estate, and football clubs) a stalling of reform and a very badly bungled withdrawal of social security from pensioners and veterans whilst increasing them for bureaucrats. It would appear that during their 10+ years in the wilderness they failed to read any Adam Smith.
What next? There is no opposition, the Silovki can fix elections, so there is no one to provide an alternative view of the facts. I previously believed that Putin would step down at the end of his second term to preserve his place in history. His place in history will be as the President who undid all that was working in Russia - so not stepping down pretty much cements that position.
It's also increasingly clear that he is not in charge. I have previously written that he is primus inter pares of a group of like-minded people. It would appear that he no longer holds that position. German Gref, the reformist Minister of the Economy, has made a number of very critical remarks recently. Putin will be loathe to fire him. It removes the pretence that he is trying to undertake liberal reforms. Loyalty to the party line is pretty much Silovki 1.01 so I would expect that he will be taking a long holiday somewhere warm this winter.
So after that bout of happiness I am heading to my dacha to enjoy Russia's summer and swim in the Moscow river.
Update; even previously loyal members of the Duma are speaking out.
04 August 2004
Vonage Outed or IT & Telecom Converges
Andy Abramson blogs Vonage's Outage which may or may not have been caused by Global Crossing. In an attempt to get through some 1,000 unread blog's courtesy of much loved NewsGator sitting in the inbox I skim read, deleted and then brought it back and started writing here;
We have an investment in a next generation IN / feature sever play jNETx which is putting in a replacement IN system in to an Irish mobile provider - when the system was launched with a new HLR and various other bits and pieces the whole system went down for 3 hours. I'm pleased to say it was not jNETx that caused it but it was A BIG DEAL with as many expletives as you want to add.
I am not saying that Vonage's outage was or is the cause of calling the end of VoIP - it's not; Vonage et al will continue to take business from PSTN's. However, service includes being available nearly all the time. Is that 99.999 or some lesser number - no idea. What seems logical is that enterprises will demand the same service levels from a full VoIP sytem as they got from the PSTN's, and that is built around 99.999% availability. So whilst Vonage is principally a retail / SoHo play a few hours spent at the beach is OK. To go mainstream it's not.
Whilst I am here a link to a previous post Go South Young VoIP'ers. Yesterday I was in a meeting with a company that claims to have solved the feature issues caused by SIP passing through IPPBX's passing through border session controllers (my middle name is esoteric.)
Andy makes the point that the S. American governments are trying to protect their local PSTN's by regulating out VoIP providers. Same thing happened here in Russia. In an attempt to get the highest price for Svyazinvest, the all controlling super-telco, they force all long-distance to pass through Rostelecom - the long distance carrier. Thus a number of local enterprise CLEC's wanted to move their clients on to full VoIP systems however, they found that when a VoIP call was made via SIP that passed through a BSC and then via an IP PBX (100% of legitimate enterprise VoIP traffic) they lost the features of the call when the IP PBX diverted the call / session to an internal "number". The call went through it just lost any "intelligence" - call forwarding, voicemail (?). Thus the Russian government's desire to protect revenues caused a Russian technology company to overcome a global problem. The law of unintended consequences strikes again.
Andy Abramson blogs Vonage's Outage which may or may not have been caused by Global Crossing. In an attempt to get through some 1,000 unread blog's courtesy of much loved NewsGator sitting in the inbox I skim read, deleted and then brought it back and started writing here;
We have an investment in a next generation IN / feature sever play jNETx which is putting in a replacement IN system in to an Irish mobile provider - when the system was launched with a new HLR and various other bits and pieces the whole system went down for 3 hours. I'm pleased to say it was not jNETx that caused it but it was A BIG DEAL with as many expletives as you want to add.
I am not saying that Vonage's outage was or is the cause of calling the end of VoIP - it's not; Vonage et al will continue to take business from PSTN's. However, service includes being available nearly all the time. Is that 99.999 or some lesser number - no idea. What seems logical is that enterprises will demand the same service levels from a full VoIP sytem as they got from the PSTN's, and that is built around 99.999% availability. So whilst Vonage is principally a retail / SoHo play a few hours spent at the beach is OK. To go mainstream it's not.
Whilst I am here a link to a previous post Go South Young VoIP'ers. Yesterday I was in a meeting with a company that claims to have solved the feature issues caused by SIP passing through IPPBX's passing through border session controllers (my middle name is esoteric.)
Andy makes the point that the S. American governments are trying to protect their local PSTN's by regulating out VoIP providers. Same thing happened here in Russia. In an attempt to get the highest price for Svyazinvest, the all controlling super-telco, they force all long-distance to pass through Rostelecom - the long distance carrier. Thus a number of local enterprise CLEC's wanted to move their clients on to full VoIP systems however, they found that when a VoIP call was made via SIP that passed through a BSC and then via an IP PBX (100% of legitimate enterprise VoIP traffic) they lost the features of the call when the IP PBX diverted the call / session to an internal "number". The call went through it just lost any "intelligence" - call forwarding, voicemail (?). Thus the Russian government's desire to protect revenues caused a Russian technology company to overcome a global problem. The law of unintended consequences strikes again.
08 July 2004
Yukos and the Banks
Politics are not my normal terrain, and to be clear both Yukos and the Banks are about politics.
For ever and a day the Investment Banking analysts have been telling us that the Yukos affair is about humbling Khordokhovsky and not about taking Yukos to bankruptcy. Well its effectively bankrupt and the only way that it's not going to be bankrupt is politics. That way the portfolio investors can maintain their navel gazing shortsightedness and pretend they did not lose too badly.
The banking crisis is an oxymoron - to have a crisis you need a banking sector. Anyhow it too has been driven by politics. I have on my desk (somewhere) the banking blacklist. It comprises 38 banks including 2 of the 4 leading non-state owned banks. That I can get my hands on it somewhat goes to prove that its meant to be seen. And causing a run on the banks who you can't control is a pretty good way to get them to come in to line.
It might amuse you to know that there was a queue outside Citibank's branch yesterday. So strong is the public's faith in private banks.
The Russian menatlity is stronly zero-sum-game; and it is now being played out in front of our eyes for all to see. I am afraid to say that Putin's government has gone from partial reform to failed authoritarianism.
Valuation
Two good posts on valuing an early stage deal. First from Fred Wilson which is philospohical here. The second from Brad Feld on deal algebra here Feld Thoughts: Venture Capital Deal Algebra.
What the second post does not go on to say is that by the time you factor in a. liquidation preferences (VC's get there money out first and sometimes in a multiple of what they invested) b. potentially a coupon on the preferred stock c. penny warrants etc. that the implied pre / post-money valuation is a lot different from the headline number. To borrow some algebra from Brad Feld:
Implied post-money = (invested amount)/(return to investors / total return). For the implied pre-money subtract the amount initially invested.
Thus if you invested $2mn at $3mn pre-money (assuming no further dilution) you would expect the investor to receive 40% of the proceeds of a sale. Actually the % of the return that an investor gets after liquidation preference et al can be a lot higher.
As Brad Feld points out many serial entrepreneurs don't always follow the math - try this on a whole nation of first time entrepreneurs. Add to it the national characteristic that lawyers don't matter its the handshake agreement and you are open for all sorts of interesting discussions.
02 July 2004
Skype Under Attack
A much more cogently argued piece from The Register on what is wrong with Skype via David Isen than my rant yesterday. Isen argues that David Mahy is demonstrating "bellheadedness" and goes on to say "the "industry" that will bring VoIP to most of us is the Internet Industry."
I am not entirely sure that the two are disagreeing. The article's introduction says "and focused on the difference between the instantaneous gratification of Skype for private individuals and the safe and efficient enterprise wide VoIP implementations, reliant mostly on the SIP protocol." We are all very happy to pay nothing for personal or small-business calls. Can't see IBM doing the same.
Skype's business model is based on selling VAS. As Mahy points out that is very unlikely "That's missing the point, don't you think? Say a Skype user in India wants to communicate with me in California on a SIP network. He can make a basic call through 2 gateways with international toll charges. Its unlikely that I will see his correct caller ID, and dead certain that we can't exchange IM, video, presence status, or do file transfers. A pair of implementations using SIP could do this for free over the public Internet."
And then we return to the security issue - which has some legs but may be as much about the easy line for journalists as any real concern.
I have seen a number of recent firewall implementations that ban cross-firewall p2p sessions - I think it will be a standard feature in 2005 enterprise releases.
Ridiculous
ITunes has finally launched in the UK - hurrah. If you don't have a US registered credit card you can't buy ITunes from the US website.
However, my wife tells me that a song in the UK costs 75 pence. At the current exchange rate that's $1.42. Which is just plain ridiculous. Did the Apple execs think that we would not notice?
The Bizarre
I rarely blog the bizarre Russian happenings but here's one. From about 5a.m. this morning a car alarm from what could only be a very small car went off incessantly. It was still going when I headed off to work. Only it (it being a badly-parked Nissan Micra) was now surrounded by 6 Militsia (policemen.) Who had succeeded in opening its passenger door - but clearly not in turning the alarm off.
Usually you only see 6 policemen together when there are some Azerbaijani, Armenian, Georgian etc., market traders to be beaten up.
Q. Why do the Militsia travel in threes. One who can read, one who can write and one to guard the two dangerous intellectuals.
30 June 2004
RSS
Link via A VC to a RSS wishlist at therssweblog.
Tech bloggers are all a little self-involved (it's a stat thing) but this and Brad Feld's blog on why he invested in NewsGator makes it a big RSS day.
Telephony Software
Niklas Zennstrom on the emerging realization that telephony is just software; a fact that anyone in the telephony world cottoned on to at least 5 years ago - its just taken the software world a while to catch up with the practice. Link via A VC. As with any recent convert they have a habit of skipping over inconvenient facts and making statements that are not based in reality. Or at least in any reality that we are likely to face in this investment cycle.
The main thesis of his argument is accurate, provided that we stick to fixed-line networks.
"One key factor is that when telephony becomes a software application, it will live on the edges of a network. There will be no centralized control. Telephony development cycles are still very long. But their carriers' services are very much commodities, and there isn't much differentiation.
When we can change telephony to an application, we'll be able to change the economics of it. That will increase software innovation, new products, services, features. And that will be in the hand of small, nimble, software development companies. There will be higher competition, and the services will live on the Internet."
Hoever, he overstates his case. In this generation of telephony software, JAIN SLEE-based advanced intelligent networking, it takes less than a month to build and deploy an enterprise VPN. It takes less than one day to build a SMS marketing app, or location-based service; i.e. if you are watching Euro 2004 / the Yankees etc live from their stadium then you can get free calls over such-and-such network. These services are available today with some mobile providers in Europe, none in the US (albeit one fixed-line provider could if it had a marketing department worthy of the name,) and increasingly across Asia. Becasue the mobile operator is capable of gathering information from its network they are able to provide considerably more intelligence in an application.
The Internet is the ultimate stupid network. Client-side software cannot completely replace IN and that "information from the network is needed to provide new applications. And its the new applications that are supposed to pay for giving voice (still the killer app) away for free. Without which Skype and the like remain disruptive tecchnologies and not disruptive business models. I continue to believe that network ownership provides the information that is required to provide really innovative applications.
The article goes down hill a little after that:
"There will also be increased robustness. If you have a switch go down or a gatekeeper, that's not a problem to the end user. They can go to the Internet and find another route of communication. That will not be a problem for a decentralized network."
Unless of course the switch / node etc happens to be the one to which you are connected. The quality of service difference between my ISP and my mobile provider is the difference in call completion between 80% (ISP) and mid-90's (Vimpelcom). Move that quality differential to Europe where Vodafone et al really does buy equipment with 99.999% relaibility and any piece of network software has to have the same reliability. He also continues to believe that existing networks are centralized - they are not as decentralized as the Internet - but intelligence is increasingly at the edge and controlled by the same software of which he talks.
He goes on to make some good points about the commoditization of voice. Which as an overall point even the FCC gets. However, to Skype, voice is just another form of data, albeit one that the "higher quality" Internet can cope with, whereas video is, as yet, not enterprise standard. I suspect his emphasis on the death of voice is poorly masked marketing. As is the plea not to be regulated. VoIP should not be regulated, not because its not a monopoly. His desire not to be regulated is because Skype, and others, do not want to have to guarantee connections for emergency calls. It's business model precludes it from taking responsibility, but it also won't take responsibility becasue their QoS is not good enough.
My bet stays with the cable companies, the telco's that are willing to innovate quickly and Vonage - in that order. And that's before we start talking about Skype security issues.
23 June 2004
Pitch Me This
From Brad Feld on what questions a pitch to a VC / me should include and why PowerPoint is so badly used. Feld Thoughts: The Torturous World of Powerpoint.
Please, please, please if you are pitching read this first.
22 June 2004
Stock Options
A leader in the FT of 21 June on the cash flow impact of options. The title Will reform pull the plug on technology profits? (requires subscription) might give you a hint as to the writers initial leanings.
The net transfer of wealth diagrams at the bottom of the page are instructive. The article suggests that the furore over options is a back lash against the expose of how much value is being transferred from owners to employees. Over-stated I would imagine. A buy-side analyst worth his pay packet will already have factored in the dilutive/cash-flow impact of stock options. The greater issue is their ability to align interests all the time, not just when things are going well. Not being particularly well versed in motivations in large companies, my comments will be limited to start-ups (though they are inherently the same for people who value their work rather than their ability to climb the corporate ladder.)
When do start-up founders / employees worry about stock options?
a. When things are going well
b. The day they join
c. Every new financing round
When do start-up founders / employees worry about cash remuneration?
The rest of the time.
In particular stock options have almost no impact on employee behaviour when life gets difficult (sweat equity yes, options no.) As the article points out there is a growing feeling that options are a poor way to incentivize employees.
Not that I am trying to do away with options altogether. Better a stock option than cash, especially when the cash is limited. But lets not pretend that a talented sales guy is tied to the company (aligns his interest with yours) through stock options. Not being seen to fail is a better incentive.
Which leads to the follow on question. With what do you replace stock options? Maybe like democracy they are the worst system we have; except for all the others.
RSS and email
A good post here from Many-to-Many on ID and push versus pull communication models. Because I am looking at a deal that crosses in to this space (P2P information updating; this time push versus pull) the post touches upon a number of the areas that I think about.
I think that both Ross and I exist outside the big company way of doing things ("behind the firewall) and therefore think about email in a different way from an IBM'er. Michael Sippey comment makes the point better than I can. He concludes; "We�?re doomed to a life of infoglut, push or pull!"
Maybe the question we need to be asking is not trusted versus untrusted, push versus pull; but restoring quality of information. Is it really better if a meeting note is posted to a corporate blog-site or mailed to the everyone who might want to know about this. The same information has different meanings to different people. Since I started pondering corporate information networks I cannot count the number of times that I have been told that the seemingly useless dissemination of information (cc; all) has resulted in a bad decision not being made byforcingg someone to turn up to a meeting with additional information.
Whether the information is pushed or pulled matters not. We have to read an enormous amount and discard 99% of it so as not to miss something.
With one of our companies (a $5mn+ 2nd year start-up) they are blogging the softer elements of sales/marketing meetings. I receive the RSS feed more as an experiment in communication than trying to play a role in product marketing. The writers are all "trusted" emailers and the VP sales, a founder and board member, will regularly email me as well. He'll get in to my inbox whether he pushes or I pull. However, I rarely get informational email from the company, instead I get actionable email. I pay more attention to the actionable email when that has to be dealt with because they want me to pay attention. And when I set aside time to be informed I get more out of that. Better quality information.
You could argue that if I managed my time better I would achieve the same purpose.
07 June 2004
More On Mobile
Earlier today I had a mini-rant on the US not getting mobile services then via Om Malik comes this super rant from Russell Beattie Where's the Mobility? It took me a while to get through the comments so I have not had a chance to get the rest of his blog but I agree with the theme of what he says if not all the content.
First of all the means of communication is (relatively) unimportant. There are great things to be said for CDMA2000 versus W-CDMA v's WiFI, WiMax and on and on. In short there are inherently better ways of delivering bandwidth to the place and time that it is required; some suffer from poor economics others from integration issues, others still from pure stupidity by carriers. However, the issue is not the means of connectivity but the services that can be provided by connectivity. Just because a person's connectivity is limited to a desk top PC does not reduce the communication services that he can access via SIP (to his machine) and via SS7 to other communications devices.
It is the services that matter; these used to be called apps. To build them quickly and to utilize all the services that may be required to make them easy to deploy and easy to market you rapidly move in to the great convergence that is rarely covered; networks and IT. Some quick definitions; what do I mean by services? Parlay does a pretty good job of defining them but here they are anyway;
Generic Call Control
User Interaction
Mobility
Terminal Capabilities
Data Session Control
Generic Messaging
Connectivity
Account Management
Charging
PAM
Policy Management
A mobile operator looking to build an app on a 2.5 - 3G network needs to use some or all of these capabilities in different mixes depending on the nature of the service; a PAM app requires PAM, location, terminal capabilities, call control, charging. A video call requires call control, charging and data session control. Just think of the charging capabilities required - do you charge per mb, or for the type of the call at the time of day? Imagine if a filewas transferred during a video call - how would that be charged. Ask a Bell-head what chance of developing these services in an AIN environment. And yet as I mildly ranted earlier US operators are building services using stovepipe solutions that don't allow these services to be easily offered and easily changed.
From hosted-PBX to VoIP services over any network the convergence of networks and IT (as well as object oriented programming) has fundamentally changed the way that services can be provided over networks of any kind.
I would be remiss not to acknowledge that there are issues, substantial issues, in provisioning data for different devices; securing enterprise data; marketing the need to enterprises and on and on. However, it strikes me that these are implementation issues not technology issues.
So I conclude its not just mobility, its mostly mobility but its about services over any network.
Venture Over Funding
A great post here from Bill Burnham via Fred's A VC's blog on massive overfunding in the mobile application space.
I am not going to add to the comments on over-funding of hot companies; but actually rubbish the technology and then take a poke at technology acquisition. Seven is a great example of a stove-pipe solution. Great if you want to add just the ability to send and receive mobile email, but once a network operator wants to add other services / applications and charging capabilities with slightly greater sophistication than $x per mb, or per email then the system integrators get to rub their hands and put their hands back in to the cookie jar. All these cool apps, are just that apps. They aren't technologically advanced, they aren't future proof and they are difficult to integrate.
A semi-literate Java programmer could replicate Seven's technology in about a week using this generation open standard; if you don't believe me go to the Parlay org's website or Sun Microsystems JAIN (Java for advanced intelligent networks) JSLEE websites and think about how much more these two technologies can offer than Seven.
So why has Seven raised a chunk and the ISV's that form Parlay and JAIN / JSLEE next to nothing. Superior marketing may have something to do with it but there is also a trend in the US to keep on acquiring stove-pipe solutions - and then complain that they don't do the job advertised. It has been suggested that as US carriers, in particular, have cut back on R&D they have lost the ability to spot technical bullshit in the marketing blurb.
Somewhere between the US super-charged attitude and the European ultra-cautious approach would make sense for everyone.
01 June 2004
Energy Conservation
Flipping marvellous post from Jeff Nolan on the downside of depending upon gas guzzlers for your means of transportation Dependent on Gas. Not exactly SAP stuff but isn't that the point anyway. Anyway I am sure that he will be delighted to hear that I support one of the main tenants of his piece. Namely that electricty driven motors are the most obvious solution; provided that I remember the physics that I was once taught. If we had finished capital raising I would have backed a very smart brushed-electric motor. Instead its got Russian money and risks heading to oblivion.
Just got to find a way to create cheap electricity!! That will do for the next challenge.
RAISING CAPITAL
I am on the road raising capital for our next fund � DFJ Nexus. As an affiliate of DFJ we are targeting globally applicable Russian technology. This is now my third time doing this; cannot say that it gets any better but I get the feeling that this may be a sweet spot in the VC capital raising cycle. Yes LP�s are focused on performance, terms (transparency) and fit. As an emerging manager targeting a truly novel space we should command attention. But this far up the value chain?
All that being said I truly hate the process. Skepticism, is high among the skills that I bring to the table as an early stage VC. LP�s, Gatekeepers and the like should not be listening to me because of my ability to pitch but my ability to be intelligently skeptical. We are all intelligent people but the rules are written in favor of snake oil merchants.
BTW � I am totally in favor of transparency. I would be willing to omit an LP if they did not understand the J-curve; not because they wanted to publish the figures.
TRAVEL
I am coming to the end of one month of travel. Which included 16 separate flights, 2 train journeys and 1 long car drive. Some of observations: US major carriers will go out of business. I have flown Jet Blue, South Western and ATA over the last few weeks. Jet Blue is the clear winner. In all of them the service was better than the established airlines, the prices were cheaper and we landed on time and they were FULL. My international travel on American Airlines was scandalous. It was low cost travel at high cost prices. The US and EU have to come to an agreement on open skies as soon as possible. However I assume that national carriers, which includes Delta, AA and United, control over landing slots will preclude this and leave us all subject to cartel pricing.
The winner however is rail journeys. I write this on board Eurostar from London to Brussels � not cheap but comfortable. The same is true for the Acela (?) from DC to NY. Travel, waiting, check-in (try travelling around the US with an Uzbek, Ukrainian and Turkmen visa pasted in your passport � more security officials have had a close up of my feet than is good for an individual) are completed in 5 minutes. There is real space on the train and the wine is not bad. My next trip to the NE of the US will be done exclusively by train.
ECONOMIST RUSSIA SURVEY
It�s rare to openly praise journalists in a blog, much less those you have never met, albeit he taught my wife to salsa whilst I was traveling. However, I have to unreservedly recommend the Economist�s Russia survey to anyone even slightly interested in Russia.
Gideon Lichfield, the Economist�s Russia correspondent, has done a fantastic job of presenting a readable, accurate and balanced account of Russia today. In particular the section on the Silovki (the men of power; the ex-KGB) is as good an article as could be written by a reporter � as opposed to an interested commentator. In his Yahoo Group�s commentary he apologizes for his �inability to understand the place.� Actually his balanced, nuanced approach shows far greater understanding than his predecessor who was both a Slavophile and phobe, sometimes in the same sentence. Anyway if we understood the place what would we spend the weekend at the Dacha discussing?
I have criticisms of omission; which could be equally blamed on editors as on Gideon. The first is that he is absolutely correct to emphasize the paltry nature of real reform. That is reform that is actually implemented by the bureaucracy. But the nature of the reform deserves more praise. Without letting on how much tax I paid in 2003 the Government has agreed to pay back $6,000 of it as a result of me buying an apartment. The income tax rate is 13%. This is an intelligent policy to bring the populace into the �white� economy.
The second criticism relates to the one-sided nature of the sausage factory story. Small and medium-sized business is booming. Fredrik Ekman, my partner at Mint Capital founded Oriflame in the FSU. Oriflame is an Avon-style cosmetics business. Earlier this year it went public on the Stockholm Stock Exchange. Some 30% of its revenues and 40% of its net income is derived from the FSU, principally Russia. The numbers made good reading for its owners bank managers.
Mint�s investments in the local-economy are booming and our interaction with organized crime is zero. I have my reservations over Russia�s medium-term viability but if we can get out before Putin becomes a lame duck (which maybe a western term with no meaning in a non-liberal democracy) they will return substantially over our risked cost-of-capital.
23 May 2004
VOIP
An interesting piece entitled Broadband Wireless: BWIA VOIP = New Generation Phone Company from Steve Stroh. That's precisely what my provider in Moscow gives me and its the most reliable broadband I have used anywhere - and it's voice product is cheaper than Vonage's.
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