Markets

Remembering Windows 95

It's a slow time in the technology industry. Breakthrough innovations are few and far between: the iPod is almost four years old, and it's hard to point to anything very interesting since then. Because revenue growth has slowed, mergers and acquisitions have become the main order of business at such companies as Oracle and, for a time, HP. Venture capital is increasingly migrating to biotech, physical security, and other sectors only tangentially related to computing. The industry could use an injection of energy, activity, and not least important, revenue.

Given this state of things, everyone is watching Microsoft, which is preparing to launch a new operating system next year. Last month, merely changing the name from code (Longhorn) to product (Vista) devoured a lot of attention, and more recently a stripped-down version of the product shipped to beta testers. The product has been a long time in coming, and the scope has been managed downward in several respects. Nevertheless, both Microsoft and the industry more generally see Vista as a potential jump-start very much in the same category as Windows 95 ten years ago. Because Vista represents the first opportunity in over ten years to begin with a "clean sheet of paper," unlike Windows 3.1, 98, ME, and 2000/XP, Bill Gates has repeatedly linked the two products in public.

Before looking at whether that association is warranted, it's worth remembering just what Windows 95 brought to market. In 1994, loading a browser onto Windows could be complicated by the operating system's lack of Internet Protocol support. DOS prompts were very much a day-to-day reality. File names were limited to eight letters, and CD-ROM support was spotty. E-mail was used only by fringe populations rather than being nearly universal. Adding hardware was more difficult than it needed to be, multitasking was nearly impossible for both processing and user interface reasons, and multimedia computing was, again, the province of only a small subset of users.

Windows 95 changed all of that. Even before Gates' famous "Pearl Harbor" speech helped turn Microsoft into an Internet-aware company, Windows 95 made Internet connection, through both browser and e-mail, a mass phenomenon. Multimedia, too, became an everyday event with better hardware support (including CD-ROM drivers). Overall usability, despite the initial confusion at using a "Start" button to shut down a machine, was enhanced by deeper camouflaging of the command-line layer, longer file names, and plug-and-play peripheral support. Finally, the operating system kept pace with Intel's chip performance and supported more realistic instances of multitasking.

The public responded. In the quarters immediately following the launch, retail sales of Windows 95 software soared, augmenting a strong increase in OEM sales of pre-loaded operating systems. Responding positively to improved networking support and promises of enhanced manageability, corporate IT organizations spent at record levels: Microsoft's operating systems revenues jumped from $1.5 billion in fiscal 1994 to $4.1 billion only two years later.

What might we deduce about the prospects for Vista based on the Windows 95 experience? First, it's hard to see a parallel burst of initial interest, with or without a Rolling Stones commercial. According to Microsoft, the benefits of Vista fall under five general headings:

-Reliability
-Security
-Deployment (for organizations managing large rollouts)
-Performance (including better power management and faster boot up)
-Management

These categories of improvements are clearly aimed at corporate buyers rather than individuals. Most of the things a consumer-grade user will see - including better desktop graphics, and RSS support within Internet Explorer - already come standard in Mac OS X. Backward compatibility will be substantial, to the point that many Vista improvements (including the IE browser) will be available as retrofits to Windows XP. These upgrades will also slow Vista adoption.

Here's another way of thinking about the comparison. In 1995, Microsoft turned the telephone network into an extension of the computer, or vice versa: between them AOL and Windows 95 made the Internet a household utility. In 2006, no parallel leap into an adjoining domain - think of home entertainment, specifically the television - will be supported. Bill Gates’ longstanding prediction about widespread adoption of a voice and speech interface to the PC will be addressed with Vista support, but even given a powerful standard processor configuration at its disposal, Vista still won't make masses of people retire their keyboards.

In short, Windows Vista looks like a solid product for corporate purchasers, but the lack of "gee-whiz" and "I've always wanted to be able to do that" desirability will prevent end-user excitement from reappearing the way it did ten years ago. An industry in search of the next big thing will have to keep looking.

--Dr. John Jordan
Founder, Still River Research

Posted by John Jordan at 12:53 PM | TrackBack

Catalyzing Europe's Technology Innovation Ecosystem

Over the past three weeks, I’ve been visiting with technology entrepreneurs in London, Paris, Madrid, and Geneva. These conversations have confirmed my belief that the technology development on the right side of the Atlantic is absolutely world class.

In fact, despite the constant refrain that Europe is “behind the U.S.,” I find that European-developed technology is quite contemporary with – and often exceeds – U.S. innovation. In certain markets – such as mobile content and services – the U.S. lags considerably behind much of the world.

Still, there is this perception among American investors and customers – and even among Europeans -- that Europe is lagging.

The perception is fueled in large measure by the lack of strong, recognizable global technology players to come out of Europe in the last 20 years. Today, when you list the great European technology brands, you can count them on the fingers of one hand: ARM from the UK. Business Objects and Gemplus in France. Nokia and Ericsson in Scandinavia. SAP in Germany. And this despite some €73 billion being spent on technology R&D throughout the European Union

So why -- with innovative engineering, significant public investment, world-class universities, a growing venture capital industry – has Europe not produce more great global companies?

The answers are not easy – and they do vary among Europe’s geographical and technical markets. But one thread is consistent: European countries, individually and collectively, do not have a cohesive ecosystem to support entrepreneurship and to move great, innovative ideas from conception to product reality. The parts are in place, but they are not working together effectively.

European entrepreneurs, for example, are a growing but still rare breed. Culturally, Europeans are risk adverse in their careers. Why take a chance on a startup venture when a public service job will pay you, if not exceptionally well, at least for the rest of your life? Besides, new ventures tend to spin out of large, established companies controlled by wealthy families or state interests. How can a small startup compete with that?

Contrast this cultural mindset with the United States, a country built on risk taking by the earliest settlers, explorers and prospectors. And whereas a failed venture in the U.S. is an opportunity to learn from mistakes, failure in a European venture is an indelible blemish on the record of the entrepreneur. So while hundreds of initiatives from the European Commission through local government outreach outline marked increases in technology growth, the initiatives themselves are thwarted by a cultural proclivity toward safer research positions inside large companies and public and private universities.

The entrepreneurial mindset is changing, albeit slowly, fueled in part by an emerging venture capital industry. Yet it is a mistake to closely associate European venture capital with U.S. venture capital. As an asset class, technology venture capital is some 10 to 20 years the junior to its counterpart in the United States. And because European venture investments have relatively fewer and smaller exit strategies to exercise, European venture is considerably more conservative and more selective than U.S. venture funds.

In the United States, early-stage companies are also supported by a network of service organizations. Lawyers, accountants, market strategists, communications specialists, strategic consultants, and a raft of others have deep experience in the specific needs of
early-stage companies. Many of these firms work with startups in exchange for ownership share, dealing in the one currency most startups have in abundance – equity. In Europe, these service businesses have neither the depth of experience nor the flexibility to work with startups on an equity basis.

The fourth leg of the ecosystem is the early adopters of technology itself. In Europe, large customers tend to be conservative in their adoption of technology. They are hesitant to do business with all but the most established of companies. As the CEO of a French software company told me last week, “My customers are more likely to examine my P&L before they will look at my technology solution.”

U.S. companies, on the other hand, have adopted the practice of embracing technology as a competitive lever. And while they can be cautious about working with young companies, they will weigh the competitive reward against the risk an early-stage company may pose.

Without a robust ecosystem to support technology innovation, European innovation is a lot of great ideas – but not a lot of great products or great companies. Worse, Europe risks becoming a second world technology market after North America and China, as early stage ventures pass over Europe to do business with the larger markets to the East and West.

The good news, however, is that things are changing in Europe, and changing quickly! Where just a few years ago, I was told that an event such as Innovate!Europe could not happen because the market is too fractured, today, I am told that it has to happen because the market is so fractured.

Indeed, that is Guidewire Group’s goal with Innovate!Europe – to bring together the pieces of the European technology innovation ecosystem and to act as a catalyst to encourage a unified and productive European marketplace. Innovate!Europe is a dialog among the actors who together can build a pan-European infrastructure to accelerate European innovation and product commercialization, and to build the next great European – even global – technology companies.

The ambitious goal of Innovate!Europe is – in a few years’ time – to require more than one hand to count Europe’s great global technology companies. In ten years or less, we ought to be able to name a dozen or more global technology brands grown from European soil.

This is not a simple task, and it cannot be achieved by simple conversations. Europe must address challenging questions and build an agenda to move forward together to create a great European Technology Innovation Ecosystem.

Posted by Guidewire Group at 11:08 PM | TrackBack

The State of the European Innovation Ecosystem

Conventional wisdom says that Europe’s technology markets are far too fractured to support a one-Europe competitive ecosystem of technology innovation and product development. Yet this is exactly the challenge that Europe’s technology investors, entrepreneurs, public sector officials, ITC executives, and early adopter customers must demand from one another.

Indeed, while the conventionally wise may have held firm to this belief in the past, the wisdom is in dire need of rethinking if European technology innovators are to compete on a global stage and European businesses are to remain competitive in global markets.

I tested this theory as I met with investors, startups, service providers, and journalists around Paris and London last week. No one doubted the premise.

“There is no point in one market, if it isn’t really one market,” said Fiona Vickers, an executive recruiter for Highland Partners and a founder of the exclusive business networking organization “The Chemistry” in London. “If Europe is going to be any kind of power [in the global technology market], we must come together. And if we do, Europe has the opportunity to be the leading power.”

Certainly, there are business barriers to creating a unified European technology ecosystem. Yet it seems that nations that have come together under a common currency should be able to find their way to mutually beneficial laws, regulation, and business practices to create an environment in which innovation flourishes.

The challenges could be overcome easily if they were “simply” business issues. Instead, centuries of history, culture and custom divide European countries as much as the Euro and the European Commission attempt to unite it. Europeans -- who travel along routes established by the Romans and live among medieval castles and cathedrals -- have very long memories, indeed. They are rightfully proud and fiercely protective of their heritages, their cultures, and their languages.

And those cultural differences set up very high barriers to business. Take, for example, the conversation I had with a French entrepreneur who has been building his startup entirely in the U.S. He told me, when I asked why he didn’t build the company in his homeland, that “it is too hard to sell in Europe.” Then he told me about a German customer who insisted that native-German speakers be assigned to provide customer services – and that customer service representatives be physically located near the customer’s site. “To roll out in Europe, we would have to place people in every country where we want to do business. That is too expensive. In the U.S., I have an office in Silicon Valley and another in Boston, maybe also in Chicago, and I am covered. It is much more efficient.”

And pity that poor German customer. By placing demand for local, native-German speaking sales and customer support, the customer effectively limits its technology choices only to those companies who are willing to comply with that demand. Surely some startups will do so, but many of the most innovative companies will not. They will seek out larger markets that can be effectively targeted with a few well-placed resources – markets such as the U.S. and China. And the German customer? He’s left without a technology lever to use for business advantage.

That said, after some eight years of Europe watching, it is clear to me that Europeans are eager to see things change. To a person, the people I talk to agree that the time is now to bring together a dialog that promotes a cross-border technology ecosystem in Europe.

In fact, in the most shocking admission, one French venture capitalist acknowledged that English would be the language of business in Europe. Coming from a Frenchman, that is some sign of change, indeed!

Posted by Guidewire Group at 06:03 PM | TrackBack

Where is Europe's Garage?

On a quiet tree-lined street in Palo Alto, California, you can stroll by the modest address where William Hewlett and David Packard worked together to start the company that is now known worldwide as HP. Indeed, the tiny garage at 367 Addison Avenue, designated by an historical marker as the ''birthplace of Silicon Valley,” is for many the symbol of innovation, invention, and entrepreneurship in the United States.

While Hewlett and Packard were not the first Silicon Valley entrepreneurs, they are no doubt the best known, in the U.S. and around the world. They have been followed by Andy Grove, Bill Gates, Steve Jobs, Scott McNealy, Larry Ellison, and countless other, lesser-known entrepreneurs. Today, it is not uncommon to refer to the early days of any technology company as “just two guys in a garage.”

As much as the garage on Addison Avenue represents entrepreneurship, however, it also represents an ecosystem that came alive to help these two men and those that followed build world-class companies. Along with Hewlett and Packard, names like Kleiner, Perkins, Wilson, Sonsini, Silicon Valley Bank, Regis McKenna, and hundreds of other investors, bankers, lawyers, and professionals that work with struggling startups to accelerate their march to success. This “Innovation Ecosystem” works together in the world’s richest IT marketplace to build the products and companies that drive the U.S. and, increasingly, the global economy forward.

This ecosystem is vital to any technology market, and as we look to Europe, we must ask: “Where is the garage?” “Where is the ecosystem?” Indeed, Europe’s research parks, universities, and institutions are ripe with innovation. Yet the ecosystem which surrounds the development, launch and commercialization of innovative technology products is highly fragmented across Europe.

This is the innovation challenge for Europe in the first decade of the twenty-first century, and why Guidewire Group is hosting Innovate!Europe. Innovate!Europe is the first executive-level conference focused exclusively on highlighting, supporting, and celebrating European-originated technology innovation, and uniting an ecosystem to transform technology innovation and entrepreneurship in Europe. We invite you to join us in Zaragoza, Spain, June 13 – 15, 2005 to take your place in this ecosystem of innovation. To learn more, visit http://www.innovate-events.com.

While many suggest that a pan-European technology market cannot be created from the fractured collection of country markets, we believe that a pan-European tech market must be created in order to build a strong innovation center -- in distinct European countries and across European country borders. Failure to bridge markets into a European technology powerhouse will stifle European economies in an increasingly global technology market. Without a large, attractive market base in Europe, technology companies in North American and Asia will bypass European sectors and look to one another as global technology trade partners, focusing on the large, and by comparison homogeneous, markets that each region offers the other.

Posted by Guidewire Group at 01:19 PM | TrackBack

The DEMO@15! Opening Remarks

Welcome to DEMO@15! Fifteen years! It’s almost hard to believe. . .

In that time, we’ve produced twenty DEMO and DEMOmobile Conferences. In fact, this is the21st DEMO event in 15 years. Over the years, nearly fifteen hundred products have been introduced on the DEMO Stage.

DEMO has tremendous reach, and tremendous staying power –through good economic times and terrible ones – because of the great community that has grown up around this event. DEMO really is about the people, and, of course, it is about the products -- products that become the lens through which we get a better glimpse into the trends and ideas that will shape the technology market in the coming months.

Long before these 73 companies came together in the DEMO Class of 2005, the DEMO marketing team was talking about “technology in Bloom.” That idea became the central theme of the marketing. And I have to confess that while I liked the artwork, the colors, and the design, I really didn’t pay close attention to the campaign. I was busy narrowing a field of some 450 companies to 160 finalist, and then down to the 73 that are at DEMO@15!

I’ve often said that in planning DEMO, I don’t begin with an concept of the market and find products to fit it. Rather, I find the best companies and suss out the market trends those products reveal and amplify.

So there is some serendipity in the fact that the 73 products and companies -- in the longer context of the past 15 years – speak to this idea of “technology in bloom.” You see, if there is a unifying idea among these extremely diverse products, it is that of fruition and growth. Whether in the consumer segment or the enterprise market, these products speak to fulfillment of long-held promises.

Think back to the very first DEMO in 1991. Howard Elias, one of our innovator award winners – introduced the very first integrated multimedia PC. Two vendors were showing the PC as a platform for television. These were the harbingers of the digital media revolution. Fifteen years later, a half-dozen companies are here demonstrating that digital media is a powerful, everyday reality.

DEMO 94 was host to a shootout between Novell and Lotus over the desktop application that was then called Groupware. Today, collaboration is simple and accessible, and a part of dozens of applications, from collaborative blogs and wikis to business instant messaging.

Throughout the mid 90s, DEMO attendees saw the first digital cameras and photo editing software. Among our most memorable onstage demos was Kai Kraus’s demo of the photo morphing software called Soap. Now, digital cameras are everywhere, including our mobile phones, and we have companies here who are continue to push the bounds of digital photography.

In 1996, DEMO showed early work in Voice over IP. At DEMO, you’ll see companies that have embraced VoIP. They have tackled the hard problems of messaging and are bringing new sanity to business and consumer telephony.

At DEMO 97, a little company called Hot Office introduced what was arguably the first ASP software. A few attendees that year thought accessing server based software through a browser was a ridiculous idea. A few years later, we struggled to define .NET and Web services and to show meaningful examples of these then-new ideas at work. This week, service-based software is almost a given and Web services are opening new opportunities for businesses of all sizes, but especially smaller enterprises. Delivering enterprise-class functionality at small business prices is leveling the playing field of business in a manner that could profoundly affect how work is organized in the years ahead.

At DEMOmobile 99, Atheros unveiled its WiFi chipset. Two companies at DEMO are advancing the state of the art in WiFi connectivity. As importantly, the ubiquity of WiFi is having a profound affect on the consumer technology experience. Supported by this wireless networking technology and others, long-envisioned ideas around the complex problem of home monitoring and control are a simple reality, ready to implement now.

These are just a few of many examples where the seeds of technologies, planted across the years, that are coming to fruition in the products and services being launched here this week.

But make no mistake: these are not merely iterative products built on old ideas. Certainly, they are evidence that the personal technology market has reached a level of maturity and stability. Yet each of these products is innovative in its own right: innovative in creation of new technology, in the combining of components, in their approach to problems, and in the business models that take them to customers. The 73 products at DEMO this week are here because they move the market forward.

In fact, growth is clearly a theme in these products: The growth and maturity of the consumer market; a return to growth in the business market. Now to be clear: I’m not talking about hot-house growth spurred by artificial light and potent fertilizer – the conditions that allows for a spurt of energy without deep roots.

We are moving into a period of sustained growth because the tough soil and harsh conditions of the past four years have made today’s technology companies stronger. It is interesting to note that nearly half of the companies at DEMO this year – 32 to be precise -- are self- or angel-funded. These are companies that have accomplished the hard task of bringing products to market on the grit, passion and determination that they can create real change.

But no matter the size or funding, all of these companies know the challenges of innovating in a tough market and each has pushed through, developing great ideas, fueling new concepts, and creating real and sustainable value for their customers and themselves. These companies and these products are well-rooted for future success.

And these companies will play a role in the market growth that cuts across technology sectors – business and consumer. You’ve heard me talk before about the blending of work and personal lives. That line continues to blur, at least when it comes to technology. Today, business and consumer technology markets are tightly integrated.

Thre are so many entry points in the market that lead to the purchase of even more productivity enhancing, life-style enhancing products. And you know how quickly one purchase can lead to another, how products justified as a work expense are used as well for your personal enjoyment.

There are, simply put, great things to buy and they are offered in programs and packages and at prices that make them attractive to business and individual consumers. And they are coming to market at a time when consumers and IT Buyers are coming back to the table.

Indeed, I have said about this particular demonstrating class that it may well be the most expensive DEMO I have produced – expensive because there are a lot of products in this class that I simply have to have.

I invite you to visit the DEMO@15! Web site to learn more about these products.

Posted by Chris Shipley at 09:10 AM | Comments (0) | TrackBack