About Jean-Louis Gassée

http://

Posts by Jean-Louis Gassée:

iPhone Applications: Apple people now believe in a Supreme Being

No, no, not Steve Jobs but an even higher entity smiling upon the company. As I hope to show, Apple’s hard work years ago is now about to pay huge unexpected dividends on the iPhone. When the iPhone first came out of Steve Jobs’ quasi-divine hands in January 2007, it was a hack, the result of clever handcrafting by Apple engineers, a crazed last-minute rush to the show deadline. As such, it lacked the basics of what we call a platform, an industry term of art – or BS. Here, a platform means a combination software, or hardware, or both on which software developers build applications. A platform requires documentation, where the building blocks are, what they do, how to use them. The platform also comes with tools, software to build and test the applications. Last but not least, a platform implies some stability, meaning it works often enough, and it’s predictable, it doesn’t take brutal turns that undo the work of developers.

Early 2007, the iPhone had none of these attributes. So, Steve resorted to proven industry maneuver: If you can’t fix it, feature it. No need for “native” (meaning running on the iPhone itself) applications. This is the New World of Web 2.0, bleated the propagandastaffel. Use the iPhone’s browser (the best in the business, it helped immensely) to run server-based applications. No need to download anything, centralized maintenance, easy updates… The faithful heretics would have none of that and a new game started. One week the hackers managed to break Apple’s barriers preventing the installation of native applications. A few days later Apple issued an update to the iPhone firmware that broke the hacks.

Let’s pause for a lemma, a building block in the story: from day one, the iPhone had something no competitor had: iTunes. Apple made having an iTunes account a sine qua non requirement for using an iPhone. For downloading songs and movies, just like its younger brother the iPod? That and more. With iTunes you backup your iPhone, you bring it back to “factory settings”, helpful if a hack “bricked” it, meaning if it became as lively of a brick, you install software updates, most of which defeated the impudent hacks.

Moving forward, the pressure was building: Apple made a very smart move by using a trimmed down version of OS X (the Mac’s software… platform) as the software engine for the iPhone. We know and love OS X, said the developers. Mr. Jobs, tear down that wall! It now looks like Google’s Android helped Dear Leader make up his mind. Rumors were mounting: RSN (Real Soon, Now), Google would announce a free, open-source platform for smartphones. Just as Steve smartly turned around and touted Intel processors after years of expounding the superior PowerPC architecture, on October 17th, 2007, he stood up and announced the SDK (Software Development Kit) for the iPhone. Availability by the end of February 2008.

The belief in Providence benignly smiling on Apple now comes in. In 2001, Apple sweated the servers, the legal agreements with publishers, the one-click payment system, the client software on PC and Mac. All this to create the still-unequaled iTunes experience. Now, one bright 2007 morning, they have an epiphany: Songs are zeroes and ones. One click and they land in a bin, a directory in the iPhone. But applications are also strings of zeroes and ones. If we put up iPhone applications in the iTunes store, they land in a different bin inside the iPhone but the one-click purchase and download is the same. Halleluiah! All the work to build the iTunes business now pays off for the applications. We must be The Chosen Ones. This is no small detail. Today, if you’re an independent software developer, writing good code is the easy part. The Evil S&M, Sales and Marketing, await you. Shelf space, physical or on the Web, is very expensive. Setting up download and payment systems isn’t for the faint of wallet either. With the iPhone, Apple removes (most of) these hurdles. All you have to do is write good code.

Picture the young developer still living in his mother’s basement, he sells 50,000 copies of his work for $10, the price of an iTunes album. Apple keeps $3, he gets $7. Times 50,000, he makes $350,000 and can now pay rent to his mother and buy her a car. (For perspective, the current forecast is for between 30 and 45 million iPhones sold by the end of 2009.) Picture also the competition. No one else has such a well-oiled, widely known system to add applications to a smartphone as Itunes. (Google says they will eventually offer one for Android.) This is a billion dollars business. Actually, $1.2 billion in 2009, according to Gene Munster a Piper Jaffray analyst. (For a healthy counterpoint, see the snarky comments on TechCrunch.) Regardless, the arrival of native applications on the iPhone is a big event, one made possible by an unintended – and rather amusing – consequence of the iTunes music distribution system. How will this be written up in books and Harvard Business School case studies? –JLG

Barack Obama is our man

From a distance, it must be hard to comprehend Silicon’s Valley position on the 2008 presidential election. Isn’t Stanford University, the heart of the region, a private, capitalistic university? Aren’t all rich investors and entrepreneurs siding with the party of money, Republicans? This is the capital of capital, the world-center of free enterprise, how can we support Tax & Spend Big Government Liberals? There are many answers to that, suspiciously too many, perhaps.

Let’s start with the Caviar Left posture: now that we’ve made our money, we tell others to make sacrifices. See Al Gore pontificating about carbon footprints while traveling by private jet and living in a huge energy-hungry mansion. A note in passing: Al is a partner in a Kleiner Perkins venture capital fund. John Doerr, one of Kleiner’s lead VC is a hyperactive fund raiser for Democrats. And while we note things in passing, see Colin Powell on the masthead as a Strategic Limited Partner.

A year ago, we were all for Hillary. Out with Bush and the litany of Iraq War, frightening deficit, torture, domestic spying, healthcare, education, infrastructure neglect. Not that we were in love with Hillary but, based on her and Bill’s track record, we knew she could be bought, we could do business with her. In a not so perverse way, we like Obama for the exact opposite reason: he can’t be bought. Hillary took money from big donors, from the lobbies our elected officials sold us to. Barack, on the other hand, handily outraised Hillary by an almost two to one margin, getting money from small donors, mostly on the Web. This gets us in what I think is the real reason we like Obama: He’s one of us. I’m not saying this because he’s been spotted using an iPhone. No, what we see is someone who connects with the connected generation. We see someone like us, venture investors and entrepreneurs, who holds an optimistic and meritocratic picture of the future. The latter adjective, meritocratic, got him in trouble. Used without enough discretion at a San Francisco meeting, it upset the more pessimistic market segment, the white lower middle class with a justifiably gloomy view of their prospects.

Then, while Hillary banked on her inevitability, Barack out-strategized, outraised, out-organized and outspoke her. And as inevitability switched sides, so did we. The really real reason came into play: visionary sheep that we are, we flocked to the winner. Hillary tried every dirty trick in the Clinton playbook to try and stop him. From raising prospects of Kennedy and Martin Luther King-like assassinations to bad-faith answers to questions about Obama’s own faith. What do you think of rumors that Obama is a Moslem? Instead of saying such libel had no place in a campaign for the highest office of the land, she replied she took him “at his own word he is a Christian”. The interviewer insisted: Come on, you know these rumors are false. “I take him at his own word.” Hillary had one more opportunity to rise above the gutter, to look presidential. Instead, the highly visible low blow, this was on 60 Minutes, strengthened her reputation for being Bill’s even less principled half.

I was half-kidding when I wrote above we back Obama because we like to back the winner. To us, he looks like a mestizo of JFK and MLK, minus the women and the pharmacy. To us, he looks like he will return the US to a position of exporting hope instead of exporting fear. That’s why we allow ourselves to hope we’ll make history together. In the end, how could we support the Clintons in their re-conquest of the White House, they don’t email, they don’t use Blackberries… Seriously, the BFD (Big Fundable Deal, in VC parlance) this coming week is the iPhone Applications Developers Conference in SFO. Watch this space next week. — JLG

Honesty at the D6 Schmooze fest

A word (or two, or three) of explanation is in order. D6 is a conference organized by the Walt Mossberg, the personal technology guru of the Wall Street Journal. Over the years, Walt’s finely tuned columns earned him the position of high tech kingmaker. From there, a conference was born for his subjects to meet once a year near San Diego, California.

Second, “schmooze” , evolved from its Yiddish origin to designate an social networking activity. Sorry, for our younger readers, we’re referring to the BFB (Before Facebook) version of networking. There, we smell each other’s pheromones, make small talk, pin decorations on each other’s chest, discreetly but feverishly check we’re not missing the next Big Idea or slipping down the pecking order.

Third, Honesty. At such an event? With speakers ranging from Bill Gates and Steve Ballmer to Michael Dell, Jeff Bewkes (TimeWarner’s CEO) and Kevin Martin (Chairman of the FCC), there risk of honesty is infinitesimal. And that’s part of the fun. In the audience you have entrepreneurs, corpocrats, journalists, bloggers, investment bankers and venture capitalists. On stage, Walt Mossberg and Kara Swisher, his associate, pretend to interview the magnate of the moment. The fun is trained bullshit artists in the audience watching fellow artists prevaricating on stage. We admire the high wire act or lament the lame obvious “misstatement”.

The Gates & Ballmer show was highly professional, a testament to their experience, focus and preparation. We were first treated to the mollifying bit of schmaltz, how the love story between the two of them started at Harvard. Thus supposedly oiled, we got into more scabrous topics: Vista and Yahoo! No problem, we sold a lot of Vista, it’s been massively well received and, as always, we look forward to make our product even better. And, you know what, here is a quick taste of the even more wonderful Windows 7, available in 18 months or so, with our new invention: Multi-touch. And the coda: We avoid monopolies, we love to compete. The connoisseurs in the room nodded their appreciation: impeccable, first-class chutzpah, not a single hairline crack in the dam. Moving to Yahoo! things got a little less polished, a whiteboard was brought out and Ballmer did his Scale number: We need Scale in advertising, we’re still talking to Yahoo! about ways to gain Scale while not buying the company. But we’ll gain Scale by ourselves anyway because we never give up, we keep coming back, and coming back and coming back. The pros thought this was protesting a little too much.

But, Yahoo’s Jerry Yang and Sue Decker, the next day, made the Micro-couple look like the consummate fabulists that they are. Jerry Yang went through a “he said – she said” recount of the aborted deal and was caught flat-footed when asked to define Yahoo’s business. His minder, Sued Decker, regurgitated the party line but the damage was done, we were looking at a future has-been.

Jeff Bezos, his usual happy smart self unfortunately couldn’t resist bullshitting the bullshitters and danced clumsily around his refusal to release Kindle statistics. Too bad because the rest of his act was pitch perfect. He is loved and respected for all the right reasons: vision, execution and culture of the great Amazon.

Mark Zuckerberg brought his new adult guardian with him, the terrifying Sheryl Sandberg. Terrifying? See here quasi-Hillary résumé here. Unfortunately, her professional supervision didn’t spare us a dozen Zuckerberg robotic repetitions of the We help people share information and share themselves. Possibly a good company but definitely bad BS.

I saved the best for last. There was one straight shooter: Rupert Murdoch, the head of News Corp, owner of MySpace, a flock of TV and newspaper properties such as the Times of London, the tabloid New York Post and… the Wall Street Journal. Walt and Kara were interviewing their new master. Everyone in the room was paying attention, wondering who was on the high wire, Murdoch or his hosts. The boss doesn’t miss a beat, didn’t worry about admitting misfires or slow progress in places like MySpace, changing his mind a bit about the strategy – not the goal, depose the New York Times – for the WSJ. The man was speaking honestly, holding forth about media, newspapers – not the news – in trouble, the economy, in recession. And then came the moment: Who caused his New York Post to endorse Obama? Me. What? You support Obama? Well, I need to meet him but if he his the way he looks like, I might. Not a word of Clinton. We knew we were in the presence of a 78 years-old man who had reached a position of power without fear. No wonder the next day 23andMe, the personal genomics company (co-founded by Ann Wojcicki, Sergey Brin’s wife) asked for a sample of Rupert… More artful use of the American-English language here. –JLG

User experience — Microsoft Buying Love

Silicon Valley VC-dom is having a grand time watching Microsoft. It always did, in fear some time, with hope the Bill Gates would buy ingenious or annoying startups at other moments, always with respect for the giant’s impact on the high-tech industry.

Lately, the respect has turned into puzzlement. Because of, to simplify, Google and Vista. Google has exposed Microsoft’s inability to have any significant impact on search, advertising and, more generally, Cloud computing.

Vista surprised everyone, myself included, by how immature and uninteresting it is. To the point where Ballmer had to call it a “work in progress” — this five years after the previous version, Windows XP. So immature that many large organizations have decided against upgrading and launched a campaign to “save XP”, to force Microsoft to keep it available indefinitely. The market reaction to the new 2007 version of Office has been similar: Why bother?

I’ll hasten to say Microsoft is still hugely profitable: just Office made it more money in one quarter than Google in an entire year. But, last week, puzzlement turned into something else: a mixture of incredulity and worry. Is this all Microsoft has to offer to take Google down from its number one position?

“Microsoft is going to pay us to search!” said many stories. Not quite. It’s more complicated. When I search for a Nikon lens in Microsoft’s new Live Search site, I get offers from selected merchants. When I buy, Microsoft gives me a small percentage of the purchase price, 2% to 4%. So, I set up the Microsoft rebate money to go to my PayPal account and off I go, looking for the Nikon 85 mm 1.4 lens of my dreams. (Don’t go to Livesearch.com, that’s another company, they’re probably holding out for a better offer from Redmond.) For a lens worth about $1,000, live.com gets me 6 stores with discounts in the 2% to 4% range. Out of curiosity, I try Goggle. In one instance, the same merchant, B&H, offers the same lens for less than on live.com, in an “imported” version. And when I do research on the other Microsoft-offered merchants I won’t name here, I see slightly lower prices. But… a bit of research shows the sellers are labeled as crooks or worse by dissatisfied customers. Google also reminds me Amazon offers the lens for $999, free two-day shipping and no doubt about integrity. I try another search, for an inexpensive camera this time. The results are similar: the lowest price is from a company with an ugly reputation (and recently sold to another entity). For $10 more, you buy from Amazon. No complication, no paying one price and getting the discount later from Microsoft.

Let’s review. Microsoft Live Search: not really cheaper, not safer, not simpler.
Speaking of safety, it is fair to point out that some of the merchants featured on the right-side of the Google results page are known bait-and-switch artists. Also, several “shopping engines” on the same list are honey traps working for the scammers just mentioned. The good news is two minutes of googling gets you plenty of data on these schemes. Caveat emptor.
The other news from Microsoft is Per Action pricing. The advertiser only pays if the customer buys, downloads, makes a reservation. Much better than Per Click pricing, no? No. Merchants continuously evolve statistics measuring the conversion of clicks into action. In other words: How many clicks to get an action, a purchase. As a result, they already bid the clicking business with the Per Action cost in mind.

Is this how Microsoft is going to lift themselves from their 9% share in search (vs. Google’s 60% and growing)? Probably not. That’s why they’re still angling for a deal with Yahoo! Buying their search business only this time.

For more, a niece piece by Henry Blodget in Silicon Alley Insider: From the VC perspective, here, it’s hard to avoid ambivalence. Yes, this is quality entertainment. But how does this lead us to healthy start-ups? Even a “less than Google” search engine will get you a long litany of Microsoft fumbling attempts at gaining a meaningful share of the on-line business. Do we have a Satan IV (an old sci-fi novella) questions? Will the “new Microsoft” of the on-line world be as domineering as the old one was in the PC business, draining much of the resources, much of the money out of the domain?
In plain(er) English: how much oxygen left after Goggle inspires? – JLG

Yahoo! Part II: Naked capitalism

This week’s complaint in the Valley: Carl Icahn is an ugly capitalist. He only bought 3.9% of Yahoo! to extract profit from his investment and, in the process, he’ll destroy the company. Really? Isn’t this is a little rich coming from people who make money from stock options? You will recall Microsoft walked away from their Yahoo! bid writing Jerry Yang a nasty “protesting too much” letter on their way out. Monday morning quarterbacking rose to a new pitch and shareholders who hoped to cash out launched lawsuits – SOP, Standard Operating Procedure. More surprising was Carl Icahn’s decision to accumulate Yahoo! shares and start a proxy fight. Here, proxy fight means putting a proposal before shareholders against the board of directors’ party line. In this case, Carl Icahn tells shareholders to elect his “slate” (list) of directors at the coming July 3rd meeting. His pitch: Management and directors at Yahoo! are idiots. Before Microsoft’s offer the stock traded below $20. Those incompetents could have sold to Microsoft for $33 or so. Let’s kick them out. Our newly elected board will re-open negotiations with Microsoft and we’ll make you money. There are problems with that line of thinking but they’re not what the whiners and ankle-biters think.

Yes, there are good reasons to fear Carl Icahn. He is relentless, he takes no prisoners, sweeps in, shakes the company down (greenmail) or up (restructuring). He extracts a profit from his investment and goes on to his next prey. A vulture capitalist, say his critics (I thought this was us VC): he’s taking advantage of troubled companies. But how did these corporations get in trouble? The causes are commonplace: resting on one’s laurels, complacent Boards of Directors, failure to adapt to new competition, to strategize or just plain incompetent top executives. All this causing shareholders to lose money. The latest Icahn raid got Ed Zander out of the CEO job at Motorola as, year after year, the company failed to keep its leadership position in an industry they invented: cell phones.

So, Icahn waltzes in and the worriers worry: He’s going to do irreparable damage to Yahoo! The thing is, it’s already done, that’s why the stock tanked before Terry Semel got fired, sorry, before he “stepped down”. In 1994, Yang and Filo founded Yahoo! and, for a brief moment, made it the shining star of the Web, the place to go as a user, the place to be as an engineer. But, quickly, Yang and Filo decided that the dirty task of managing was beneath their creative level. They hired Tim Koogle to make the trains run on time, it didn’t quite work, then Terry Semel from Hollywood because “it” was all about media, about content. Never mind technology. Yahoo! failed to grow its server farms, to sharpen its search, to make shopping competitive, to fire the ones who needed to be fired. Google came and we know what happened: they shed a cruel light on Yahoo’s directors and management. So, Carl Icahn is doing what he’s known to do: pounce on poorly run companies, clean up messes and make money for shareholders. Unpleasant but healthy. Predators keeping the ecosystem in shape.

But, will it work? I doubt it. First, Microsoft made up its mind. Too messy. What were we thinking? They won’t be back at the bargaining table. Second, it’s the technology and the techies, Carl. It’s not a bricks and mortar business where the accountants, the attorneys and the investment bankers can rely on a stable set of formulae to remodel the house. This, the Web, is the new New Frontier, we make laws as we move forward. People, the real assets, users as well as engineers move around at will, creating and destroying value much quicker than at an auto parts company or a shopping mall conglomerate. Ask Terry Semel and, actually, ask any outsider who came to the Valley to try and mend its ways. Conversely, ask any outsider, hello J6M, who tried to run Hollywood.

Carl Icahn could end up being right about the diagnosis: Yahoo! needs a new Board of Directors and a new management. And he could be the wrong doctor because the patient is unlike any other he’s treated so far. Unless he manages to force Yahoo! to re-open talks with Microsoft — which seems to be the case .– JLG

Why Venture Capitalists cry over the failed MicroHoo! Deal

The answer is simple: we love destruction. We don’t like order — unless we briefly own a monopoly, take it public or sell it to Cisco and recycle the money.

There was much to love in that Microsoft’s projected acquisition of Yahoo! The people, the cultures were incompatible, there were duplicate products, mail as an example, different advertising platforms and disparate server “farms”. Lovely.

Thanks to Microsoft’s unsolicited offer, techies were going to stream out of Yahoo! We were going to get a fresh supply of much-needed engineers for our start-ups.

You see, we love Google but they’ve been a pain in the wallet lately. How do you compete with three free meals a day, Google’s own buses transporting them to work and back, 20% time for their pet projects, on-site laundry and dry-cleaning pick-up and delivery, free munchies, soda, organic coffee and green tea everywhere on campus? The monstrous heap of amenities – I was going to forget massages and restricted stock, not riskier options – makes getting talent for our nascent companies much harder. Harder as in expensive. Expensive as in threat to our return on investment.

So, for a moment, we thought of Steve Ballmer as our benefactor. The Yahoo! acquisition closes, the engineer cashes her or his stock options after the prescribed interval and leaves.

This is a triple win.

First, the engineer pays off student loans or part of a mortgage. This results in a mind more open to risk, to joining an unproven company.

Second, the time the individual must “mark” before cashing out of the combined company is used to our benefit. Writing code for a new music widget site, a PowerPoint presentation to raise money, just thinking what to do next or schmoozing with a team in formation. This is all good traditional Silicon Valley use of OPM, Other People’s Money.

Third and last, building up a head of steam. Frustration begets creativity. Large company (let alone victim of an acquisition) politics creates negative energy. We invert it, we channel it towards building a shining (as in gold) proof of what the old fogies should have done if only they had listened.
Some say we shouldn’t despair. Wait one quarter or two, Yahoo’s performance will tank, so will the stock. In six months, Microsoft might get the company for ten billions less. And we still get a fresh supply of adequately frustrated engineers.

In the meantime, we’re watching a migration of execs from Google to Facebook. A COO, Sheryl Sandberg, a CFO, Gideon Yu, a PR exec, Elliot Schrage, to name but the most prominent. We’re not really interested in such individuals as their most prominent skills are corporate politics and PowerPoint. An exodus of engineers would be another topic, they know things we can’t see but care for. These execs, on the other hand, jump from a company with an immensely profitable business to one with a huge (70 million) user base but no earnings. Facebook is now raising money ($100 million) through debt because no investor wants to pony up more funds at the latest $15 billion valuation. Unlike Google, Facebook is still a private company, we can’t see the stock deals the transfuges are getting as a reward for their skill, experience, reputation and risk taking. Who knows, they might soon work for Microsoft. The company invested $240 million in Facebook in October 2007, getting 1.6% of the company, but it apparently declined to do more – for the time being. I guess we’ll have to wait a little more to see if Steve Ballmer gets us freshly motivated engineers out of Facebook. –JLG

Steve Ballmer not so gracious

Background: this Sunday May 4th Microsoft withdrew its offer to buy Yahoo for $44.6bn. Saturday, Microsoft CEO Steve Ballmer had invited the two co-founder of Yahoo, Jerry Yang and David Filo for a final discussion. In a last move, Ballmer sweetened his proposal by $5bn, to $33 a share. Yang and Filo demanded $37.

So, Microsoft walks away from a bad deal. Incompatible cultures, incompatible computer systems made this a terrible idea, to say nothing of probable delays due to regulatory reviews.
Steve Ballmer could have issued a terse letter: We withdraw our offer because we couldn’t agree on price. We’ll continue on our own path and wish you the best of successes. Steve Ballmer.
Instead, Steve Ballmer sends a long letter to Yahoo’s CEO, Jerry Yang. First mistake. Second, and much worse, this is a bitter, angry, accusatory letter. Accusations and veiled threats.

This raises a number of questions.

First. To quote Ballmer: “By failing to reach an agreement with us, you and your stockholders have left significant value on the table.” If this is true, trust shareholders and their attorneys, they’ll see it without Ballmer’s help and sue Yahoo’s Board of Directors. What does such a statement do for Microsoft shareholders or employees? It just makes their boss sound petulant, entitled. You should have seen we were your only salvation…

Second. Explaining at length (6 paragraphs) why a subcontracting some search and advertising to Google was a terrible idea. Again, is this rising graciously from a muddy playing field or is this trying to throw more mud at the adversary Ballmer couldn’t bring to heel?

Third. Accusing Yahoo! and, indirectly, Google of fomenting the creation of an advertising monopoly. How does this look coming from a repeat monopolist?

Fourth. Is Ballmer angry because, after the Vista fiasco, after failing to achieve any traction in Cloud Computing (ironically called Microsoft Live), or in Search, or in Advertising, his leadership could be questioned?

Fifth. Is Ballmer secretly relieved or is he so insulted by this defeat he’ll go an bomb another country?

What to expect? Perhaps Microsoft will turn to better targets: Intuit, Adobe, SAP… They’ll have to do something and Ballmer will have to explain what got to him going in and going out of this ill-conceived sortie. – JLG

Markitecture (take 2) — Google descends from the Cloud

Google’s markitecture isn’t so different from Microsoft’s. Just like the old champion, Google tells us we can have the best of both worlds: Everything in the Cloud, applications and data. What? You want to work off-line? No problem, we can do that too. Your data and your applications also on the desktop, re-connect and everything is in sync. Another all pros and non cons con.

Like any good preacher, Google doesn’t confuse what you say and what you do. It is well aware of the problem with the new religion: editing this column with Google Docs is great but what happens if I lose my connection? What happens if I’m on a plane? The solution is a browser extension, Google Gears.

Suddenly, they Cloud applications just work, connected or not. Two months ago, Google Reader, a free (and very good) blog reader gets a Gears update. My (large) set of blog subscriptions is now synched to my desktop and equally readable off-line or on-line. Just recently, we see Google Docs get its own Gears extension. As I start writing this on-line, the Cloud docs synch automatically to my desktop. I cut off my Net connection and I continue typing off-line. Back on-line, the two off- and on-line versions re-synch on their own. It seems to work as expected.

Microsoft’s Outlook isn’t that different. On the desktop, you have a local copy of your mail, calendar, address book. If you answer mail off-line, or change a calendar entry, everything will synch back at the next connection with the Exchange server. And, you don’t need Outlook. From any browser, you get to the Exchange server and take care of business. This sounds very much like the on-line/off-line modes extolled by Google.

Where are the differences?

Google: Yes, we have no choice. The truth is we must provide desktop software. We’ll call it a browser extension, but software running off-line on the desktop is what it is. The Desktop vs. Cloud dichotomy? A question of nuances.

Microsoft: Yes, we do on-line/off-line dual mode software. So, what prevents us from doing an on-line/off-line version of Office? Well… Three things, size, profits and culture. Once upon a time, we did software that was small, fast and inexpensive. Hard to believe when you see Vista and Office, but true. Our users grew in numbers, our software grew in size and now we are facing someone like us a quarter of century ago, only better financed than we were and with a better computer infrastructure (in English: large number of servers working well together) than we have.

The real debate isn’t between Desktop and Cloud. Everyone agrees the hybrid model is the future. But Microsoft is saddled with heavy desktop software that will be harder to hybridize than Google’s young on-line applications. To say nothing of business model transitions and corporate culture. –JLG

Microsoft mesh — Caught Between The Desktop And The Cloud, Part II: The Markitecture Solution

Last week’s column asked how you’d like to be Microsoft’s CEO, caught between the aging desktop and the emerging cloud. How do you grab a significant (Microsoft likes “dominant”) share of Cloud Computing. without cannibalizing your desktop business? Imagine shutting off the Divine Earnings Stream, the immense profits from desktop applications, Microsot Office, mostly before the Cloud applications profits kick in. Immense? In one quarter, Microsoft Office makes as much money as Google does in one year.

This week, we have the answer: Live Mesh.

We The People, are going to get the best of both worlds, the Desktop and the Cloud, without any disruption whatsoever. It is so beautiful, so obvious that I wonder: How come I didn’t think of it before? Actually, I did. I once was a corpocrat, we told stories like this all the time. Chief, no problem, here is how we get the best of both worlds. Same thing in politics, a French president campaigned on Change With Continuity. In the US, we have More Spending With Less Taxes.

The Theory Of Everything: Live Mesh synchronizes everything on all your devices — through the Cloud. An offer we can’t refuse. See, you keep using your PC, meaning Office the way you always did. But we, Microsoft, know you’ve been seduced by these sirens: smartphones, laptops, Macintosh and, soon, MID, Mobile Internet Devices (small pocketable computers not running Windows and using Cloud applications through non-Microsoft browsers). No need to feel guilty, my son, come back to our embrace — and don’t forget your wallet. Live Mesh connects all these devices and applications in a synchronized mesh. Here, synchronized means your data are kept identical, up-to-date, everywhere. Let’s say you have a PC at the office, a laptop and a smartphone. The PowerPoint presentation you write at the office will automagically propagate to your other devices. So, when you’re on the Eurostar going to London, you edit the same presentation on your laptop and the changes appear everywhere on your universe of devices and applications. And, while you’re at it, make sure to create different Meshes: one for your work and one for your family. This way, the pictures from your smartphones will propagate to your wife’s iMac, just like that. [Sorry, I've just been advised by Microsoft there is an update for Silverlight to be downloaded: Click Here. And, sorry again, "We Were Unable To Service That Request".... Just happened as I'm writing this on Google Docs.] The problem with this story? Too perfect. Who can disagree with keeping everything synchronized, consistent? In Valley argot: When it’s all pros and no cons, it’s a con! We’re being framed, the proposition is couched in an artfully arranged perspective leaving annoying details in the dark and no room for disagreement. Still in Valley-speak, we also call such discourse markitecture, architectural discussions for marketing purposes only. No need to worry about the Mere Matter Of Implementation. Which is where the ugly details lurk.

Examples: Do I want to replicate everything everywhere? Do all my company documents belong into my smartphone, or even my personal laptop? Does my home iTunes music and video library belong to my PC at the office? Away from industry conference slideware, pedestrian reality intrudes: the dream of seamless (another much abused word) synchronization becomes a complicated reality of segregation and permissions. Where can this file go and not go, who owns it, who can see it, modify it. Nothing new here, these are old, known computer systems problems without simplistic solutions. Things get even more complicated when what you really want isn’t synched copies of presentations but calendars, address books and more delicate data structures, think real-time business data for a mobile organization, running on incompatible systems. Ask the folks at RIM/Blackberry, it’s close to black magic — and a reason why Microsoft should buy a winner like RIM instead of a Yahoo!

And there is another “mere matter”, the matter of making money, the business model. At an industry conference this week, one of the Mesh evangelist, Amit Mital, was asked by a French journalist, Dominique Nora: What about the business model? In substance, the answer is it’s still very early to talk about money. Here, “it” refers to the availability of Live Mesh. In other words, we’re being conceptual here, folks, this is not a product announcement. Just an attempt to cloud the Cloud. Don’t worry about this Google stuff, keep using our desktop applications, we’ll protect and extend your investment as you use more and more connected devices.
Pure, undliluted markitecture, a clever attempt by Microsoft to finesse the Cloud vs. Desktop dilemma.

Next week, if nothing more pressing presents itself, we’ll examine some of the half-truths in Goggle’s theory of Cloud Computing. And, perhaps, my boss Mr. Filloux will let me take you through an exercise in kremlinology: commenting Ray Ozzie’s BS paragraph by paragraph. For fun, I used to do this for an industry analyst in Paris and it got me my second biggest career break. Who knows what this could lead to now. –JLG

Caught Between The Desktop And The Cloud

How would you like to be the head of Microsoft? Yesterday, you were the emperor of the desktop. Riding Moore’s Law, microprocessors doubling their power every 18 months, microcomputers became personal and made IBM’s mainframes passé. Microsoft Office, Windows on the desktop, Windows servers running Exchange became the industry standards. The resulting dominant position (some say monopoly) gave Microsoft unheard of pricing power and generated billions for shareholders, founders and employees. But, today, we have Cloud Computing. It is often characterized as all applications run on servers in the Cloud, the PC’s browser is merely the interface. Is this a pendulum swing back to the old mainframe and dumb terminals days? No. Is it the passing of Marc Andreesen’s 1996 prophecy: The browser is the operating system? We’re getting closer.

First step: delivering former desktop applications from a server. This is what Salesforce.com pioneered with the leading CRM application. Initially a struggle, Salesforce.com is now a brilliant success with many imitators. The genre is known as Software as a Service, Saas.

Second step: Google’s server farms. Combining technical brilliance, foresight and agile opportunism, Google now runs the largest sever farm on the planet, more than one million servers on three continents. Building on this infrastructure, on its engineers and on its brand, Google enters the Saas business buying applications such as Writely. We now have Google Docs. Essentially, this is Microsoft Office delivered from the cloud. Who cares which PC and which OS you run, all you need if Firefox (Linux, Mac or Windows) and a Net connection. I’m writing this column on Google Docs in Palo Alto, for my boss Mr. Filloux editing it in Paris.

Third step: working off-line. It’s nice to store data and run applications in the Cloud but what do you do when you’re on a plane? Google (and others) have thought about it and we see an off-line version of applications coming to us. Edit on-line, go off-line, write some more and re-sync with the server when you reconnect. The idea isn’t exactly new, a good sign. Consider Outlook/Entourage and Exchange in Cache Mode: you “own” a local version of the server data on your machine. You answer mail, edit your calendar locally. Then, you send/receive mail, re-sync you calendar when you reconnect.

Fourth step: offering the server farm to application developers. Again, not the newest of ideas: Amazon has been offering very good server services, AWS, Amazon Web Services. Small start-ups delight in using AWS to host their applications. Now, building again on its infrastructure, engineers and brand, Google tells entrepreneurs: Come and build your cloud on our cloud. You see the idea: getting it both ways, autonomy when off-line, full power, world reach when connected. I’m leaving many other examples and companies aside to go back to Microsoft. Today, Microsoft gets more than $300 (at retail) for a copy of Microsoft Office. That copy costs a few dollars to make. That’s pricing power. But what I called The Divine Earnings Stream is doomed to run dry.

Microsoft cannot and doesn’t ignore the threat but what can it do? In theory, they should do what Google does, deliver Office in Saas mode, cached locally and run form a server farm. In practice, they’re caught in three concentric prisons. First: servers. Windows Server works reasonably well for enterprise applications. But using it for a million servers farm is out of the question. Second: the Office code base. Big and heavy. Can it be adapted to an on-line/off-line Saas delivery model? Third: Wall Street. Free is a four-letter for Microsoft shareholders. How do you earnings trouble when converting from $300 per copy to a free or freemium Saas Office? This is what Microsoft is timidly testing with Albany. Not a Saas version yet, but Office by rental subscription. In the meantime, Salesforce.com and Google join forces, Google Apps now available with the leading CRM application. As for the question at the beginning: Bill Gates answered it by passing the baton to Steve Ballmer. –JLG