21
Jan

Microsoft debuts many new products while analysts hypothesize about impact on its revenue model

2-Color-Design-Hi-Res-100px-widthOn Wednesday, January 21, 2015, Microsoft published a webcast on its Windows blog. The reason for the webcast was the debut of a number of new products, each of which is scheduled for release later this year. Readers interested in the presentation can view the entire webcast, titled Windows 10: the Next Chapter (http://news NULL.microsoft NULL.com/windows10story/) via the link just provided.

But despite the freshness of the products presented by Terry Myerson, Joe Bellefiore, and Alex Kipman, not to mention the potential for business expansion (or shall I say evolution?) represented by the feature sets of each of these products, some representatives from the analyst community, who attended the event, in person, appeared to fixate on a pair of negative possibilities:

  1. Windows 10 as a free product (for anyone already owning devices with an authorized licensed copy of either Windows 8.1, or Windows 7, or even a Windows Phone with Windows Phone 8.1) threatening what Shira Ovide and Jeff Elder presented (with reference to Rick Sherlund of Nomura Securities) as “about 19% of Microsoft’s revenue in the year ended June 30”
  2. and an announcement of the company doubling down on its commitment to establish a substantial presence in markets for mobile hardware devices despite a diminished presence, which has shrunk, over the last few years, into what looks to be little more than 3%, respectively, of global consumption of smartphone and tablet devices (I gleaned this data from Ovide and Elder’s article in the Online Wall Street Journal, titled Microsoft Shows Off Windows 10 Software (http://www NULL.wsj NULL.com/articles/microsoft-unveils-more-of-windows-10-1421861492?mod=WSJ_hp_RightTopStories))

I am not disputing the relevance of the above points, but I think the potential negative impact of them has been overstated. My position is predicated on two points:

  1. The first of these is a set of APIs, which Alex Kipman presented. Developers can use these APIs to leverage the artificial intelligence/neural networks/cognition features built into Windows 10 to enable mass market consumption of services likewise only accessible via bigger machines
  2. The second is the Windows 10 Holographic system, including the computer and the Holo Studio development environment. Readers should not overlook the inclusion of JPL (Jet Propulsion Laboratory) in the presentation as a present consumer of the computer. With a very prominent consumer already in place, is it hard to extrapolate other organizations implementing this technology? Perhaps profit-making businesses in, for example, the aircraft manufacturing space?

I cannot provide more detail here about the potential of the APIs, beyond merely noting the extensive market interest in robotics, AI, and machine learning. The revenue potential represented by these two points may cover any revenue short fall from Microsoft’s announced decision to give away the Windows 10 OS for the first year after it is RTM sooner than analysts appear to be thinking.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2015 All Rights Reserved

14
Dec

Dell Implements an Acquisition Strategy to Fundamentally Transform Its Business Model

As we wrote in the prior post to this blog, “ready, fire aim” as a product development strategy should not be applied to fundamental transitions in a business. “Ready, fire, aim” is a method of entering markets, and, subsequently, effecting very rapid changes in product design. Doubtless, an approach like “ready, fire, aim” can be very effective for product development as it permits businesses to enter markets very early, albeit with some risk to brand should early version of products fail to meet minimum levels of satisfaction in a market.

The key objective that should drive a decision to implement “ready, fire, aim” is timing an entrance to a market. With particular regard to technology products and services, it is generally advantageous to enter markets early. Further, it is generally the case that early entrants to markets for technical solutions are harder to displace by competitors who arrive later. Therefore, “ready, fire, aim” is a sensible approach to the right set of opportunities.

Making fundamental changes to what you sell does not constitute a right opportunity to implement “ready, fire, aim”. On the contrary, it is critically important that this type of fundamental change be carefully thought through, with especial care to consider the negative ramifications of mistakes. We treated some of these points in the prior post to this blog. For the remainder of this post, we think it will be useful to present our view of what Dell is up to with its recent set of acquisitions, given its intention to transform its business. We do need to note that we do own shares of Dell stock; therefore, we have an interest in Dell succeeding at its strategy. The reader has now been warned.

In fact, Dell is looking to make the same type of fundamental change in its revenue model that we have presented in these recent posts to our blog, albeit at a much bigger scale. We are focused on emerging tech businesses. In contrast, Dell is a mature, publicly traded businesses with a major presence in the markets for hardware products like desktop computers, servers, networking devices, printers, backup solutions, and more.

Back in 2007 Dell publicized its intention to enter other markets, namely the solutions markets for enterprise business (we are using this label to include public sector organizations of comparable size, as well as comparable size organizations in the not for profit sectors) needs for software solutions, and, integrated solutions that include hardware and software components, together with the specialized expertise required to put all of these components together into a working system.

Over the last four years Dell has consistently executed on this strategy, albeit with a level of positive effect on its bottom line that has not meant with widespread approval from the investment community. It is not our intention in these posts to opine on why Dell has only marginally benefited from these acquisitions; rather, we make reference to Dell as an example of why a business should consider buying its way into a market, rather than trying to build a presence from ground up. We think Dell’s plan makes sense, and, further, constitutes a safer method of fundamentally transforming a business revenue model.

In the next post to this blog we will look at a typical problem area that can stymie a business looking to buy its way into a market — assimilation.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved