State Of My BLOG

Image via WikipediaOne of the things that makes writing this BLOG tough is balancing a lot of competing needs and interests.

I write here to help me keep my hand and head in the business and technology world and because I like to think try to understand stuff and write about it.

One thing that makes the whole operation tricky is I'd also like to work in that larger world some day and I worry sometimes about offending a company I might want to work for. I don't generally pull my punches, but there are times when I probably spend a bit too much time thinking about how to phrase something in a way that will be descriptive but innocuous. Taking that approach has a tendency to produce prose that is stilted and bland.

On the flip side, I don't want to be snarky. I know that sells but it doesn't feel right to me. A little humor or sarcasm every once in awhile is OK but I don't see any merit in being some sort of Internet bully.

I don't write for money or fame but I'd be lying if I said I didn't write for recognition. That's one of those basic human drives that we're all hard wired for.

Occasionally I've written about some very esoteric topics. I used to do this without a second thought but as my page views have increased over the past few months I'm starting to have second thoughts. Does anyone really want to hear my half baked ruminations on the future of high performance computing?

Now that I'm on a pretty good positive growth curve do I really want to keep stepping out of the box? Knowing who your audience is and catering to their needs, desires and interests isn't optional if you want to see continued growth.

Which leads to my big question right now. Do I want to see continued growth? I've set myself some fairly aggressive goals for this BLOG over the past few months in terms of readership and so far I've been able to meet them. I haven't set a new goal for this month and the main reason is that I want to figure out where I'm going with this thing. Setting a page view goal pretty much answers that question.

Finally there is the thought that some day I might be looking for a job or a potential business partner. Odds are good that this BLOG will be one of the things they'll examine while working their way through to a decision.  What if they read something that they consider to be sub par or disagree with? I should probably pretend that I wouldn't care but the truth is I would. I work with a great bunch of people and have excellent management but I don't want to be doing what I'm doing today for the rest of my professional life. The thought that I might lose an interesting and potentially life changing opportunity because I happen to do a poor job of explaining a point I'm making or express a controversial perspective is a sobering one.

But I believe life should be about taking risks. When you do that you risk failure. That's a little scary but I'm OK with it. The world is a constantly changing place and right now that is more true than it's ever been in my experience.

Change comes whether we like it or not. We're all running with the bulls; we can ignore this and hope we don't get gored or participate and work towards something better.

Dell No More

Image via Wikipedia
I originally wrote this about six months ago and then shelved it. I'm busy studying for a technical exam right now and decided to dust it off. My opinions on dell haven't changed at all in the intervening time. Once I dropped the matter Dell never got back to me. The case was either automatically closed with zero notice or sitting collecting virtual dust. The text below this paragraph is the previously unpublished post.

I''ll keep this short.  Barring a major change in the way they deal with service calls I'll never buy a Dell nor recommend that anyone else do so again. I've been less than impressed at times in the past when I contacted their support but had always managed to get a satisfactory resolution eventually.  This time I've come to the conclusion that I won't.  Both because they appear to be unwilling and I'm just not willing to invest any more of my time.

I've owned, used or bought in excess of two dozen Dell computers over the past fifteen years.  I've recommended that friends and family buy another half dozen or so in that time.  In the grand scheme of things I'm small potatoes to Dell but I've been a loyal customer for a long time and if they are treating me badly they are likely treating most people badly.

The facts, over the last few months my trusty Dell laptop has been showing increasing signs of trouble. It would crash, and when I rebooted I'd get a screen indicating it had over heated.  When I ran the diagnostics it would power itself off after some random amount of time without identifying the problem.

I dutifully opened a case with Dell and after a bit was able to get their support to dispatch parts to hopefully fix the problem.  This is where the problems began.  After a few days I got a call from one of their repair people; though to be clear, this person wasn't really a Dell employee.  He apparently works for a company that provides support for several different vendors including Dell.  I found this out when I called their support number and got asked for which of a handful of vendors my call was in regards to.  I was out of my office at the time of the call.  I received the voice mail within a couple of hours.  I called back at the number requested and ended up leaving a voice mail of my own.  I never received a call back.

To give a bit more background, I've been by turns either very busy at work with a big high pressure/time critical assignment or on vacation.  The first of those two facts has made it difficult for me to get home on short notice, even though I live very close to where I work.  Another fact is that I own another much smaller laptop, an Alienware M11X first generation that I've been using as a substitute.  Yes, the M11X is essentially a Dell product as well.  Which might explain why it powers itself off randomly while running on battery .  I'm going to have to put in a ticket for that soon.

Two weeks or so went by before I had a chance to get in contact with Dell again.  I was informed that they had tried to contact me numerous times (false) and that the parts had been returned and the incident closed.  After a bit of back and forth where they continued to insist that it was all my fault (great customer service that) they agreed to dispatch the parts again.  A few days later I got a call from a contracted Dell repair person.  We setup a time for the next morning for him to come to my home and do the repair.  Actually we setup a window.  I believe it was three hours.  Halfway through that window he called me to say he couldn't make it until late afternoon.  I'd already missed a couple of hours of work, something I couldn't really afford to do and I had commitments all afternoon.  We scheduled a window for the following afternoon.  I mistakenly heard that the window started at 2:30PM.  The tech thought it started at 2:00PM.  I arrived home at 2:20 and found a message on our answering machine.  The tech had arrived at 2:00, hung around for ten minutes and left.  He had also closed the ticket.  Yes, I was pissed but I'm smart enough to know that this sort of behavior is generally policy driven.  I don't know what Dell's contract with the company that provides repair support looks like but I suspect that there are clauses that encourage this kind of behavior. To be clear, it was the ticket closing part that pissed me off.

The tech and I had a brief conversation in which he suggested that I ask Dell's dispatch to just send a replacement laptop.  This sounded like an excellent idea to me, in part because I had suggested it to Dell after the first failed attempt. After a couple of weeks of arguing with Dell I'm convinced this is not going to happen. Their stance seems to be that it is all my fault that things have gone badly to date.

The laptop in question is nearly four years old.  The extended warranty is about to expire.  I can get a better laptop today for under $1000.   I already have a replacement built into my budget in the March 2011 time frame.   At this point I don't know which laptop I'll be buying then, but I know it won't be a Dell.

Apple iPhone/iPad/HDTV?

Image via WikipediaFollowing Apple in the press is always interesting. When you're the number one technology company in the world it's very hard to hide what you are doing but somehow Apple manages. They are scary good at it.

There are some leaks but the tricky and fun bit is figuring out which ones are credible. Right now the iPhone and iPad tend to be the two products that get the most press. Here's what I think is going to happen with these products over the next six months based on the various rumors that have been circulating and my own intuition.

For the iPhone I'm going with a September announcement and an October ship date. I don't think we'll see a 4G phone but we will see dual band CDMA/GSM, a slightly wider screen and a less boxy form factor. The iPhone 4 was just plain ugly to me. Softening the edges would get them back to a more aesthetically pleasing design. I also think the rumors of a narrower bezel and wider usable screen are credible. The Core A5 processor should be a given as well.

There has been some debate as to whether the next iPhone is going to be enough of an upgrade to be labeled the "iPhone 5". That is purely a marketing decision. I think they will call it the iPhone 5. There will be enough upgrades to justify that naming and after waiting a year and a half people are going to expect it to be a big upgrade even if it isn't.

I also think there is a better than decent chance we'll see Apple release a new iPhone in June of 2012 called something like the "iPhone 5G" that will have one or more flavors of LTE baked in and modest upgrades to the CPU and graphics but otherwise be pretty much identical to the previous generation.

On the iPad front there have been rumors of a late 2011 update. I don't think this is going to happen. The iPad 2 was a big upgrade over the original iPad and it hasn't been out that long. The minute Apple releases an iPad 3 the iPad 2 becomes passe. We're all conditioned to waiting a year or more for upgrades to Apples major product lines and expect to be able to enjoy having Apples best product in a particular category for a full twelve months. Relatively minor updates that don't impact the aesthetic aren't as big a deal because they are essentially invisible.

The iPad 3 will probably be announced in March of 2012. I'd expect it to be a bit thinner, have a much higher resolution display and sport an upgraded camera, GPU and quad core processor plus at least one other feature that nobody has thought of but everyone will want. Yeah, I'm not being very precise with that last prediction. With Apple half the fun is the surprise and it wouldn't be a surprise if somebody like me could figure stuff out five or six months in advance.

There have been persistent rumors that Apple is going to start releasing HDTV's. Other than being a consumer electronics item I don't see the appeal of going this route from Apple's perspective. We tend to keep our TV's for five years plus or until they break. Apple has primarily been selling products with a two to five year life cycle up until now. A lot of their business is built on driving people to buy new product every couple of years. They've arguably been able to accelerate that time table a bit but they haven't fundamentally changed the consumer dynamic in the product spaces they work in.

If Apple does get into the HDTV business I'd expect them to have their first failure in recent memory. The Apple TV product has only recently become a modest success after a major revision and big price drop. Maybe they learned something from that experience and have what it takes to make a run at the TV business but I have some serious doubts.

Related Articles:

• Apple will Launch the iPhone 5 in October, Not September (techie-buzz.com)
• What is the next Apple iPhone, 5 or 4S? (theinformativereport.com)

New Month/Brazil

Image via WikipediaThe past few months have been good ones for this BLOG. I've had steady growth page view wise and have been on a role posting wise, particularly this past month when I had twenty seven entries. I don't think I'm going to be able to maintain that pace. In fact this past weekend I went two days in a row without a new entry for the first time in awhile. I did have a couple of updates on my Guitar making BLOG though so I wasn't completely idle.

This month I want to make more time for guitar building which is going to impact my ability to post here. I think that's a better balance though and I want to keep exploring/learning about building acoustic guitars. I have a decent shop after several years of tools acquisition and just need to continue to build on my skill set and try new things. Right now I'm in the mode of learning how to create my own spin on the acoustic guitar so I'm experimenting a bit. That should continue to be fun and a bit frustrating as I occasionally stumble.

On a different tack, today is the second anniversary of my trip to Brazil. The trip was part of an elective I took while finishing up my MBA. I have seldom been as busy or sleep deprived as I was during the next seven days. I've also never been happier. It was an amazing trip from a learning perspective and not counting a brief stay in Canada the first time I'd been out of the US since coming here as a baby from the UK.

Brazil is an amazing country with both tremendous upside and big challenges. The beaches of Rio are every bit as beautiful as they look on TV and in the movies. Some day I'd like to go back but it's hard to believe it could ever be as good. The group of students, staff and faculty I went with all helped make the trip very special.

You haven't lived until you've gone to a Brazilian soccer game. American fans of sports can be enthusiastic but nothing you're likely to experience in the US will prepare you for the intensity of Brazilian soccer fans. A word to the wise, don't route for the visiting team. Oakland Raiders fans are easy going in comparison to what you could expect to experience in Brazil.

OK, time to prepare to greet the week.

Apple/Why 30% Is A Lot Of Money

Image via WikipediaI won't lie, finance was not my best subject area when I went back to school and earned my MBA. It looks like simple addition and subtraction but appearances are in fact VERY deceiving. Yesterday I threw the word margin around a lot. I know what the word margin means, but I'm a little unsure if it was the right word to use in that context. It probably would have been safer to insert the word "profit" in front of margin whenever I used it. having said that, on with the show...

I'm going to take a bit of time today to illustrate why 30% is a lot amount of money for Apple to be extracting from transactions that involve products with relatively high per unit costs to the companies who are selling them.

My examples will be based on what I know (or think I know) about the Martin guitar company and how their instruments are typically bought and sold.

The Martin Guitar company is rumored to sell guitars to their dealers at 50% of their published retail price. Since the 1960's knowledgeable buyers have expected and been able to get 40% off of the MSRP  if they shopped around a bit or knew of a dealer who was willing to honor that mark down.

Lets assume Martin has a guitar with an MSRP of $1000. They sell it to their dealers for

$500

Knowledgeable purchasers know that they can find a dealer who is willing to sell for 60% of the MSRP which would be

$600

In this case the dealer pockets $100 from this transaction. Note there are additional costs such as labor and warehousing but we're going to ignore them. $100 is 20% of the shop owners $500 investment. That's not a bad return, particularly if you can turn your inventory over quickly.

Now lets pretend that the guitar was sold via an iPad running a custom App that the dealer created. In that case the numbers would be as follows.

Dealer pays

$500

Buyer pays

$600

Apple gets 30%*$600 which would be

$180

Dealer gets

$600-$180

which equals

$420

of revenue on their $500 purchase. This is a net loss of 16% for the dealer. Clearly you couldn't stay in business based on that transaction.

Lets assume though that you can find a few customers who are willing to pay 75% of the MSRP. This is possible since 25% will seem like a decent discount to shoppers who are not familiar with how this market works.

In this case the guitar sells for

$750

Apple gets 30%*$750 which would be

$225

If we subtract Apple's $225 from the sale price...

$750-$225

would equal

$525

OK, the dealer made a profit, albeit a very small one at 5% ($25/$500). Meanwhile Apple pockets six times as much money and had zero skin in the game money wise. Not a bad racket at all. In the case where buyers are paying 60% Apple would get half the profits by taking just 5% of the transaction. As an aside, this is also why even a 1.5% transaction fee by credit cards can cause some companies distress. If you're profit margin is 3% a 1.5% charge is going to eat half your profits.

Lets put these two scenarios into a handy little table.

Profit @  |W/Apple |Direct
60% Retail|-16%    | 20%
75% Retail|  5%    | 50%

Inserting Apple into this equation is clearly not a win for the dealer under normal circumstances. If Apple has a big pool of potential customers who don't mind paying MSRP it might be though. In that case the picture looks pretty good for the dealer as they would make $350 on the sale of that $1000 MSRP guitar which would be a 70% profit margin. I'm not going to go through the math on that one but it should be fairly straight forward based on the examples above.

People who buy Apple products tend to be more affluent than average, but they also tend to be knowledgeable about how pricing works in the real world so if I were a dealer I wouldn't invest in an iOS app under the assumption I'd find a bunch of customers willing to pay retail or anything close to it.

As I said in my previous entry none of this is a surprise to Apple. The 30% isn't about collecting revenue in the case of this type of transaction. It's about eliminating their competition and creating an opportunity for Apple when they need to add some additional dollars to their bottom line. By creating this opportunity for themselves they are eliminating choice for their customers and creating a coercive relationship with both their customers and their potential competition/partners.

Related Articles:

• Guitar Heaven ... Confessions of a Martin Worshiper (judson2history.wordpress.com)
• Apple/Vendor Lock In/Not For Me (emkey1.blogspot.com)

Apple/Vendor Lock In/Not For Me

Image via WikipediaYesterday I explained why I don't own an iPhone. In the process of doing that I touched on something I want to explore a little bit more.

One of the reasons I cited was Apple's 30% tax on any purchases made by way of an application. If you're selling a magazine or other purely electronic piece of media and you own all the rights to your content that isn't necessarily a bad deal. This is because there are high fixed costs to producing the first copy of an electronic magazine but after that the incremental cost of selling another copy is nearly zero. Note, I'm not an expert on magazine publishing but the two times I sold an article I got a check up front and there was no additional per copy payment. So, if Apple provides  a way to put your product in front of millions of prospective new customers that 30% just might be a very attractive proposition. In cases like this I think Apple is being fair and reasonable as they are providing a potentially lucrative channel and want to be compensated for that.

The case for book publishers isn't quite as clear cut. They still have high fixed costs up front but in most cases they also have to pay royalties to the people who produced the work they are selling. I have no clue what a typical royalty on a book is but it's probably enough money that paying 30% of the gross sale price for a book to Apple is a bit of an unpleasant experience  having a viable alternative to Amazon probably makes that pill easier to swallow. Again, if Apple is charging 30% it's a reasonable deal.

Where we run into problems is when Apple tries to apply that % to companies like Amazon who are selling a wide variety of products including items that are not electronic in nature. Amazon's margin on products of that kind are small and are being squeezed as Amazon attempts to expand in a tough economy. This is easily proven by the fact that they had a 50+% revenue increase year over year in their most recent quarter but saw a drop in profits.

Amazon sells a lot of different things, including Apple products like the iPad. I very much doubt Apple is allowing Amazon a 30% margin on those items.

There was a time when 50% margins were common for retailers. Even before the advent of the world wide web and the consumer friendly increase in competition that it created average margins were in decline. Sam Walton built an empire with Wal-Mart and Sam's Club by squeezing margins down to 5% or less while still making a tidy profit.

So, clearly it's not feasible for companies like Amazon to pay 30% to Apple for most of the stuff they sell.

Obviously Apple isn't stupid. They know this. The fact that they are insisting on imposing this kind of fee tells me that they aren't actually expecting to collect much if any money in this case which means they have a different outcome in mind and it's not one I'm interested in being a part of.

One of the less clever things that most companies do at some point is to try to subtly or not so subtly lock us into using their products or services. Logically enough this is called "Vendor lock in". The reason I describe it as less than clever is that it's basically a coercive approach that works against the interests of a businesses customers. When you work against the interests of your customers those customers eventually get angry and frustrated. When that happens you're in trouble no matter how high you've built the walls around them. The only sustainable method to lock your customers in is to constantly please them. When you depend on any form of coercion you're building a dysfunctional and one sided relationship that will fail eventually.

Apple has established an impressive ecosystem with iTunes and the app store. They make boatloads of money off of their hardware but the hardware is just part of the picture. Apple also wants to sell us stuff. So far they've primarily sold us music and applications but you can be sure they'd like to sell more than just those items.

So, lets assume that Apple would like to sell us anything and everything like Amazon. They might brand such a venture the "iStore". Forcing Amazon and other similar companies out of the Apple ecosystem would reduce/eliminate competition for the iStore. In the short to mid term this would be great for Apple as they would benefit from not having to share their pool of customers for such purchases. They wouldn't even have to take advantage of their monopoly to charge higher prices. Just having 100% of the potential market increases their bottom line.

The long term problem with this approach is that consumers aren't stupid and when you start to depend on building walls around them they eventually become unhappy and look for ways to escape. I tend to be one of the first people out the door in this situation.

Apple used to be the plucky and smart underdog. This is changing. They are dominant in the Tablet space, control a substantial portion of the smart phone market and own the lions share of the revenues there and continue to see growth in their share of the PC market. This kind of success can be tricky for any company to maneuver. If you're publicly traded the problems only compound. Apple's financial performance over the past several years has been amazing and unprecedented. They are under an immense amount of pressure to continue to execute and grow. That kind of pressure can lead companies to do things that aren't always in their or their customers best long term interests. I think Apple's attempts to drive off competition and lock their customers in is an example of that scenario playing out.

All of which explains why I'm off the Apple bandwagon for now. I will not support a company that removes my ability to choose and uses their dominant position to strong arm their competition out of the picture. You win on innovation and quality or you don't win at all in my book.

Apple has consistently been a company that followed the high road in the past but it looks like they are starting to lose their way to me.

Related Articles:

• Apple's in-app-purchasing rules mean inconvenience for e-book buys (news.consumerreports.org)
• No iPhone For Me! (emkey1.blogspot.com)

No iPhone For Me!

Image by hobnogs via FlickrAnyone that has read more than a few of my previous posts will know that I'm a big fan of Apple and their products. My wife and I have owned several iPod's, an Apple TV, an iMac and a couple of iPad's over the years. There is one product I won't be buying and that's an iPhone. Actually, I won't be buying another iPad either. There are two factors that drove me to make this decision.

The first is the lack of a native Google Mail client. Yes, you can use Safari to look at your Gmail and it kind of works but it's not close to the full experience of a native client and that really bugs me. I don't care whether it's Apple or Google that is primarily responsible for this shortcoming.

It doesn't end with GMail either. Google has apparently taken a dim view on all things Apple since their Google voice App got rejected. I need my Google stuff and I'd be willing to consider an iPhone if it were all there. Since it isn't, the iPhone loses.

Actually it would still lose because of problem number two which is Apple's insistence that in app purchases must filter through them so they can take a sizable cut. I understand the business driver behind this but I don't like it at all. Charging anyone who wants to sell stuff through an Apple device 30% is theft in my book.

One of the reasons Apple is such an impressive company is that their margins are very high. This isn't true of companies like Amazon and Barnes & Noble who have very small margins on most products. When your margins are 10% you lose a lot of money selling something and paying Apple 30%. We're already seeing companies pull back from providing in app purchases because of this. This means choices are being eliminated and I'm a guy who likes to have choices.

There is an hope though. HTML5, while still not an official standard is gaining a lot of traction. The capabilities of HTML5 are making it possible to present users with a browser experience that is very similar to a dedicated application. "The Next Web" is an online magazine that shows what is already possible with HTML5 on the iPad. It offers a clean and simple interface that doesn't look like a traditional web site at all. What this means is that companies that can't or won't pay Apples exorbitant tax have an option. So in theory we users of Apple products won't lose in the longer term because of the Apple tax. I have to wonder though if Apple is going to take some sort of action against companies that bypass them in this fashion. I can see that happening based on some of Apples recent moves and I want no part of it.

Apple is a great company with great products but they are starting to lose their way a bit in terms of how they approach their customers and their partners. If this doesn't change I won't be buying any Apple products in the future.

Related Articles:

• Kobo preps HTML5 e-book app to get around Apple rules (electronista.com)
• Facebook using HTML5 to get around Apple, Google for mobile apps? (intomobile.com)