Microsoft misses the boat on web applications

walle boatEditor’s note: Chuck Dietrich is the chief executive of online presentation company SlideRocket, and previously served as general manager and vice president of mobile at He contributed this column to VentureBeat.

There is a lot of chatter over the impending arrival of Microsoft’s Office 2010. Delayed as it may be, it has prompted an enormous amount of discussion over the potential value of Office-type applications moving online. Some say it is a game changer and bound to happen, and some claim that most users are too entrenched in current computing behaviors to make significant and habitual change. No matter where you fall in the debate, there seems to be a baseline level of agreement that, at the very least, online access to your documents is a good thing.

The big question remains: Are you better off moving your entire business and document life online? Large companies like Google bet yes, and I not only agree with them, but believe there is much, much more to the online story than what Microsoft (or Google, for that matter) has to offer.

I spent the previous nine years at, and have seen first-hand how software-as-a-service and web-based applications can completely change an industry and displace the entrenched companies whose revenues rely on client based software.

Is Microsoft one of the “old” and in for a similar fate? Based on the current trajectory of innovation from new technologies, many signs point to yes.

Case in point

Let’s look at Microsoft’s Office 2010 due out later this year. Judging from the technical preview, Office 2010 will include Web-based versions of its popular desktop suite, including PowerPoint. Since a web-based PowerPoint is of particular importance to me, allow me to indulge in a bit of a deep-dive on this one.

This is the biggest thing to happen to PowerPoint in a long time. After all, the technology is more than 25-years-old — it is an application that allows for the creation of presentations. But, if you try to go beyond authoring and embrace the entire lifecycle of a presentation from creation to management, collaboration, delivery and measurement, PowerPoint fails.

Will Microsoft’s plans for the semi-web version of PowerPoint change this dramatically? It does not appear so. Essentially, what the feature does is create an FTP server in the cloud where users can upload and download PPT files. Granted, this is a step forward in what PowerPoint presentations can do, but there are so many more possibilities when you allow a presentation to become truly online content — a living, breathing document that allows a presenter and viewer to interact with and learn from each other.

Think about all the online tools that sales and marketing teams take for granted and can’t live without, such as collaboration, asset management, analytics and more. Match that up against the reality that presentations are second only to email in their importance to sales — they are the conversation opener and hopefully the deal closer, and 30 million of them are delivered each and every day — and it is easy to see Microsoft shortcomings.

Online documents and presentations need to be living, dynamic web content. This is the game changer. By simply posting files to the cloud like 2010 plans to do, Microsoft is again missing the boat by not embracing online architecture in its entirety.

So why is Microsoft only taking a small step toward a cloud-based presentation application? The crux of Microsoft’s problem is old habits. It is a problem of addiction to an out-of-date technology foundation. Beyond this, and perhaps most importantly, it’s a problem of Microsoft’s business model — the company continues to find it difficult to let go of up-front software sales and revenue and truly commit to the cloud based revenue stream. Customers expect web apps to be straightforward, but Office 2010 is not as simple as “log-in and get to work.” At the very least, it seems business users will need SharePoint for content management, likely Groove for collaboration, and even more Microsoft applications will be required for more advanced work flows.

Chuck headshotIt’s a long way from SaaS to $aa$

Microsoft’s revenue question is a big one — going from licenses to software-as-a-service has it’s complications and growing pains, especially for a well-established, license-based, public company. It isn’t just a short-term hit either. This has massive long-term ramifications that will require Microsoft to either make a giant leap all at once and feel a lot of pain, or take baby steps that make room for innovative and faster moving companies to overtake them.

SaaS is an all or nothing deal. You architect from the ground up for SaaS or you try unnatural acts to get client server software to look and feel like SaaS … and it fails.

This is definitely a fascinating space to be in at this moment in time, and I for one look forward to helping people find a new path to business success.

[top image:flickr/meddygarnet]

The 40/30/30 Rule Preps You for The Game of Life [Motivation]

When you've placed yourself physically where you need to be, kept at something past your initial doubts, and taken a risk at failing, you're running at 100 percent. Thinking of challenges that way—40/30/30—is a great motivational tool.

Photo by martinhoward.

Financial blogger Trent Hamm at The Simple Dollar breaks it down:

"What is the 40-30-30 rule? Simply put, it's an argument that when you prepare for anything in life, only 40% of the preparation is physical – the rest is mental. Thirty percent of preparation is technical skill and experience, and the second thirty percent is the willingness to take risks."

Trent's quick essay on how those ratios come into play, both day-to-day and on personal or career projects, launches off a post at The 99 Percent blog, and is worth reading if you find yourself not exactly hitting your marks at getting up, getting into something, and sticking with it when it doesn't quite seem practical.

Does risk stress you out and make you more anxious or do you find it motivating? What are some of your best tips for prepping for the challenges life throws at you? Talk about it in the comments.

Twitter: “Really Cool” Ads and Commercial Accounts Coming Soon [GigaOM]

Twitter COO Dick Costolo, speaking today on a panel at TechCrunch’s Real-Time CrunchUp event in San Francisco, shed some light into the micromessaging service’s revenue plans, promising that it will begin taking a cut of its partners’ advertising revenues “early next year.” Meanwhile, it will “foster mechanisms that allow partners to do more sophisticated things” with its APIs. Twitter also plans to offer commercial accounts that contain premium features like analytics dashboards and multiple authors, according to Costolo.

Achieving the seemingly impossible task of building up more hype about Twitter’s business model, Costolo promised Twitter’s advertising will be “fascinating,” “non-traditional” and “really cool.” Some partners already pay Twitter to use certain parts of its APIs, he added, though Seesmic CEO Loic Le Meur noted from the audience that his company does not.

Costolo emphasized that Twitter will continue to offer free access to users and partners, and that small startups who start building on Twitter’s APIs won’t be expected to pay up front.

Windows 7 Will Throw Down, But Not Just Yet [GigaOM]

The Windows 7 trumpets are blasting with gusto, with Steve Felice, president of the small and medium-sized business (SMB) division of Dell, claiming that Microsoft’s new operating system is fueling a surge in demand for PCs, according to Computerworld. “As soon as Oct. 22 hit, both our consumer business and our SMB business had a very healthy increase in demand,” Felice is quoted as saying. Meanwhile, David Coursey reports that with Vista on the sidelines and a well-reviewed new OS, Microsoft CEO Steve Ballmer “has a new ‘f’ word” to describe Windows: ‘Fantastic.’”

These comments fall in line with recent lofty predictions from Dell founder Michael Dell about Windows 7 driving the PC market forward. But is that, in fact, true? Moreover, is it not still too early to measure the operating system’s success?

At a Churchill Club event that I attended in Silicon Valley in October, Michael Dell said that many businesses were running Windows XP, which is eight years old, and that Windows 7 would usher in a major upgrade cycle. The fact that Dell just missed profit estimates amidst declining market share has nothing to do with Windows 7, of course, but there are some signs that a truly major upgrade cycle toward the OS hasn’t yet happened.

While research shows that Vista users are upgrading to Windows 7, keep in mind that Vista has only 30 percent market share after several years in the wild. Windows 7 is not replacing the huge installed base of Windows XP at anywhere near the rate that it’s replacing Vista.

The Wall Street Journal estimates that some 30-40 million copies of Windows 7 have sold since its October release, and most estimates put the operating system’s market share at about 4 percent. These numbers are nothing to shake a stick at, and I agree with Michael Dell that Windows 7 will spark a major upgrade cycle — eventually.

In the meantime, however, we are in a period of relative limbo in the PC buying cycle. Holiday shopping hasn’t taken off yet, and, for safety reasons, businesses tend to wait and watch whenever a brand-new version of Windows is released before implementing widespread adoption. Hardware incompatibilities, driver issues and many more things get resolved in an operating system’s first months, prompting many businesses to sit on the sidelines.

Historically, January has a much higher PC-buying profile than October and November do, and by that point holiday shopping numbers for Windows 7 will have started to roll in. Indeed, it will take a few months before we have truly accurate numbers for Windows 7 adoption, but I don’t doubt that it will eventually spark an upgrade cycle that — love or hate Microsoft — will benefit the tech industry.

Get Ready for the South Korean Smart Grid Firms [Earth2Tech]

Back when I was a broadband reporter for Red Herring magazine, I took a trip to Seoul and did the classic story on how South Korea kick-started its economy with government investment into blazing-fast broadband pipes that created its world-leading mobile and web industries. South Korea’s broadband buildout may hold some interesting lessons for the U.S. smart grid rollout, as I’ve noted before. But the country could also take a leading role in the smart grid market, with South Korean smart grid firms competing directly against the companies in Silicon Valley that are developing the next-generation of smart grid tools. According to a report today in Reuters, South Korea has picked eight consortiums to build a smart grid test bed in the country and South Korea is vying for “30 percent share of the global smart grid industry.”

In the same way (albeit on a smaller scale) that the South Korean government pumped money into developing broadband infrastructure, the government plans to invest 37 billion won (about $32 million) initially into building out the smart grid test-bed. The companies that will start building the smart grid infrastructure include a who’s-who of South Korean IT companies including mobile leaders SK Telecom and KT, consumer electronics and cell phone heavyweight LG, power companies KEPCO and GS Caltex, and Hyundai Heavy Industries. Taking the same approach as the island nation of Malta — isolating the buildout to a geographical area — the South Korean government plans to build the smart grid test bed on the island of Jeju, which is south of Seoul (see map above).

While the investment from the South Korean government isn’t huge at this point, I wouldn’t discount its goal to acquire a 30 percent share of the global market as unreachable. KT, SK Telecom, and LG have long histories of mobile and broadband innovation, and they tend to spend a lot of money on R&D, taking risks and rolling out products and services that are at the bleeding edge. That means some of the companies’ risky products can be duds — see SK Telecom’s failed mobile joint venture Helio, which was sold off to Virgin Mobile. But the approach seems to be working for many of them: LG is the third largest cell phone maker in terms of marketshare, solidly beating out American phone maker Motorola.

I haven’t researched the ins and outs of what types of smart grid products South Korean firms are working on, but the country’s leadership in the battery space could also give it a leg up in energy storage for the smart grid. Very few American firms have so far been able to compete with both South Korean and Japanese companies when it comes to battery technology.

Given the smart grid industry is just being developed, recently getting a boost from the $3.4 billion in U.S. stimulus funding, it’s not strictly about competition at this point. There’s some cooperative learning going on as well: Earlier this year the U.S. smart grid trade group the GridWise Alliance and the Korea Smart Grid Association (KGSA) teamed up to share intelligence about building out smart grid technology.

What was the big news that happened in your sector in Q3? Catch up with GigaOM Pro's, "Quarterly Wrap-ups."

Babelgum Shutters 2 European Offices [NewTeeVee]

Babelgum is closing down its Dublin headquarters and an office in Nice, according to a report in paidContent, moves that could signal the end is near for the online video site.

Babelgum says the cuts will allow it to streamline its business to “ensure continued growth.” The company told paidContent that it will continue to develop applications from other locations, spreading the operations from its shuttered offices across those in London, Milan and New York. But there are questions as to whether Babelgum will continue to develop technology or keep focusing on content investment.

Babelgum is backed by deep-pocketed billionaire investor Silvio Scaglia; he invested €50 million ($73 milllion) in the company in 2008, and has said he plans to spend €40- €60 million annually on the company over the next 2-3 years. But the recent cuts could mean he’s losing patience while waiting for a return on that initial investment.

The office closures come not long after a Babelgum executive detailed plans for an extensive — and expensive — plan to spend many millions of dollars obtaining and developing exclusive, original content. Then-executive vice president and chief revenue officer Michael Rosen told NewTeeVee in October that Babelgum had ramped up operations in the U.S. and that it had a “mandate to launch 10-15 content initiatives per month.” Rosen has reportedly since left the company, according to paidContent.

Babelgum isn’t the only web video aggregator trying to differentiate itself in a market dominated by YouTube, which still delivers about 40 percent of all online video streams in the U.S. Veoh, which was founded around the same time as Babelgum, laid off a number of employees earlier this year as it shifted its focus to developing its video compass technology from that of content. In the meantime others, like Dailymotion and Metacafe, have been trying to cash in on the growing consumption of online video.

Babelgum has also suffered from a lack of strategic focus. On the technology side, the company began as a P2P-based streaming provider, but shifted to browser-based Adobe Flash streaming earlier this year. Like Joost, which also launched as a P2P-based video provider, the slowness with which it moved from proprietary technology to streaming based on a widely adopted video platform may have also held it back from attracting wider user adoption.

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