Category Archives: Blog

Dinosaur Down: IBM’s Q3 Earnings

Scene: Armonk, New York

The earnings release speaks for itself (love that typeface – they must still do press releases on a Selectric typewriter in the IBM museum), but a few comments:

A billion dollar (as in $1,000,000,000) miss on the top line. Everything in varying levels of freefall, led by the swan dive of the hardware business (Power Series down 38%!). After a decade of the consistency so prized by Wall Street, that is three misses in a row for IBM and six straight quarters of declining revenue. Yet they beat their EPS number (modulo “other stuff”) and recommitted to the EPS roadmap for the year. Somehow, profits keep going up even as revenue declines (key contributor: a materially lower tax rate).

The earnings release in a nutshell: “Growth markets revenue down 9 percent”.

Cloud is starting to bite IBM and as I have noted, they lack a relevance amidst generational change. The company made some more detailed yet meaningless claims about cloud revenue. As with Q2, “cloud revenue up more than 70 percent year to date” but with no definition of what constitutes cloud (last week they were out making a distinction between “cloud-enabled” and actual cloud services). They did break new ground and say “$460 million is delivered as a cloud service” which presumably is mostly SoftLayer. Most glaring, IBM still doesn’t seem to have any material customer references, either in terms of the cloud technology being consumed or in terms of business impact.

IBM’s fundamental problem: they supply those being disrupted by technology, not those doing the disrupting. Today an IBM dependency can be an existential risk.

Exploring Alternative History

Tablet circa the year 2000

Bloomberg has a nice piece revisiting the broad vision Microsoft laid out in June 2000 at the grandiosely named Forum 2000. They even have an edited cut of some of the scenario videos developed for the event to bring the vision to life.

The event was originally scheduled to open the new millennium in January with a bang and more importantly to lay out Microsoft’s vision for the 21st century. The company felt intense pressure to reassert its thought leadership on at least three fronts. Microsoft, by virtue of being a business with actual profits, probably had an even greater relevance problem during the height of the dot com mania than it does today. Second, the unrelenting antirust assault on the company was building to its climax and the company desperately wanted an alternative narrative. And, largely forgotten today, the company was very concerned about demonstrating it would not lose a step in the transition to its brand new CEO, one Steven A. Ballmer, who had just taken the reins from Bill Gates.

The event was pushed from January to March and then ultimately June because the dates kept overlapping with antitrust rulings. That event kicked off a train of events that lead us directly to Microsoft’s current situation and the search for a new leader. It definitely provides a glimpse of a different trajectory for Microsoft over the last decade.

The original process to define Microsoft’s forward vision was through a set of technical committees made up of Microsoft’s best and brightest technologists. Despite high hopes and leaks to the press that such a process was under way, this approach was pretty much a complete bust. As that became apparent, Steve asked Paul Maritz to oversee an effort to pull together a compelling vision for the company. Paul described this exercise as “creating a new parade”.  A small and fairly eclectic group was formed of people from across the company but largely outside the engineering ranks. We sketched out the broad attributes of what things going forward would look like and then five sub-teams were tasked with making this brave new world come alive for consumers, small business, enterprises, knowledge workers and an end-to-end healthcare scenario that illustrated what developers would be able to build. Each group scripted and then shot professional quality videos from the user perspective.

I don’t think people appreciate how close Microsoft came to completely imploding in 2000. Employees woke up every day to relentlessly negative headlines from the DoJ case. It was not yet evident that the surreal world of the dot com bubble had ended, and even if you weren’t being wooed daily to join revenue-less startups with ridiculous valuations, you felt obligated to explore options.

Forum 2000 changed all that internally. It provided a sense of purpose and showed how the whole could be greater than the sum of the parts. Soon after Forum 2000, Mark Lucovsky, one of the key contributors to Windows NT, the inventor of Win32 (he also likes to brag he invented “DLL Hell”) and one of the company’s distinguished engineers, showed up with an architecture to make the Forum 2000 videos real (the ability to actually implement had not been the foremost consideration in painting the vision…). This lead to .NET My Services (aka hailStorm) which was announced in the spring of 2001.

.NET My Services was a cloud-centric model using web services to deliver consistent, personalized experiences across a wide variety of devices (including non-Microsoft devices – the very first device demonstrated was a Palm). It was also an API-first model, which meant any endpoint could access the system (this is an approach the Facebooks and Twitters claim, but regularly violate in the name of “protecting the user experience” which really means protecting ad revenue). It was a major departure from Microsoft’s traditional PC-centric platform and also introduced a subscription business model as opposed to the traditional license model. It was an open platform accessible from any device or service through open XML-based protocols but could be bootstrapped using Microsoft’s vast footprint of devices, applications and services. It represented a fundamental shift to a service-centric world, both technically and in terms of business model.

By 2001, it was clearer that the dot com mania had been a giant bubble and wasn’t coming back, plus the appeals court ruled that Microsoft would survive the antitrust proceedings intact. The confidence stemming from these positive external factors, however, ultimately undermined Microsoft’s desire to invest and realize the new vision.

Competitors like Sun Microsystems, no doubt horrified that their years of lobbying had failed to hobble the company, now faced a revitalized Microsoft with a vision for the future that was compelling to customers and driving the industry discussion. When they probably should have been figuring out how to save a business shackled to the dot com ship, Sun embarked upon a very effective campaign of demagoguery around Microsoft leading the shift to a user-centric model. As a result, My Services ushered in the first big industry debate around identity and privacy in the cloud. In retrospect, Microsoft’s personal computing heritage and fundamentally user-centric approach to give users full control over how their data would be shared looks vastly superior to today’s world administered by the almost interchangeable Big Brothers of Facebook, Google and NSA.

With the competitive and existential threats from dot coms and the DoJ having abated by this time, Microsoft chickened out on seeing it through. It was easy to back down from the industry debate over identity, shirk the challenges of figuring out the subscription service model and revert to the comfort and familiarity of good old Windows and Office. Harvard Business School later did an interesting case on the tensions between the old and the new camps inside the company and how it played out.

I don’t think it is widely appreciated that WinFS was born of a desire to realize the My Services scenarios, but to do it in a Windows-centric way. There was broad agreement on the importance of the scenarios, but strategic nostalgia for Windows resulted in the company trying to rethread them through the franchise and revisit the eternal dream of integrated storage. Instead of the truth being in the cloud, the truth would reside on Windows and everything would have to sync with your PC (just don’t turn your laptop off…). This decision triggered a sequence of events that directly brings us to the present day where the erosion of the Windows franchise played no small role in Steve Ballmer’s departure,

My Services was shut down, with CTO and WinFS cheerleader David Vaskevitch dismissively telling the team the company “didn’t need another $500 million business”. The fixation on WinFS technology brought down Longhorn, the release of Windows scheduled to follow Windows XP. Simply put, WinFS was too ambitious technically. After much internal debate, Longhorn came to an end with the “Longhorn Reset” whereupon the company embarked on the far less ambitious Windows Vista (and WinFS was never to be seen again, although I have flashbacks when I listen to the Hadoop guys talk today). However, given it had been over five years since Windows XP had shipped, the company felt pressure to rush the product out the door to meet obligations to customers who had paid for a new version of Windows as part of their enterprise agreements. Hence the “Vistaster” of shipping a half-baked version of Windows.

The company then spent three more years cleaning up the quality, performance, haphazard user experience and packaging of Vista, resulting in the very solid Windows 7, but failing to move the PC industry forward in any material way during that time. Windows XP remained the most popular version of Windows and Microsoft was forced multiple times to extend the end of life of Windows XP by a customer base that was just not compelled by multiple subsequent releases.

Meanwhile, iPhone and iPad (and imitators like Android) were in market and Microsoft’s Post-PC nightmare was looking very real. The company decided to focus Windows 8 almost exclusively on tablets, hoping to pull the tablet category back into the PC universe. Except that didn’t happen. Windows 8 on tablets received mixed reviews. Surface was a costly mistake, both financially and in its impact on critical OEM relationships. And it screwed up the desktop experience for billions of PC users (one senior Microsoft executive told me Windows 8 was only for tablets, but didn’t answer my question of why they neglected to mention that in the advertising). Which brings us to the present and the search for a new CEO.

In retrospect, this sequence of events is crystal clear in a way it never is in the fog of the present. Even with greater commitment, there are a million other ways the Forum 2000 vision could have gone wrong. Parts of the vision were dead on, others such as assuming tablets would rely on a stylus were big misses. It was still predicated on bootstrapping from the current Microsoft installed base, which would force a myriad of tradeoffs between old and new every day. There were major business challenges to overcome in building a successful subscription business, particularly as the Google advertising revenue volcano was just beginning to erupt. Microsoft subsequently spent years drooling over the prospect of hundreds of billions of dollars of advertising moving online, without fully internalizing that capturing those revenues would require behavior that was in many ways antithetical to the personal computing ethos at the core of the company. The good news is the rise of the tablet kept Microsoft from turning Windows into an ad-funded desktop billboard monstrosity.

The Price of Success

And of course, Microsoft faced the innovator’s dilemma in spades. The last decade of Microsoft’s history is a classic and very public case study on how a very successful company deals with disruption (disruption it knows is coming). The dissipation of the Forum 2000 vision was very much the result of a battle between seemingly reactionary forces exercising their fiduciary responsibilities and the hazy dreamers of a less distinct and unproven future. The counter-revolution obviously prevailed, at least temporarily.

Some have even argued that Microsoft did the right thing by maximizing Windows profits for as long as it did (and is still doing even though Windows profits dipped slightly below $10 billion in the last fiscal year). Horace Dediu’s recent podcast “The Limits of Executive Power” has an interesting take on this (and smart commentary recently on Microsoft is hard to find):

We begin with a defense of Ballmer for preserving great things, continue by condemning him for not having destroyed those very same things and end by asking whether anyone could have done the right thing.

The Innovator’s Dilemma came out in 1997. We all read it at Microsoft and were looking for disruption behind every tree. Discussions about the need to cannibalize Windows before someone else did have been going on for at least 15 years. And in the meantime, the company has banked profits from Windows alone in excess of $100 billion (I have not done the actual math but the number is of this order of magnitude). Clearly undermining that profit stream proactively 15 years ago was the wrong thing to do, but how should the company have avoided its current situation? The company invested in pretty much every kind of non-PC device including smartphones (Microsoft was the leader in this space as recently as 2006), tablets (albeit with styluses) and a bunch of goofier form factors.

I believe the fundamental problem was the unwillingness and/or inability to transcend the single device (UPDATE: I should make explicit that this is a reference to Tim O’Reilly’s popularization of Dave Stutz’s farewell from Microsoft missive which was written after the My Services experience). Microsoft had the vision and means to both lead the industry and bridge its existing businesses to a cloud-centric, multi-device world, but failed to follow through. Now it finds itself belatedly embracing this model but from a disadvantaged position. It is yet another technology industry example of innovations conceived in one place being successfully commercialized elsewhere that lacks the baggage of the conceiver.

Near the end of my tenure at Microsoft, I was in a meeting with a cast of thousands. One of the presenters said “we wouldn’t want to do another hailStorm”, expecting all the heads in the room to nod in unison. The SVP in the room turned to me and said “we should have done hailStorm” to which my answer was “damn straight”. The rest of the room was aghast. I suspect this viewpoint is not as contentious now, even at the board level. Success can be a bitch.

Looking Ahead

Sayonara

With the initial frenzy around the great Ballmer succession sweepstakes slowing down, lets look ahead at how things may play out:

Timing

I can’t believe this will take 12 months to resolve or that the company can afford to let it drag on that long. If the board can’t find a new CEO in three months, they’re never going to find someone. My guess is they shoot for an announcement around November with a January start date for new guy. Overlap between old and new CEOs is fraught with issues, so my guess is Steve will get an extremely well-deserved and complete summer vacation next year. UPDATE: the fact ValueAct doesn’t get its board seat until early next year is another impetus to get this decision made before then.

Candidates

I speculated discretely a little here, but am stunned at some of the crazy names in play. How does a company like Ladbrokes stay in business if this is an example of their handicapping skills? Does anyone know how to arbitrage this insanity? And where is Harold Stassen in this race?

I said earlier there was really only one internal candidate. After more thought, I now think there are two but the second one is not showing up in all the speculation (which is really surprising because this puts him in the minority it seems of Microsoft employees).

The Re-org

I maintain my earlier (and evidently not safe for publication) claim that the ongoing functional reorganization is batshit crazy. It was crazy with Steve, but it is barking mad with an unknown new leader showing up at some indeterminate time in the future. But the company can’t go back to the old model at this point and has to keep marching ahead in the absence of any other option. I guess they keep implementing this re-org until the new CEO unveils the next re-org. In the meantime, between a lame duck CEO and the groping-in-the-dark of the current re-org, Microsoft is largely on hold strategically (which makes it all the more important to find the new leader quickly).

Breakup

The uncertain transition period and ongoing re-org to greater centralization actually make it harder to break the company up into the “Svelte Steves”, but this is still the right solution for Microsoft’s existential plight. Hopefully the board will realize after interviewing a bunch of candidates that there isn’t anyone likely to manage the sprawling software conglomerate that is Microsoft today any better than Steve and they should break the company up, create a more focused set of companies and unlock substantial value.

Layoffs

I hate to say it, but these seem almost inevitable upon the arrival of whoever comes next. Every new CEO wants to get bad news out of the way while they can still implicitly (or explicitly) blame their predecessor. And I think one of the big motivations for the recent re-org was to “increase marketing efficiencies”. Microsoft laid off a couple hundred marketing people last year, but rumor is the original target was ten times higher. This has implications for local hiring and the Seattle real estate market if nothing else.

Executive Departures

Just as we saw an exodus of “Bill guys” after Steve took over, there are some “Steve guys” that it is hard to imagine being part of any new regime. Kevin Turner would be one (and for anyone wagering on KT as the next CEO of Microsoft, I will take the other side of that bet for every penny you want to put down). Mark Penn, who still lives in the other Washington, may  suddenly discover Hillary’s 2016 campaign is ramping up (perhaps they will have forgotten his prior contributions). And there are some of Steve’s Pro Club basketball buddies with their brogrammer bonhomie (except they lack even brogrammer-level programming chops) whose career trajectories could be impacted. Who else is busy updating their LinkedIn profile (beyond every marketing employee at the company)?

NBA Basketball Returning to Seattle

Steve can get busy on this front, just as our archenemy the hated and despised David Stern exits the scene. Steve would be a great owner (and cheerleader – every home game will like MGX to him), a la Mark Cuban. Others have suggested Steve could also help salvage his home town of Detroit.

What else should we expect on the Microsoft front as this transition plays out?

Filling Big Shoes

Big Big Shoes by tom@hk | 湯米tomhk, on Flickr
Creative Commons Attribution 2.0 Generic License  via Flickr 

There is a lesson in the all-around thrashing Steve Ballmer has received in recent days about filling the shoes of the greats: don’t.

Anyone who succeeds one of the greats -– be it Bill Gates, Steve Jobs, Jack Welch, Peter Lynch, Warren Buffett, Michael Jordan or Peter the Great -– is likely to suffer by comparison. As general career advice, there is more downside than upside to following a legend.

You may be as or even more skilled than the superstar you’re following, but they also likely had both good luck and timing on their side. The tailwinds that favored them probably won’t keep blowing for you. Nothing lasts forever. The rules change. The great bull market eventually comes to an end. Low draft picks erode your bench. The competitors keep coming and coming, and unlike you, they often have nothing to lose. The window for breakthrough innovation in your industry may not stay open 24×7. Cambrian explosions can be followed by long periods of unpunctuated equilibrium. No small part of becoming a legend is successfully getting out on top (cf. Michael Dell).

And your predecessor’s success increases degree of difficulty you face. It sets expectations for your performance, yet there are real diseconomies associated with success. You get to defend the substantial realm your predecessor built. That scale and scope of success brings complexity. You inherit a valuation that presumes your future trajectory; you really only can screw it up. Sheer size means you move markets. Opposing teams always get up for the game when the defending champions come to town, even if there have been roster changes. The key lieutenants who had the legend’s back may decide it is time to enjoy their rewards. You’re an easy target for populists, contrarians and anyone who wants to stick it to ‘the man’. The press, who first build you up, inevitably get bored and will decide it is time to tear you down. A government or two may shake you down for campaign contributions, directly or indirectly.

A big part of Steve’s problem is he isn’t Bill. He’s had to manage the house that Bill built in the face of unprecedented government assault, the complete collapse (and rebirth) of the tech sector and try to keep up with, much less stay ahead of the incessant march of technology. Steve is a amazingly successful and accomplished guy, contrary to what you may conclude from the twenty-something blogger consensus this week. It isn’t clear anyone, including Bill, could manage the sprawling empire that is Microsoft today or have maintained Microsoft’s dominance in the serendipitous world of technology up to the present day. I wish Steve’s last move had been to break the company up (and frankly, there is still time for that). It would be better for the company and for his legacy.

But it isn’t just Steve who has this problem. Tim Cook is experiencing all the joys of not being Steve Jobs. Ballmer’s buddy Jeff Immelt soldiers on at GE, having started at a similarly awkward time of high valuations (GE has dropped a couple hundred billion in market cap on his watch). Peter Lynch’s Fidelity Magellan Fund, where at least the first couple managers to follow Lynch made headlines, is largely forgotten today. And I won’t invest any money with whoever eventually takes the reins from Warren Buffett (whose own best performance came when he was investing much much smaller amounts). Pete Myers, of course, had a career year and lead the Bulls to a 55 win season after MJ retired (the first time), but the Bulls didn’t win another championship. Peter the Great continues to cast a long shadow unbroken by any Russian leader in the ensuing centuries (except maybe Stalin, but he was more from the Ivan the Terrible school).

Mean reversion is a bitch, and mean reversion from an extreme outlier can be even more painful. Put another way: bet against the guy who comes after the legend.

Note: I leave Larry Ellison off this list of examples. Due to the fact he intends to live forever, he will spare any successor the ordeal of following him.

A Handicapper’s Guide

 
With the announcement that SteveB will depart within the year, there is all kinds of speculation about his successor, much of it ranging between vapid and nutty. There are three classes of candidate:

Internal Candidates

While people are having fun going through every headshot of the Senior Leadership Team as a possible CEO candidate, there really is only one internal candidate. This candidate would be a strong vote for continuity. The next CEO of Microsoft will be in Redmond and won’t be a connoisseur of corndogs.

External Candidates

Microsoft is historically very tough on executives hired from outside and succeeding Steve would be exceptionally challenging. Given Microsoft could have almost anyone, there are not a lot of obvious candidates here. Would love to hear suggestions as I am sure there are some out-of-the-box candidates I have not considered. Gray-faced/gray suited enterprise executives seem unlikely, and especially not anyone who ever worked at HP or IBM (internships should not be disqualifiers).

Alumni Candidates

This is the most interesting category (at least for us alumni ;-). There are a number of names that have been tossed around: KJ, Elop, Sinofsky, Muglia, Gundotra, Maritz. I have a tough time imagining any of them as the next CEO of Microsoft except for Paul. The question is what would it take to get him to do it. And Bill definitely isn’t coming back. It is hard to think of a founder of his stature who has done as good a job of extricating himself from his company as he has.

A few other other thoughts:

  • The most interesting question to me is whether this decision happened over months or weeks. You can infer very different catalysts depending on the timeframe.
  • It is now basically acknowledged there has been no succession plan.
  • The recent reorg, which is batshit crazy, looks even more crazy with Steve out of the picture. Still waiting for someone inside the company to sell, defend or rationalize this move to me.
  • I am still a staunch believer that the best option for the company is to break itself up. With expectations set on a single successor and a year to find that successor, this doesn’t bode well for a breakup. The board in theory could come back with this conclusion before Steve departs after a few disappointing interviews/rejections. But Steve clearly is not an advocate of this approach.
  • With Steve’s fate settled, I expect more eyes turn to John Chambers. Steve became CEO at the top of the dot com market peak in 2000 and subsequently was at the helm as the company lost hundreds of billions in market cap. At the time, he’d lost more market cap than any CEO in history, which was definitely not a badge he wore with pride. After Cisco went on to lose even more market cap, Steve was known to bellow “Thank god for John Chambers”.

Forget Summers and Yellen: Let a Bot Run the Federal Reserve

1956 - ”Forbidden Planet” - Robbie! by x-ray delta one, on Flickr
Creative Commons Attribution-Share Alike 2.0 Generic License  via  Flickr 

 
The shameless campaigning and cat fight over who should be our next Federal Reserve Chair has only served to underscore the inevitable human flaws and lack of omniscience of whoever is ultimately appointed, all while further politicizing and debasing the office. I argued four years ago a bot could do that job and feel obligated to make the case again. Other than changing the date, this still makes perfect sense:

Software Bot To Be Nominated Chairman of 
Federal Reserve System

Cutting edge technology tapped to bring stability and
consistency to monetary policy

WASHINGTON D.C. – August 25, 2009 — President Barack Obama today announced he intends to nominate Monet 3.0, a software bot, to become Chairman and a member of the Board of Governors of the Federal Reserve System. As Chairman, Monet will be charged with conducting the nation’s monetary policy by influencing money and credit conditions in the economy.

“Software bots today are successfully outperforming the world’s best human practitioners in complex endeavors like chess, and they do so without irrationality or exuberance,” said President Obama. “Despite the bot’s French-sounding name, I am confident that Monet 3.0’s discipline and transparency will bring price stability and foster the economic growth required for a full economic recovery.”

Monet was born in a lab at Stanford University in the early 1990s and is currently in version 3.0.  The software instantiates a modified version of the Taylor Rule.  Source code for Monet is available for broad inspection and reuse under the modified BSD license at http://bot.federalreserve.gov.

Monet’s nomination requires approval by the Senate and a bout of hyperinflation that makes the Hungarian episode of 1946 look modest.

I could update the proposal with a dash of Big Data and or integrate with the Bitcoin blockchain (we’ll leave pioneering on that front to Iceland), but I think the original idea still suffices. It is easy to make contemporary arguments for our bot (e.g. even a “headless” bot will be more user friendly than Larry Summers). All the bird-watching speculation about hawks and doves becomes irrelevant, as our bot will mindlessly execute a direct link between objectives and policy. And in these times of government fiscal constraint, beyond electricity and the occasional motherboard upgrade, moving to a bot will be cheaper than a new human occupant.

Making a bot the Fed chair will also help the broader Federal Reserve Board of Governors increase their understanding of important economic dynamics. Members of the Federal Reserve have not always demonstrated the greatest empathy for the consequences of their policy. Seeing a robot take a colleagues’ job firsthand should give them a deeper appreciation for the situation of the American worker.

Plus, the all-knowing NSA is already moving down this path to cut fickle and fallible humans out of the loop and the Federal Reserve, perhaps the only other government entity with comparable reach and influence, would not want to fall behind in the Race Against the Machine (a topic I will get to one of these days).

I will keep posting this every four years until a bot takes its rightful place as Chair of the Federal Reserve.

Now Every Company Really Is A…

My stump speech seven or eight years ago included two assertions: 1.) every company is now a media company and 2.) every company is now a software company. Someone recently reminded me of that pitch and while it seems obvious today, it was definitely before its time. The globe-spanning organizational behemoths I was then hectoring weren’t buying it (but unlike with mainframe customers, I don’t think anyone ever called me “son” in the course of the conversation).

The media company prediction came out of the path we were taking with Microsoft’s developer platform business. That business at Microsoft, despite Steve Ballmer’s infamous and sweaty “Developers, Developers, Developers!!!” performances (and you should see him order lunch: “Pastrami, Pastrami, Pastrami!!!” with all credit to Bruce Ryan for not only coming up with that line, but shouting it out while Steve was in the sandwich line), was strategically important but a sideline by any quantitative metric. The developer audience had an endless thirst for content but was also very suspicious of anything that reeked of marketing. Intermediaries, particularly the press, had a tendency to water things down and didn’t always fully comprehend the topic at hand. So we started to reach out directly to the developer audience and sidestep the traditional gatekeepers.

Those were the early days of corporate blogging. We had a sign in the office showing “Days Since Last Blogging Accident” (I’m looking at you Scoble ;-) and spent too much time fighting off a prominent executive who wanted to ban blogging across the company (ironically, he went on to probably blog more sheer word volume than any other blogger ever). The genesis of Channel 9 also happened in this time, which provided an authentic and humanizing behind the scenes look at the Microsoft developer platform (it was also as much a rejection of MSDN, a CD-ROM library of developer tools that had clumsily migrated to the web, as anything else). Channel 9 also quickly metastasized into a vibrant community around that content channel. The end result is we found ourselves using cheap digital technology to program (in the TV sense) directly to our audience.

It seemed obvious at the time that everyone would be doing this soon. And this was before the rise of social media, the christening of content marketing or the fixation on the CMO as the new Great White Whale of IT, all of which have fueled the ability for anyone to be their own media business. Meanwhile, the traditional media continue to face gale force headwinds (e.g. the New York Times recently paying to get rid of the Boston Globe, which they paid over a billion dollars for not so long ago). Dan “Fake Steve Jobs” Lyons chronicles the ranks of traditional journalists taking to the lifeboats to join the corporate media ranks, a path he too has taken. There is some irony that being in the media business is increasingly attractive to everyone except those actually in the media business. Even the old line about not getting into a fight with someone who buys ink by the barrel has far less applicability when printing presses are ridiculously cheap (and the guys who buy ink have to budget for bankruptcy lawyers).

In terms of every company becoming a software company, Marc Andreessen nailed this with his Wall Street Journal essay “Why Software is Eating the World”. Software no longer just replaces older generations of software, but everywhere you look software is chewing up and spitting out enormous traditional industries. Skype finished off the long distance business. iOS and Android broke the operator chokehold on the mobile experience (“hello Mr. dumb pipe!!!”). Netflix destroyed the DVD rental business (remember Blockbuster?) and is now driving the DVD itself to extinction as a medium. Uber has pushed the taxi business to lawyer up in the absent of any other strategies for coping with change. Barnes & Noble is a case study in understanding the software threat but then mismanaging its play to the point of threatening the viability of their still profitable bookstore business. AirBnB is not appreciated by hoteliers for opening lots of vacancies. The hottest thing in cars is software that powers the entertainment system. connects with your smartphone, manages the hybrid powertrain and is poised to resurrect the slogan “leave the driving to us”. The energy revolution that has pulled the rug out from under OPEC, Vladimir Putin and predictions of peak oil owes much to advances in data analysis and visualization software. And we’ve recently learned that even the world’s second oldest profession — spying — appears to have become a vast software play.

At a time when the assumption is you outsource everything you can outside your core business, both media and software development are being in-sourced with a vengeance. You just can’t live without them.