Face IT - IESE Technology Blog

Digital TV, Telecoms, and the push for the end of Net Neutrality

On May 30th 2010 we wrote about the alliance of Sony, Google, Intel and Logitec and their effort to control out TV sets by putting at out disposal the wealth of video, both user generated and commercial, floating in the Web. Well, the days when streaming television displace traditional TV viewing may not be far. The inserted graph from business insider shows that for the first time ever there is a drop in Pay TV subscribers. Pay TV has sailed through the economic crisis adding net subscribers every quarter, until Q2'10.

It is still to early to have definite studies to know if the real reason for this decline is that customers are dropping cable and satellite in favor of streamed or downloaded TV programs. The true fact is that in addition to the yet to be deployed Google TV there are a myriad of offerings that bring traditional cable and satellite content to your PC (examples, by no means endorsed here, are "digitaltvonpc" and "digiatlsatelite.tv".)

If these changes in customer attitudes toward streaming versus cable or satellite materialize, there are two issues that will have to be resolved soon. The first one is emission rights. Currently, Hulu.com and the traditional networks (ABC.com and alike) prevent users with IP addresses from outside the USA from watching their content, as most likely the rights to their programs have been sold to traditional channels for broadcasting outside the US and not blocking them would violate these rights. This does not seem to be the case of the "digital to pc" sites mentioned above, which currently allow thousands of channels to be watched from anywhere in the world. In any case, as it is well known, there are many proxy services that will allow a user anywhere in the world appear to the sender as if he or she were located wherever the proxy service is located, rendering the IP locator service quite ineffective as a territorial rights management system. Content owners will have to start writing distribution contracts without territorial exclusivity and charge these new "channels" either by the number of viewers or be advertising supported in some sort of revenue sharing agreement.

The second big change will have to come from the segregation of content as they transit through the pipes. It seems quite unlikely that in most countries, where many networks, and the local loop in particular, are still copper, the infrastructure will sustain the enormous growth in traffic that will come parallel with the new services. And if this is the case, it seems only logical that both customers and companies will be willing to pay some extra cash to guarantee that some content, in particular live events, will have enough bandwidth for a perfect image by taking preference over less critical traffic like email or P2P downloads, for example, where a hiccup or a few seconds is imperceptible. And this will raise all kinds of irate reactions form the net neutrality advocates, who will see this as an open door for possible discrimination, not only for customers that pay differently for different services, but for content type. The pressure that telecom companies will exert for the enactement this discrimination in quality will be enormous, as they will see in it the possibility of breaking from the terrible commoditizatin cycle with "all you can eat" fixed prices they are inmersed in. Polititians, regulators, customers, and telcos will have to come to an agreement in that issue soon.

In any event, the TV industry is in flux as the music industry was a few years ago, and we have to see whether any lessons regarding pricing, ease of use, and DRM were learnt from it.

Java - A Speed Bump for Android?

Right as Android is taking one of the dominant roles in the smartphone market, Oracle (which acquired Java owner Sun recently for over $5 billion) is suing Google over the use of Java code in its Android mobile OS. Android has recently edged past the iPhone in market-share, and it has the 3rd largest share in the smartphone market. Now that Android's success is clear, Oracle has claimed that Android uses parts of its patented Java code without permission. Oracle is arguing that Java is a competitor mobile OS to Android, and that Google is using parts of it unlicensed. This move could be revealing one of the ways Oracle likely plans to change the oversight of Java now that they own it - Sun never challenged Google about the use of code. Oracle may start a strategy of seeking out and attempting make money off other companies using unlicensed Java code. Many systems use parts of Java in their code due to the fact that Sun open-sourced much of the Java code in 2006 (to spur development related to the OS). 

One of the interesting aspects of this lawsuit is that Google's CEO, Eric Schmidt, was previously the Chief Technology Officer at Sun. Oracle is arguing that Schmidt's close knowledge about Java led to the wrongdoing. However, Google claims that they wrote the Android system from scratch. Further, it is legal to use many pieces of Java code in new system creation, since its code has been openly released. However, even if Google may feel like they have an advantage in the lawsuit, another part of the lawsuit may cause Google to retract their position and settle our of court. Oracle is trying to get an order that stops sale and use of Android-based devices. Android is increasingly important to Google, and they likely can't let the growth of Android be disrupted - Google estimates that this part of their business could be worth $10 billion in the near future.

If a settlement happens, it will be large, however the biggest impact from the lawsuit may be on the future use of Java. The lawsuit will likely cause a further decline in Java use. Oracle is making a statement that you must go through them if you use Java, and so many developers will probably move to other open code bases.

Google Travel, may I help you?

This may be the answer you get when you call the travel agent that helped you book your flights and find a budget hotel in Reykjavik. Is that possible? Well, wait for a while.

In a presentation of Bing's virtues, the search engine by Microsoft, Mark Johnson, a senior Program Manager at Bing described the concept of search verticals, that is, specialized search engines that using semantic rules and context information provide users with a much better search experience than generic search engines, Google in particular. The point of Bing, was that there is a lot more to search than Web pages. When you are looking for a cheap hotel in Reykjavik, you do not only want a list of pages, but a comparison of the prices of the different alternatives, the average price of the city, and hopefully, an easy and secure way to check availabilities and make a reservation. Something similar occurs with airline tickets. In fact, you would like something else, you would also like to know whether in the next few days prices are likely to increase or decrease for the destination you are interested in. All this is what a good vertical should give you, and in fact, if we are talking about monetizing traffic, the possibility of so doing in verticals, due to the extremely targeted audience, is much higher than in generic web searches.

Bing, with this specialization strategy has been able to reach about 4% of worldwide searches, but its possibilities of monetizing are far greater than its overall market share. If you combine this with the fact that according to Google travel-related advertising is the number one industry in revenue, the stage is set for Google to make a serious approach to travel.

According to a number of reports, the smart search engine behind Bing Travel is not software developed or owned by Microsoft, but by a company created by a number of MIT scientists by the name of ITA. ITA, in fact, is also behind most of the online travel sites that offer airline tickets from multiple companies, like Orbitz and Kayak, and even it is used by some airlines to optimize its yield by changing prices in real time according to the reservations they hold for a given route. It makes sense, then, that if Google wants to enter seriously the travel vertical, it does so by targeting ITA, and this is what it did July 1st by paying $700 million and securing control of the company.

What will this do to the online travel industry? First, we have to wait for regulators to approve the deal, but it does not seem to have many problems as Google has promised to honor the existing contracts (until its clients choose to stay with Google, that is!) And this move in fact can be seen as a way to increase competition, since it brings a new player into the field. Assuming then, that the merge goes through, we should expect Google to offer smart airline searches (they seem to shy away from the use of the word vertical or specialized searches) combined with hotels at destination. The extremely powerful location-based information at its disposal in Earth and Maps, together with StreetView and the wealth of user-generated information, can make Google a formidable travel agency combined with a travel guide, all in one.

If this prediction is true, we will see a great shakeup in the industry, with massive consolidations and the world market concentrating in the hands of a few competitors that can master the power and energy to be contenders with the Google powerhouse. One trump remains in MIcrosoft's hand though: the Redmond company did not sleep in its laurels and in 2008 bought Farecast, the smart engine that predicts whether the prices of the tickets will go up or down in the next few days, and that is heralded as the reason Bing Travel grew 9% this past year. But knowing what Google engineers can do, I would not bet anything that they do not have a similar engine ready for deployment when Google travel launches.

Microsoft Office Web Apps vs. Google Apps

  = Free?!

In the last few years, Google has has taken the front-running position in the online productivity application market. Until recently, they did not have a large competitor in the area. However, Microsoft recently released their new web apps software suite. As with Google, Microsoft is giving the basic version of this software suite away for free. Some may consider this a surprising move, since Microsoft makes a significant part of its revenue from its traditional office suite. However, Microsoft obviously sees a significant potential shift in organizations' use of productivity software, and so they have created a competitor to Google apps.

Due to the importance of traditional office software to their business, Microsoft has taken a different approach with its web apps than has Google. Google has created a system that allows for easy file creation and rich formatting, and they have integrated advanced collaboration features into the applications. Google's apps enable multiple invidiuals to edit a document at one time, and for all users to see edits in near real-time. Google has basically created a suite of apps that they hope can be an online substitute for the Microsoft Office suite in many organizations. Microsoft's online apps suite is much more basic, and it seems to be aimed towards users that want to share and make minor edits to traditionally produced office files in an online setting. Microsoft's online system is much better at preserving the formatting from Documents produced in their Office file formats, and it retains many of the menu and user-interface elements that are present in the traditional Office suite. However, the overall number of features are limited in Microsoft's suite, and their apps do not allow multiple users to edit documents at the same time. With the Microsoft apps, users need to "lock" documents when they want to edit, and while they are locked, they can not be accessed by other users. The Microsoft apps also seem to run slower than do the Google apps. These last differences highlight the lead that Google currently has in technical knowledge about cloud computing over Microsoft.

Microsoft's goal is likely to create a complement for its traditional Office suite with the new web apps. They want to allow individuals to easily make minor corrections to existing documents online (rather than to creating whole documents online). Microsoft hopes that these new capabilities will preserve their market space in the productivity apps area, and that individuals that already have the traditional office suite will use their web apps when they need to update documents in a group setting. However, if real-time collaboration features become highly-valued in new business settings, Microsoft's software may not be highly accepted by users, which could cause further adoption of Google apps by organizations.

Googling on Google

In a previous post, I was quoting Joseph Licklider’s statement “people tend to overestimate what can be done in one year and to underestimate what can be done in five or ten years.” Let’s choose Google as an example. On the word of “Googled: The End of the World As We Know It” by Ken Auletta, in 2000,  Google had $19.1 million in revenue, and a $14.7 million loss. Last year, Google had $24 billion in revenue, and net income of $6.5 billion. Moreover, according to BusinessWeek, Google served up 23 million searches per day. Now, it’s over 300 million searches per day, as said by comScore. In less than ten years, Google has become the paradigm of how a technology company is transforming complete sectors. To that extent, I use the business case “Google: Organizing Information on the Web” written by Prof.  Sandra Sieber and Prof. Josep Valor in the Management Development Program (PDD) that I lecture at IESE.

Last time I gave a Google session was four weeks ago in a PDD in Santiago de Compostela. This weekend, I will have again a Google session in a PDD in Madrid. Therefore, it is a good time to google on Google to take into account the latest developments. Using Google News, I got today 32,865 entries on Google generated only in the past month.  Some of the entries refer to picturesque news. For instance, the lawsuit against Google filed by Lauren Rosenberg on June 1st, seeking more than $100,000 when she was injured by a motorist while following an online route, claiming Google Inc. supplied unsafe directions. However, the majority of these entries reflect the speed of change in the Information and Communication Technologies (ICT) sector. Let’s review four of this news:

“The World is Flat”  According to comScore, Google amounted for the 64,4% of the US search market. A year ago, Google had 65% of this market. For the last decade, Google has consistently gained a point of search share a month. However, for the last 12 months Google’s search share has flatlined. This means that Google could lose the main revenue growth engine, which is based on search products (i.e., AdWords).

“The Tyranny of Choice”  After Google, the second most popular engine is YouTube, which is celebrating its 5-year anniversary reaching two billion videos viewed daily. Some analysts forecast that YouTube could reach this year break even point after five years of heavy losses mainly derived from bandwidth and storage costs. One of the key factors to monetize for YouTube audience is showing its video offering in the living room. Google TV initiative (see the previous post) is framed in this strategy.  Paradoxically, one of the main challenges is that an average user spends 15 minutes in YouTube compared to the 5 hours a day spent in front of the TV. To that extent, YouTube will launched in the Fall YouTube Leanback, or an attempt to turn YouTube into a passive-consumption experience. YouTube Leanback will show an endless stream of YouTube videos, eliminating the “decision” points at the end of each short video or a new video searchs, which constitutes a potential abandonment of the site.

“Big Brother”  Google’s leading position in the ICT sector translates into a constant scrutiny by different Government Agencies. Google recently acknowledged that it had systematically collected private data since 2006 (e.g., household WiFi addresses and record of sites viewed through those WiFi stations) while building Google’s Street View, which is a technology featured in Google Maps and Google Earth that provides panoramic views from various positions along many streets in the world. Google stated that the data collection was the result of a programming error. However, this incident erodes Google’s mantra “Don’t be evil” and has opened new inquiries on privacy in Germany, Spain, France and the Czech Republic.

“Stormy Weather”  “Google is the next Microsoft” is heard more often than not. Just in case, Google has banned Microsoft Windows from internal use. The official explanation behind that decision was that security vulnerabilities of Windows caused the China hacking incident last January. However, it is more likely that constitutes another cloud battle between Microsoft and Google (see previous post), which includes the MS announcement of a free web version of MS Office 2010 (Office Web Apps) competing with Google Docs. Meanwhile, Google is already conducting “test flights” of Chrome OS (see previous post) to secure its entry point to Internet and into the Google cloud in particular.

Last week, a student said “facebook is the next Google”. Let’s wait at least four more weeks, before we replace Google… In the mean time, let’s keep googling on Google.

The battle for your TV (and your money!) is heating up

Only a few years ago nobody would have thought that companies like Intel, Apple, or Google would be scrambling and throwing their muscle around to be in your living room, and not in any place, but inside the “dumb box” that will be not “dumb” any more, your TV. 

Only last week Intel, Sony, Google and Logitech announced an alliance to market the “Smart TV” (not to be deceived by the generic name), an evolution of the failed Bravia Internet TV by Sony. Of these partners, the one giving up the most of what it was already doing is Sony, that has scrapped its internet TV project in favor of the much slicker and customer friendly Google software. Sony learned the hard way that users liked the iPod a lot better than their Digital Walkman, an earlier and more rudimentary product and did not want to keep investing in a product that probably would not entice customers. 

Intel and Logitech have their own agendas as well. Intel has been trying to market its new chips into consumer electronics, and developing an open platform hand by the hand of Google can be the opportunity to create the Wintel platform for home entertainment, the Googtel, I guess. Google no doubt will base its software on Android and pull all of its resources and the community of developers to create as soon as possible a myriad of apps to grow the first entertainment ecosystem. If they succeed, we will have an interesting situation with Intel holding the most precious private IP of this new development environment. 

Logitech is presumably in the game to be able to enter the consumer electronics market for the millions of TVs that do not have the capability to be turned into these new “Smart TVs.” Creating a cheap, Intel-based Google-powered set top box seems a very good idea to offset the dwindling sales of mice, keyboards, and standalone cameras, devices more and more integrated into laptops and touch-driven computers. The business model seems quite obvious. Since the inception of television companies have been trying to “help” you decide what to watch on your TV and in the process earn some profits by stuffing advertising with their programming. The first TV channels, predecessors of today’s free advertising-supported channels, were the content aggregators of the time. They would purchase content from third parties, produce some of their own, and construct a “programming grid” that would be broadcast to your home. This was done first via the airwaves, and then in some countries, via coaxial cable. The competitive positioning of these channels relied in two key assets: first and foremost the license to use a scarce resource (a government assigned frequency through which to send the signal to you), and second, being able to secure by contract content viewers would appreciate. This begun to change when the capacity of the cable networks increased and digital TV allowed to multiply the number of channels received by viewers. Using the parallelism of retail, we went from having a few stores in town to the grand opening of a great shopping mall. This clearly fragmented audiences, and advertising, the main source of revenue got fragmented as well, with the subsequent drop in income, pushing channels to reduce costs. These changes, even if profound, brought challenges that were overcome with relatively small adjustments of the business models: looking for blockbusters, securing first exhibition windows in TV, switching to pay per view, etc. 

Now the situation has changed drastically entering  completely different scenario. The number one competitive pillar, the use of a yet somewhat scarce resource has vanished. Via the Internet you can theoretically watch any content from anywhere in the world. 

And if this is so, what does the world “channel” mean? Aggregators can be dynamic, tailored to your individual needs, making money by inserting the advertising that suits your needs; independently of it is a global brand or your neighborhood corner store. And which company is the master of individually targeted advertising? It should be no surprise that when looking for avenues of growth, Google, the king of internet advertising and search, Intel, the ruler of the PC processor industry, Sony, the leader of top-of-the-scale consumer electronics, and Logitech, the number one keyboard manufacturer join forces to develop what they hope will be the winning platform of the near future.

Online Sourcing Marketplaces: Looking For The Tipping Point (Part I)

Part 1: Sorting out the OSM Platforms 

We’ve been a bit baffled. The tech and business  world have recently been abuzz with stories on crowdsourcing, open innovation, Enterprise 2.0 and other web 2.0-enabled models that are about to reshape today’s business. Just a few years back -- about 2005-- the topic of outsourcing and offshoring dominated the public spotlight in a similar fashion, with especially heated debates raging in the US. It seems odd then that a development that sits right at the intersection of these two domains, web 2.0 and outsourcing, has so far received scant attention. In this post, we start to fill this gap.

Online Sourcing Marketplaces (OSMs) seek to harness the power of the web to enable firms and individuals to source tasks and projects from external providers or hire temporary workers. OSMs have been around since the late 1990s and today they are doing quite well – the total revenue for the industry in 2009 is estimated between $200 and $250 million. But OSMs are not at the paradigm shift point, at least not yet. Many would argue that it's still very much up in the air whether OSMs will ever live up to their promise of transforming the way work is being done and making the “e-lance economy” a reality. We believe, however, that today OSMs may be as close to the tipping point as ever.

In 2009  we started a research project aimed at getting a better understanding of how OSMs have evolved in the past, where they stand today, and how they will likely develop in the future. We spoke to and visited all major OSM platforms, including Elance, Guru, oDesk, Rent-A-Coder, TopCoder, Crowdspring as well as a few smaller ones. Today we start a series of blog posts highlighting our key findings.

We are also in the process of launching the second phase of the project, this time focusing on OSM buyers and suppliers. If you have ever done business through OSMs in either of these capacities or if you considered using an OSM but in the end decided not to, we would love to talk to you. Please, send a short email to core@iese.edu and we will provide more details on what the participation will involve.

Back to the blog post, in the next month or so we will publish three pieces on the topic of OSM. In the remainder of the current post, will define OSMs and discuss key characteristics of OSM platforms. In the second post, we will go into more detail on OSM buyers and suppliers. In the third and final post, we will outline key challenges that OSMs are facing today and suggest how OSMs will be develop in the future. For those interested in a more detailed analysis of the OSM space, we will prepare and make available (including on this blog) a project report. This will likely be done once the second phase of the study is complete.

OSM defined

What are OSMs? We define Online Sourcing Marketplaces (OSM) as online spaces where buyers and suppliers of services can meet, offer and apply for jobs, carry out project-related tasks, and conduct financial transactions. This definition needs to be applied broadly as there exists a wide variation of practices across different OSM models. As we will discuss later, some OSM platforms offer just a few functional features included in the definition, while others go well beyond it.

How do OSMs work? Despite the significant variation in models and practices, all OSM environments include three main stakeholders: buyers, suppliers, and (online) platforms. Generally, the interaction among the three unfolds in a manner shown in the diagram below. That is, the buyer and supplier go through the stages of their respective workflows, whereas the OSM platform connects the two.

  
 

Types of OSM platforms 

What takes place within each of the stages shown above, as well as what mechanisms the platforms deploy to connect the two workflows, varies widely across different OSM environments. Based on these variations, we’ve identified three main types of OSM platforms. The key characteristics of different

	Directory	Marketplace	Community
Main focus/objective	Help buyers discover suppliers by providing supplier listings with profile and contact information.	Connects buyers and suppliers in all stages of the workflow	Helps members (i.e., suppliers) to develop professionally through community interaction and paid client (i.e., buyer) engagements
Nature/structure of deals	Deals are done off-line. The platform is not involved.	Deals are done online, usually through a reverse auction-type process. The platform is involved in both legal and financial aspects of the deal.	Deals are done online and usually structured as contests or competitions. The platform is involved in both legal and financial aspects of the deal.
Platform’s role in facilitating buyer-supplier interaction	No buyer-suppliers interaction takes place on the platform. Buyers may have an option of posting projects online but all the ensuing activities take place outside of the platform.	The platform facilitates buyer-supplier interaction with focus on project completion.	The platform facilitates buyer-supplier interaction with focus on learning and community building
Revenue model	Advertising, sponsorship	Project commission paid by suppliers, buyers and suppliers may sign up for premium membership	Project commission/fee paid by buyers
Platform examples	Infolancer, Chinasourcing	Elance, Guru, oDesk, Rent-A-Coder	Crowdspring, TopCoder (Direct)

Boundaries between different types of OSM platform sometimes get pretty fuzzy. For example, a platform may start out as a directory but, over time, add features with an objective of gradually evolving into a marketplace. Similarly, there seem to be a trend wherein platforms in the marketplace category adopt elements from the “community” category, and vice verse. For example, marketplace platforms, such as Elance and oDesk, have made significant effort to engage with and foster the community of suppliers (e.g., both maintain blogs and are active on Twitter). On the other hand, Crowdspiring, a community platform, has been diversifying modes in which deals can be structured. Recently, it added an auction-type model to its portfolio.

It is also important to note that the marketplace category in itself is quite diverse. While all the platforms share the high-level characteristics shown in table above, the focus and implementation details differ significantly from one platform to another. Elance, for example, seeks to provide buyer and suppliers with an ultimate “online workplace”. Its focus, consequently, is on building up a comprehensive tool set for project management and execution. Guru, on the other hand, concentrates on tweaking its rating and feedback system with the goal of attracting the best and brightest suppliers. Similarly, difference can be found in the approach taken by other platforms, such as oDesk, Rent-A-Coder.

In general, however, we believe that this classification of the platforms is helpful. Joining different types of OSM platforms holds significant implications for buyers and suppliers in terms the kind of counterparties they are likely to encounter, the sort of challenges they will likely to face, and the types of mechanisms the platform will provide to alleviate these challenges. In our next post, we will discuss these issues in more detail.

Monetizing Micro-Blogging

= $$$ ?

The use of Micro-Bogging tools (particularly Twitter) has taken off over the past year. Twitter is now hosting over 7 million unique users every month, which is a more than 1000 percent increase from a year ago. This high level of user growth has been accompanied by a skyrocketing company valuation, which is currently estimated at over 1 billion USD. However, these increases in use and valuation have not been correlated with a large increase in revenue. Most micro-blogging services have not yet developed clear revenue generating strategies.

Twitter recently took a step in this direction. They announced that they have developed a multi-stage plan to allow companies to pay for Tweets (messages) that will be prominently displayed within users’ messages. They have also revealed that they are treading very lightly with these changes, to limit the risk of turning off users with the advertising.

Twitter will initially allow advertisers to purchase the top tweet that users will see after doing a search. Advertisers will purchase keywords, somewhat similar to how Google sells search-related ads. Twitter will only display one sponsored tweet in user's search results, and the advertisement will have to be a normal tweet that the advertiser previously tweeted on the system. Twitter hopes that this style of advertising will help users become more accepting of the advertising. The sponsored tweets will look very similar to normal tweets, which may help with this, but this could also be a risky move. General search engine companies (such as Yahoo) have tried to 'hide' advertisements in search results in the past, and many users resisted this type of advertising. 

Another risk with micro-blog search advertising is that many people searching for information on Twitter are not likely looking to purchase something. Studies have shown than a large percentage (over 30%) of people searching on general search engines (like Google) are doing planned-purchase related searches. Therefore, individuals are often accepting of relevant advertising in general search engines, since it helps their purchase process. However, this may not be the case with micro-blogs, where people are often searching for news or current event-related content.

Twitter will use a different pay model than Google's pay-per-click model, since the aim of these advertisements will often be different than with general search engine ads. In the beginning, advertisers will pay per thousand people that view a promoted tweet. However, as Twitter builds up more data about the impact of different tweets, they will shift to a model of pay-for-"resonance". Resonance will be a mix of how often individuals reply to tweets, how often they click on advertisers' profiles, and how often they re-tweet a message. Only sponsored tweets with minimum levels of resonance will continue to appear. Others will be dropped, and advertisers will have to create a higher-impact tweet if they want to continue to appear in users' message streams.

It will be interesting to see how much value advertisers see in this form of advertising, and how much they are willing to pay for this type of interaction with customers. Micro-blog advertising could end up being an effective way for companies to increase awareness when hot issues are happening. However, this will only work if users are willing to accept integrated ads in their message streams and search results.

What's up in the air? It's not planes! - How data predictions are impacting our lives

You have most probably been following quite closely the recent travel chaos in Europe. I certainly did, since I was one of those that went from "up in the air" to "up on a train", experiencing a new notion of distance. It's when traveling from Germany to Spain takes two days, rather than 2 hours. 

Today, we are all seeing that airlines are claiming that restrictions should be eased, and the no-fly ban should be ended soon, in order to prevent them from even more dramatic financial results. I don't want to enter this discussion, but I do want to highlight which type of information should guide the decision to open up our airspaces again. It is a brilliant illustration of a recent cover of the Economist, on "The Data Deluge". Why? Because in this case, very dramatically, decisions so far have been taken on a series of highly complex mathematical simulations. Hence, to properly understand the problem that is currently being discussed in the general press all over the world, we need to have a deeper look into the information that was taken into account to take the decisions of closing the aerial space in more and more countries.

To start with a little bit of background information. The decision to close the airspace is based on an initial evidence that volcanic ash has a number of effects on planes, one of them being the loss of engine power, which is certainly critical. In the mid 80s, British Airways and KLM reported how their planes had been affected by poer loss after flying through ashes from volcanos in Indonesia and Alaska respectively. In order to prevent fatal accidents,  the International Civil Aviation Organization (ICAO) asked for the establishment of volcano ash contingency plans. These plans, which indicate how many grams of ash particles and aircraft con fly through per hour before being affected, are the basis for the decision to close most of Europe's airspace during the past weekend.

Today, the industry is raising voices that claim that the established level is extremely low, and that test flights are indicating that flying is safe. And here starts the critical issue. In order to know, we need facts. Facts means real data on the ash concentration at different heights. Do we have those data? For me, after having done some research about what data are being used during this discussion, the answer is highly unclear.

There is no doubt on that the decision to close the airspace has been taking based on a a forecast which in fact is highly sophisticated data simulation, issued by an agency run y the British Met Office, called London Volcanic Ash Adivisory Centre (VAAC). This centre is one of a network of 9 centres worldwide, and covers the affected volcanic area, Iceland. (For a map of all the centres, please have a look here). But, how does this simulation work? Basically, based on a number of initial data, they run a atmospheric dispersion model, called NAME, to predict the spread of volcanic ash plumes. Similar models are also used to predict the spread of a eventual chemical leakage, or even of an airborne disease, so they seem pretty proven. You probably have seen the output of running this forecasting model, it gives back a map like the following (I include the one that has been published this morning): 

But again, we have to remember our initial question. We know the output of the model, and the decisions made based on that output, but what about the input data? A model can only be as good as the data it is using,that's evident. Which essentially means that we should have a very close look at the input data. In the case of the London VAAC (which is part of the Met Office), data are collected to track the movement and dispersion of volcanic ash clouds using both polar orbiting satellites and geostationary satellites. Images are produced every 15 minutes, which is actually quite impressive, since this implies a large data stream, which is crucial for any data forecasting. In addition, the model allows to be complemented with other types of data, such as visual evidence, pilot reports, etc. All these basic data inputs are being fed into the NAME model, producing the final forecast, which is then used to issue the recommendations that the London VAAC issues. These recommendations so far have been the fundamental piece of information that both the British National Aviation Travel Service (NATS) and Eurocontrol have been using for their decision making about closing or opening airspaces. To track the London VAAC observations, please visit their blog. 

You may be wondering: And what about other types of measures? Going out and measuring real concentration? Well, this is proven to be a complex task. The British Met office actually publishes all evidence they have on a meshup map (thanks to Google Map!), which I encourage you to visit to make your own judgment. Essentially, the map collects data from two types of sources: One is a so-called laser cloud base recorders (CBR), which are able to detect the presence of ash particles at different altitudes. The other source of information is what they call ad-hoc reports. These go from something like "Report from public of ash covering cars", to “a layer of ash at 10000FT observed by parachutists”. Trustworthiness of these sources? As you can imagine, they have to be thoroughly followed up.

What is surprising to me is that during the weekend, according to the German FAZ, only the UK and Finland have done this sort of measuring, while on Continental Europe only one CBR measure has taken place. Actually, while the London VAAC is issuing new reports on a 6 hour basis since the start of this "Air-crisis", the VAAC of Toulouse, in charge of the entire European Continent, Middle East, and Africa, has not issued any recommendation so far. I also haven't been able to find any information about any additional activity from the Toulouse VAAC in the past days.

Hence, it is evident that we need more data about ash concentrations to complement existing data that have been used to run the complex simulations that have been driving the decisions about our airspaces. Can this evidence come from planes making trial flight with our well known jets? It is obvious that planes that fly may give us some additional evidence, but since Commercial planes don't have the instruments to detect ashes nor their concentrations, the real amount of additional data they give us is scant. They may tell us that their inspection of the engines and other parts of the plane after a particular flight does not indicate sufficient concentration of ashes, but that is of little use to extrapolate to the entire airspace. What if the plane had be flying higher, or on a slightly different route? Where were the ashes if traces were to be found on a plane, exactly? Do we want to use this information to make a decision of opening our airspaces? Or are the basically creating buzz? 

We should probably start understanding that we need to think further about the total body of data that we want to use for a more holistic analysis, rather than claiming that the existing model is "theoretical" and that this "doesn't work", as Mr Bisignani, of the International Air Transport Association, has claimed. This is not issue of substituting a mathematical model, but of improving it with more data. It is undeniable that the data that the model uses are extremely relevant. Hence, we should start finding useful data that may improve the model currently used. And as much as I regret it, I think that the news from Airline companies add little data to improve any decision, they just create buzz and a lot of pressure on the decision bodies. What is needed now is real measures. Measures from meterological stations all around Europe which are producing data that  should be  fed into the models. We also need to see real coordination among the London and the Toulouse VAAC, which I hope is happening, but for which no information can be found on the web despite a very intensive search for some joint news. And we need real in-the-air measures should complement CBR and other types of initiatives. But not from Commercial airplanes that cannot measure concentrations of ashes at different heights. We need real data collection.  In Germany, is has been reported that today a first plane with that specific aim will start in Pfaffenhofen. This is a start, but more has to follow. At the end, it's plane that will have to go again "up in the air". But not to substitute the existing models, it's to enrich them.

Social CRM: “It’s Complicated”

“It’s Complicated”. This could have been the best status to describe the relationship between Nestlé and its Facebook page a month ago. This situation began when Greenpeace launched a campaign against an alleged purchased by Nestlé of certain palm oil for use in KitKat candy bars. Environmental activists posted a negative video on YouTube and started an organized attack to Nestlé’s page in Facebook. They claimed that the use of palm oil is contributing to the destruction of Indonesia’s rain forest and endangering orangutans. Yesterday, Nestlé posted in Facebook a letter to Greenpeace written by Peter Brabeck-Letmathe, Chairman of Nestlé, calling for a moratorium on the destruction of rainforests and describing how the two organizations can meet this common goal. Although it seems that things are returning to normal, it is clear that this organized social warfare caught Nestlé off guard. As a matter of fact, the amount of the questioned palm oil purchased by Nestlé is only 1.25% of all the palm oil purchased by the company. However, one of main the problems was the initial defensive attitude of Nestlé in Facebook by posting last March 19 the following statement: “To repeat: we welcome your comments, but please don't post using an altered version of any of our logos as your profile pic - they will be deleted.” This statement provoked a surge in the number of fans to Nestlé Facebook page, reaching in a few days more than 95,000 fans. Most of the new fans were anti-Nestlé.

This example illustrates that the use of social media, in this case Social Customer Relationship Management (Social CRM or CRM 2.0), obeys to different rules than traditional ones. While traditional CRM is focused on transactions and driven by purchases, in contrast, Social CRM is focused on the interaction with the customers. In other words, the customer owns social media and brands cannot pretend anymore controlling them but engaging customers in online conversations. Social CRM should not be considered as a replacement of CRM systems, but as an extension of them.  Nowadays, we are in the early days of Social CRM, and many companies are experimenting their presence in Facebook, Twitter, YouTube or other social networks, while they are still figuring out how to measure the ROI of such initiatives. However, those companies generally agree that Social CRM is an effective way to connect with their social customers, to identify online conversations that have an impact in their business, to enrich and enhance existing customer data, to track market reaction and to identify key trends. According to a recent report of Forrester Research, more than four in five US online adults now participate socially, and from a survey of 286 companies, 21% have already established customer communities (e.g. www.MyStarbucksIdea.com or StarBucks Facebook page with 6,8 million fans), and an additional 42% are piloting or interested in implementing customer communities. To that extent, the main CRM vendors (e.g., MS Dynamics, Oracle Siebel, Oracle  CRM, salesforce.com, SAP CRM, etc.) are already adding web 2.0 tools to their existing CRM solutions such as wikis, blogs, RSS, social bookmarking, social networking, widgets and podcasting.

As it happens with all information systems, Social CRM is not a question of using one or another technology but defining clear objectives aligned with the company strategy. For instance, if we are interested in market research we can perform ongoing monitoring of our customers’ conversations instead of traditional surveys or focus groups. Moreover, if we want to reduce our customer support costs we can enable our customers to support each other through discussion threads. Therefore, companies when using Social CRM should think about customer engagement rather than customer management. First, companies should develop strategies and tools to enable those types of interactions with their customers. Second, they should also define their Social CRM metrics, through dashboards and tools interconnected to their CRM systems, to assess the degree of success of their initiatives in social networks.

Social CRM is the natural consequence that consumers are massive embracing social networks, and it is framed in a broader trend called the consumerization of the enterprise space, where the line between consumer and business technologies continues to blur. More are more employees demand as easy to use as consumer applications. Examples of the consumerization trend is the iPhone, where enterprise users are taking significant interest, or the CISCO last week announcement of releasing its WebEx online meeting business application for Apple's iPad tablet platform. In a recent conference, Marc Benioff, CEO of salesforce.com, was wondering why in a company it easier to know through Facebook when a remote acquaintance is going to a movie than when our VP of sales is visiting a key customer. The answer is that in Facebook, content, apps and people are all fully integrated. Are we ready for a similar change in enterprise collaboration? Some initial answers can be found in the research study on the enterprise use of social media posted previously in this blog. Nevertheless, social media is here to stay. We would be better change the status from “It’s Complicated” to “Engaged”.