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Finally, Microsoft + Yahoo...

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After months and months of merger and acquisition talks with Microsoft and Google, Yahoo has finally reached a deal to merge their search and search advertising functions with someone - Microsoft! The deal will last 10 years, and "Microsoft will now power Yahoo search while Yahoo will become the exclusive worldwide relationship sales force for both companies' premium search advertisers," according to the companies. Further, Yahoo will get 88% of the search revenue for the first five years, which is higher than the 60% or so that is typically given in these types of deals.

To some Yahoo supporters, the deal may be disappointing, because it is much less lucrative than the $44 Billion buyout of Yahoo that Microsoft attempted last year. The companies announced that the new deal will likely lower Yahoo's costs and increase their profitability, but it may not have a huge impact on their revenue. The cost reductions are due to the fact that Microsoft will absorb all of the search technology development and infrastructure costs. However, Yahoo will lose the chance of having a distinctive competence in search, the most lucrative area in internet advertising.

Yahoo will now be able to focus on the portal content and display ads areas, which they are a leader in now. However, this has not been a recent growth area for the industry. AOL has focused on these areas in recent times, and the results have not been pretty.

For Microsoft, this deal will allow Bing to gain market share, and it will possibly cause Bing to become more prominent in the eyes of users. Further, the deal eliminates one of their main search rivals. As Bing receives more traffic, it will also allow Microsoft's engineers to improve its engine at a faster rate.

The deal will need to pass regulators, who did not look favorably on the recent potential Google/Yahoo deal. However, even combined, Microsoft and Yahoo will have a share in the search market that is less than half of what Google has. The companies hope that the deal will be quickly approved and that the merger will start in early 2010.

The next exciting step will be to see the reaction of the industry leader, Google. They may try to step up their search offering, and they may try to influence the decision of the regulators. More on this to come...

The future of office printing

As far as consumers are concerned, before Amazon’s Kindle arrived, the last time printing had been considered high technology had been around 15th century, the time of Johannes Gutenberg. Today people seem to be reading mostly from screens, be it mobile, desktop or Kindle screens. Declining newspaper sales are merely the most visible reflection of a larger trend: the days when people read things on paper seem all but counted and digital is king.

That is, unless you happen to be in charge of your company’s printing operations. Gartner estimates that between 1% and 3% of an organization’s revenues are spent on print. Think about the last time you went to a meeting and needed to print out meeting notes for everyone to keep everybody on the same page—literally. And what happens to these notes after the meeting? Many of them end up in the trash bin. In fact, according to Xerox, 40% of documents that are printed in the office are only viewed once. That is a huge waste, not to mention that it’s environmentally unfriendly.

While Kindle and other electronic readers are surely useful for books and newspapers, people still prefer to read many documents from paper. This is a major reason why the promised revolution in corporate workflow where electronic documents (say, in the form of PDF files) would be created and shared without the need to print them out, despite much hype, has not materialized.

So instead of changing people to wean them off paper, some are trying to change the paper itself. Xerox for one has been working on what it calls “erasable paper”. A special printer would print on special paper, and the printed image would disappear by itself in 16—24 hours, or be erased immediately by heating it, after which the paper can be reused. Separately, a team from Northwestern University is working on plastic-sheet “paper” that allows printing in color and defining the time after which the image disappears.

Neither technology is yet available commercially and their prices are unknown, so the economics of their use compared to traditional paper cannot be estimated. But if and when these technologies come about, the need for shredders and dedicated paper recycling bins would fade away, much like the text on the erasable paper.

Software as a service goes mainstream: A tribute to those that made Microsoft's decision to open its Office happen!

If last summer was that of financial turmoil, this summer may very well become that of the long-seeked change of the software industry. What a month!

Microsoft launches Bing, Google responds with Google Wave. Google announces the Chrome OS, Microsoft responds launching a free Office version. OK, it will still take some time until we see most of these things in the market (with the exception of Bing, but even Redmond’s new search engine in my humble opinion still requires some serious rework), but I have never before seen so many breaking news (and IT industry players making it to the front-papers of all sort of news outlets) in less than a month.

Nevertheless, we should not lose perspective. News these days tend to highlight that this is a battle of “titans”. I think that even though we have two enormous players, we should not forget that this battle would not be taking places if it wasn’t for the entire  IT ecosystem claiming for a change.  The “integrated software” model, initiated decades ago has proven to become more and more a burden to those clients that made caused its rise: corporate clients.

It were the corporate clients who have triggered most of the evolution in the IT industry to its current constellation. Large  corporations were asking “platforms” that would allow them to integrate all sort of solutions. Microsoft was smart enough to become the first of those platforms, other payers (like SAP) have achieved similar success following the same strategy.  But the model had some drawbacks. The first and foremost probably has been –and still is today- that firms suffered a high dependence on a single provider with noticeable pricing power and gate-keeping functions. In times of relative cost unconsciousness this model could work, especially in a context of relatively low IT-knowledge in the higher ranks of the corporations, and consequently with high de-attachment of executive boards and CEOs from IT-related decision . Even more, product innovation seemed fast enough in an environment in which most organizations were busy “automating” business processes. But those times are over. Cost consciousness has skyrocketed, and so have the needs for increased innovation, especially in the world of increased emergent, virtual and collaborative work.

Collaboration, virtuality,  and emergent connections initially were not dominant in the corporate world, but developed in the consumer world, in the world of the young people, in the world of those who had to use technology and who could not afford to spend the big sums that organizations were willing to spend. In sum: in the world of Internet. This is where the “freemium” model was born, dismissed by the dominant players. “Get the basic version free, pay for the premium” has become a business model that is feasible for many of the newcomers (including Google, of course), but not for the established league of software giants. Their rules were different. But now their rules seem not to apply anymore.

In a day like today, in which Microsoft announces that it will move towards its own “freemium” model, we should not forget to thank those that have been instrumental to make this change happen. The news that we are seeing these days are a joint effort of the many small (and some big) companies that have believed for many years that a different software would is possible. With a free operating system – think Linux. With free software pieces – thanks to Sun and Java! With a more open architecture – think Oracle. Try it for free, and then, either you pay per use (and here we go straight to software as a service!), or somebody will pay for you (advertisers, show me something that I value while I use the thing!) And of course, we should not forget all that have build up business models that have made that the final users have gotten used to this new way of functioning: In music (check out SlicethePie, or Spotify), in the telecommunications world (Apple’s application ecosystem for the iPhone or the Finnish operator DNA introducing ad-funded mobile phone subscription), on the Internet (more companies than I can possible enumerate here, look them up at Crunchbase).

Last summer, we did not want to hear the news about the evolutions in the financial industry. But I must say: I am looking forward to IT news this summer!

Increased Information Freedom in China

Greetings from China. I am writing this post from China where I am traveling with a group of global executives in the context of a corporate training program. I had not been in China for a year and a half and I must say that I can feel the effect of social media in the internet on the country’s information policies.

One of the classic discussions on the web has been the censorship of Google by the Chinese government http://www.wired.com/science/discoveries/news/2006/01/70081  The censorship basically was a reflection of the policy of restricted information by the government to its citizens; not letting Google index some sources of news was a good way to prevent users from finding them. Things have changed dramatically in a very short time, and I believe it is due to the ability of the Chinese citizens to connect to a myriad of social networks and interact outside the formal control of the government. If the citizens can send information to the world via social nets and get informed through them as well, it does not make much sense to drastically block information, if you do not block it, you may as well report it, as this gives you an opportunity to provide your own version of the story. The included picture is the front page of the China Daily newspaper reporting on the current situation in Xinjiang that forced the country’s president to return to China. Publishing this news was an almost unthinkable event just a few years ago.

Another obvious indication that the situation is changing is that I am writing this post from China (maybe they will detain me in the airport, guess that this happened if I do not block any more!) . All these changes are nothing but excellent news. There is still a way to go for this country as the freedom of the press is concerned, as evidenced by comparing the actual content of the different news sources from the outside that can be read here and those reported by Chinese media. In any case, the progress evidenced by not blocking news items from outside sources is crucial and it is the best step in the right direction 

Google Chrome Operating System!

Just a quick note to draw your attention to another piece that shows how the IT landscape is redefining! Google will launch a new operating System, Chrome OS. Have a look at their blog for the official announcement, and follow up on Techcrunch. We will write more about it soon!

Google AdSense in the Mobile World

Mobile applications have been receiving increasing business interest recently, as their functionality and capabilities have quickly increased. The early platform leader in mobile applications has been Apple. This is partially due to the fact that they were the first mover and created the first highly usable online application store. The success of this store became clear when Apple recently announced that they had reached 1 billion downloads.

While a significant amount of money has been made on the sales of applications through outlets like the iTunes store, many of the newest applications being distributed are low in price or are free, which has pushed down the average price of mobile applications and has encouraged developers to look for other revenue streams. Google, whose mobile Android operating system has not caught up to Apple yet in attracting developers, has decided to entice developers of low-cost applications with the roll-out of the beta of AdSense for Mobile Applications

AdSense for Mobile Applications allows mobile applications to display text and image ads on Android and iPhone applications. The ads will be similar to Google's other AdSense system, and advertisers can bid for placement based on keyword, demographics and location, and they can bid directly for a specific application. Also, developers will be able to filter out ads that they don't want to show in the application.

Popular applications will likely be the main beneficiaries of mobile AdSense in the beginning. Advertisers will likely not bid much until they are confident that the new ads are paying off. However, if the initial uses prove to be positive, the bidding will increase, and the use of ads on mobile applications could explode in a relatively short period of time and further drive down the price of mobile applications.