Outside the Lines

EIC Squared: Chrome, iPods, and a Dell-Salesforce union

Dan Farber — Fri, 05 Sep 2008 21:52:00 GMT

On this week's EIC Squared podcast ZDNet's Larry Dignan and I discuss Google's latest disruption in the Web 2.0 field, the Chrome browser, as well as Apple's product launch event on September 9. In addition, Larry explains his idea that Dell and Salesforce.com could merge. Dell is trying to be more of a software company and is using the Force.com platform, and Salesforce.com is a major Dell customer. But, it's unclear how Salesforce.com, its shareholders and customers, would hugely benefit from a union.

Google Apps tops 1 million businesses

Dan Farber — Wed, 03 Sep 2008 14:30:00 GMT

Google is well known as a one-trick pony.

Almost all of the company's revenue comes from its search engine, which last quarter accounted for more than $5 billion. New initiatives, such as the Chrome browser, Google Gears, and Google Friend Connect, are focused on building a mostly open-source Internet operating system out of Google technology in order to funnel more user data and targeted advertising opportunities into the Googleplex financial engine.

It's easy to draw parallels to Microsoft, which gradually built the dominant 20th century operating system and applications platform. Bill Gates and company realized that attracting developers to the Windows platform was key. Google is following that advice with its open-source projects and allowing its mad scientists to try to remake the early 21st century software world and take on Microsoft.

Microsoft has led the way with productivity software, gaining a more than 90 percent share of market with Microsoft Office. Google is hoping to replicate Microsoft's office suite success with Google Apps. It's far less feature-rich than Microsoft Office, but Google Apps Premier edition is far cheaper at $50 per user per year.

For some companies, Google Apps is "good enough," and its cloud-based, collaborative core is an advantage--no Microsoft SharePoint server required. Even with a few enterprise wins, Google Apps is a puny business. According to a Fortune article, Google brought in about $4 million with its Google Apps business in 2007, compared with $12.2 billion for Microsoft Office. Google Apps is a profitable business, according to Matthew Glotzbach, enterprise product management director at Google.

Since early this year Google has been touting 500,000 active business customers, primarily small businesses, using at least one of the Google Apps, and more than 10 million active users. In addition, thousands of universities, with more than one million active users, are using Google Apps, the company said. So far, Google's biggest wins are Valeo, a leading automotive suppliers, with 32,000 users, and the District of Columbia, with 38,000 employees.

However, the vast majority of Google Apps users are not paying customers. The company maintains that "hundreds of thousands" of users are paying the $50 annual fee. The $50 per-user-per-year Premier Edition offers several features lacking in the free Standard Edition, including Postini messaging security, APIs for integrating Google Apps with IT infrastructure, 24x7 support, 99.9 percent uptime guarantee for e-mail, Google Video and 25GB of storage per account.

At this point, Google is underplaying the number of Google Apps business customers. The company has been saying that it is adding 3,000 businesses a day, which amounts to over 1 million per year. The reality today is that Google has more than a million Apps business customers. In addition, the Apps suite continues to fill out, most recently with Google Video.

It took Microsoft years to build a base of applications and developer ecosystem for Windows and Office. Google faces the same uphill climb for Apps and its fledgling Web operating system. The company hopes to ride on the backs of the younger generation that has grown up on the Web and identify with the Google brand. As the Google generation moves into positions of purchase authority within businesses, Google is betting that those decision makers will shun Microsoft, especially as Apps product features improve. Of course, the resilient and relentless Microsoft will respond to Google's challenge when it is more than a $4 million or even $20 million blip.

EIC Squared: Psystar vs. Apple, Cisco vs. Microsoft, Dell's cloud

Dan Farber — Thu, 28 Aug 2008 13:09:00 GMT

On this week's EIC Squared podcast, ZDNet's Larry Dignan and I discuss the legal tussle between Apple and the Mac cloner, Psystar.

This week, Psystar sued Apple on antitrust grounds. Psystar execs said they just want to make the Mac OS "more accessible" by offering it on cheaper hardware than what Apple provides. It's hard not to imagine Apple fighting this one to the bitter end and Psystar getting crushed in a lengthy litigation.

Another battle is brewing with Cisco Systems adding e-mail and calendaring to its on-demand, collaborative software platform with the acquisition of PostPath. This might speed up Microsoft's delivery of an on-demand software suite. If Cisco wants to push its suite further, Zoho would be an acquisition target.

Larry and I also discuss the coverage of the Democratic National Convention. And I share my thoughts on Dell's cloud computing efforts, which means selling bare-bones servers optimized for cost, operational efficiency, and energy conservation.

Exploring Internet Explorer 8

Dan Farber — Wed, 27 Aug 2008 21:44:00 GMT

Robert Vamosi and I discuss the new features and browsing capabilities of Microsoft's Internet Explorer 8 and how it stacks up with other browsers. The new release brings IE up to par with Firefox, Safari, and Opera, and even pushes Microsoft a little ahead of the competition in a few areas.

Internet Explorer 8 beta 2 review

Internet Explorer 8 screen shots

Internet Explorer 8 gets a massive makeover

Dell's designs on cloud computing

Dan Farber — Wed, 27 Aug 2008 19:29:00 GMT

SAN FRANCISCO--Standing 52 stories in the air at the upscale Carnelian Room in the Bank of America building here, executives from Dell, Facebook, and Salesforce.com discussed the meaning and use of the latest technology buzzword, cloud computing.

The sky was blue and cloudless, but it didn't adversely impact the atmosphere of what turned out to be a Dell marketing event. It was pitched as an announcement about a partnership that involves "the next generation of cloud computing."

You might recall that Dell is the company that owns the URL Cloudcomputing.com, and made a failed attempt to trademark the phrase. Earlier this month, the United States Patent and Trademark Office rejected the company's application. Dell marketing head Andy Rhodes wasn't willing to comment on whether Dell would appeal the USPTO decision.

Despite the cloudless sky, the speakers offered genuine insights into cloud computing, an umbrella term for "hyperscale" computing that covers everything from delivering compute services like a power utility delivers electricity, to simply hosting applications off-premises (see also software-as-a-service and on-demand computing).

(Credit: Dell)

Event host Forrest Norrod, vice president and general manager of data center solutions at Dell, defined cloud computing as an economic enabler for applications, not just for single applications but for platforms-as-a-service, such as Salesforce.com. He emphasized the economies of scale advantage that cloud computing has over client/server and previous generations of infrastructure deployment.

Forrest Norrod, Dell's cloud computing chief

(Credit: Dan Farber)

Dell is currently a cloud computing arms supplier to companies such as Facebook and Salesforce.com. "Dell is focused on early adopters and large customers, about 50 worldwide, to provide optimized servers, storage, and data center infrastructure," he said. "Cloud computing is still an emerging market, with standards across the framework and software stack still emerging. We are trying to promote an ecosystem to build the software stack on top of the infrastructure. You will gradually and judiciously see us add capabilities up and down the stack.

Norrod pointed to recent Dell acquisitions--Message One, Silverback Technologies, and Everdream--as examples of Dell's focus on software, not just the hardware piece. Increasingly, both Dell and HP are building out their software stacks to compete with Sun and IBM for providing highly automated data centers running commodity hardware optimized for cloud computing.

Jonathan Heiliger, Facebook's vice president of technical operations, had some praise for Dell. "Dell is doing the most aggressive things possible to optimize for cloud computing," he said. "We think Dell is perhaps the furthest along and we see them as a thought leader." Facebook has more than 10,000 servers, Heiliger said, and it's safe to assume any of them come from Dell.

He noted the price of hardware is not the biggest issue. Vendors can even sell hardware at a loss or at a fixed margin cost to get the initial business. "What we have seen in the landscape is that most server providers are trying to provide Lexus quality products at a Toyota price. We are looking for Scion products at a Scion price," Heiliger explained. "(Vendors) have to be creative around power and airflow optimization. The cost of operating the hardware is key; you have to take down the operating cost, not just the server cost."

For Heiliger that means bare-bones servers. "We don't need fancy graphics chips and PCI cards," he said. We need one USB port and optimized power and airflow. Give me one CPU, a little memory and one power supply. If it fails, I don't care. We are solving the redundancy problem in software." Blade servers are not ideal, he said, because of the higher cost and proprietary lock-in that come with the lack of a standard chassis.

Check out the video interview I conducted with Heiliger about managing infrastructure hypergrowth as Facebook adds 250,000 users per day.

Claus Moldt, vice president of technical operations at Salesforce.com, offered similar comments to the previous speakers. The company is phasing out Sun equipment and standardizing on Dell servers (Dell is a customer of Salesforce.com). Salesforce.com has two data centers in the U.S. and one due to go online in Singapore later this year. Moldt said his biggest challenge is capacity planning, making sure that as customer usage patterns change, the Salesforce infrastructure can adapt instantly.

Dell is betting big on cloud computing to boost its enterprise footprint. At this point, Dell doesn't have plans to build its own cloud to provide hosting for external applications, Norrod said. But, there may come a time when being an arms supplier won't be enough for Dell to be competitive. In addition, selling bare-bones servers can't be much of a high margin business, which is why Dell is moving more into software and services. Norrod said Dell's cloud computing efforts have been a large component of Dell's recent market share growth. Dell's second quarter earnings due tomorrow should give a more precise indication of the impact of the cloud on company's business.

Welcome to the new CNET

Dan Farber — Wed, 27 Aug 2008 13:09:00 GMT

Over the last few months we have been beta testing, tweaking, and fine-tuning the new CNET user experience. Today, August 27, the yellow and green CNET pages are history as we have completed the rollout of our new site design and speedier service.

As I wrote in a post in June, we are updating our look and feel after nearly 13 years of variations on neon yellow and green:

CNET started out in 1992 as c/net, meaning Computer Network, a 24-hour cable network about computers and technology with original online content. CNET online launched in June 1995 and quickly became a huge success. Over the years, we stuck with the neon yellow legacy from the TV days as the Internet grew to encompass all forms of media.

We had two key goals with this CNET revamp--make the site easier to use and speed it up. Simplicity is the major theme of this design, and that includes the new "pipeless" CNET logo, a more consistent site structure and a streamlined color palette.

Behind the scenes, we also rewrote the CNET back-end infrastructure, creating a new API that is delivering pages 40 percent to 50 percent faster in some cases. The API also makes it much easier for partners, such as Yahoo and Univision, to work with our content.

(Credit: CNET Networks)

Following are some of the new CNET highlights:

• News integrates Webware and Crave as well a more topic sections under the CNET News umbrella.

• Improved search functionality and tools have been deployed throughout the CNET site.

• Buying advice is surfaced in most relevant places throughout CNET Reviews.

• Web reviews from around the Web are accessible in CNET Reviews.

• CNET TV is delivered in beautiful HD format.

We are proud of what our team of designers, engineers, and producers have accomplished over the last several months. We aren't finished with the new CNET, so after a brief rest from late nights and pizza they will be back eliminating rough edges and adding new features. We also appreciate all the feedback we have received from our users during the beta testing--keep in coming. Now back to our regular news programming...

Daily Debrief: Yahoo's winding road

Dan Farber — Tue, 26 Aug 2008 21:27:00 GMT

On Tuesday's edition of Daily Debrief, our Microsoft-Yahoo watcher Dawn Kawamoto talks with me about what has happened since Yahoo's well-documented August 1 shareholder meeting. Yahoo's stock price is nearing a 52-week low this week, but the herd of press and analysts covering the company are either on summer vacation or allowing Jerry Yang and his somewhat new board of directors a respite from their attention. Like other public companies, Yahoo lives by the financial quarter, so the watchers will be hovering as the quarter ends in September, speculating on how Yang and company perform now that the boardroom melodrama has abated.

CNET 2008 beta test expansion

Dan Farber — Mon, 25 Aug 2008 23:24:00 GMT

As I wrote in a post in June, we are updating our look and feel after nearly 13 years of variations on neon yellow and green.

We are expanding our beta testing, so you may be seeing the new site when you come to any of the CNET sites (News, Reviews, Downloads, CNET TV).

It's a work in progress--if you land on the new pages, give us some feedback (fill out the brief feedback form linked at the top of the pages).

The OpenSocial roadmap

Dan Farber — Wed, 20 Aug 2008 23:32:00 GMT

On November 1, 2007, Google launched OpenSocial, a set of APIs that leverage JavaScript and HTML for creating applications that access friends and update feeds from any compliant social network. Nearly 10 months later, Google is touting the maturation of the OpenSocial specification and growing developer and user adoption.

At this juncture OpenSocial version 0.7 has an addressable market of more than 300 million social network users, including the social networks that have delivered OpenSocial applications or are actively developing them, according to Joe Kraus, Google's director of product management. Friendster, which claims 75 million users including 55 million in Asia, recently unleashed OpenSocial for its developer community. Hi5 has more than 1,800 OpenSocial-compliant applications and 66 million installations, according to platform architect Paul Lindner. Hi5 has nearly 60 million users, with 80 percent outside the U.S., according to ComScore.

Overall, Kraus said that there are more than 4,500 OpenSocial applications and 150 million installs. In comparison, Facebook, which has so far eschewed OpenSocial, has more than 30,000 applications and 700 million installs.

"We expect to reach 500 million OpenSocial users by the end of the quarter. It's also very international, as social networking is a global phenomenon," Kraus said.

(Credit: Google)

The latest version of OpenSocial, 0.8, adds a number of new features that extend beyond its original JavaScript roots. "When we launched OpenSocial JavaScript was the center, but the community wants more choice. We agreed upon a RESTful API that gives access to the social bits and is already implemented in Apache Shindig and deployed by hi5 in beta," Kraus said. The OpenSocial RESTful API specification defines how servers, mobile devices, and desktop computers interact with OpenSocial containers without the need for JavaScript or direct user interaction.

"Hi5 launched with OpenSocial very early--January 1, 2008--and we ended up building the system, which had a lot of undefined pieces," Lindner said. "We had a lot of custom work with the REST endpoint so that applications could contact our server directly. As time went by all participants came up with one-offs, but now we are bringing it all together in the community with common types of solutions for these problems. Standardizing on a single specification will allow application developers to write code once and it will work on all different containers. We are already seeing others build on REST specification. Plaxo, for example, has enabled privacy-enabled exchange of contact info."

In addition, the OpenSocial community is working on compliance tools, such as an application that determines the level of compliance for a container.

(Credit: Google)

The 0.9 version of OpenSocial will add templates and markup, making it easier to develop the user experience dimension for an application. "Templates and markup are now in discussion on public mailing lists, but we believe we are pretty close," Kraus said. Regarding when OpenSocial is deserving of a version 1.0 designation, Kraus said that the "community will make the call."

The community Kraus speaks of is the group of about 350 developers participating in the main discussion around the evolution of the open-source OpenSocial specification and reference implementation. Google obviously has major clout in the evolution of OpenSocial, but Kraus noted that just 10 percent of the major participants are from Google.

To further untether OpenSocial from its origins, Google has also proposed an OpenSocial Foundation, which would be a steward for ensuring the OpenSocial specification stays open and intellectual property and patent non-assertions are handled so that developers feel safe about using the code, Kraus said. An announcement about the OpenSocial Foundation is expected "really soon," Kraus added.

Google clearly has a vested interest in seeing OpenSocial succeed. As Google's Vic Gundotra explained at the November 2007 launch, OpenSocial makes good economic sense. "The more applications, the more usage. More users means more searches. And, more searches means more revenue for Google. The goal is to grow the overall market, not just to increase market share." Having the an open source community behind it will make Google's economic mission much easier.

Zoho's last stand

Dan Farber — Mon, 18 Aug 2008 22:11:00 GMT

Sridhar Vembu

(Credit: Zoho)

Sridhar Vembu, CEO of AdventNet, is not afraid of going up against Microsoft Office or Google Apps. He is also the CEO of Zoho, which recently announced that it had achieved 1 million registrations (between 300,000 and 350,000 log on to the service monthly) for its cloud-based set of productivity applications. Vembu is now making a financial case that Zoho is better positioned than Google to take on Microsoft in the upcoming office suite sweepstakes.

Vembu's analysis is based on a comparison of revenue per employee and profit per employee metrics. "The gap in revenue per employee between Google and SAP and Salesforce.com, for instance, indicates that Google would more likely be more interested in what eBay does or in monetizing YouTube than in Zoho or Salesforce.com's barely profitable business. Companies invest in what generates the best return on investment," Vembu explained to me.

(Credit: Zoho)

In an e-mail explaining his financial analysis, Vembu wrote:

We simply don't believe Google has the rational business incentive to go deep into the business/IT software category. The lower revenue and profit per employee figures would be tolerable if there were huge growth opportunities there; but when very successful companies like Adobe and Intuit pull in revenues well shy of a Yahoo, when even the enterprise software leader SAP is the same size of Google (Google makes more in profit per employee than SAP makes in revenue per employee), it is fairly clear this market is not going to make a material contribution to Google's growth and profitability objectives. So what is Google's plan here? It is fairly obvious they are in it to put Microsoft on the defensive on its home turf, so that Microsoft's offensive capability in the internet is diminished. It is also perfectly clear why Microsoft wants to be an Internet player--as Google has shown, it is a higher margin business even than its monopoly-profit core business.

"Google's margins are a once in a lifetime occurrence, and Google will move in that high-growth direction--that's why Microsoft is so desperate about search. It has a higher growth rate. We are more worried about Microsoft than Google. Microsoft will address the Internet, but pulling down Office margins is a challenge for them. No company peacefully accepts a lowering of margins," Vembu said. "Our intention is to help erode Microsoft's profit margin, coming in from below." Zoho has built a more comprehensive suite of cloud-based apps than Google or Microsoft, and most of them are currently free to users.

Vembu cites the cost of sales and support as a drag on revenue per employee and profit per employee. "If salesforce is a proxy, it would be difficult for Google to justify the investment. More costs are associated with support than in R&D, even with on-demand software. The moment you have paying customers, the expectations are different, and Google is finding that out with recent Gmail problems," Vembu said. In addition, he noted that selling into small- and medium-size businesses is difficult, but the margin is higher than for large enterprise accounts. Adobe Systems and Intuit, for example, have more revenue per employee than Oracle or SAP.

Zoho's revenue per employee is mostly nonexistent given most of the Zoho suite is currently free and not-ad supported. Vembu estimates Zoho's revenue per employee will be in the $200,000 to $250,000 range when the revenue spigot is fully turned on at some undetermined point.

While Zoho behaves like a scrappy start-up, it is well-funded by India-based parent company AdventNet, which develops enterprise IT management software. AdventNet has 900 employees and is profitable, according to Vembu. "One of the privileges we enjoy as a private company is to not disclose revenue/profit numbers, which lets us do the kind of analysis on competitors they can't do on us," he joked.

The problem with Vembu's logic is that Google has an enormous pool of cash to invest in improving the economics of business and consumer productivity software suites. And, part of being a software company is having multiple and adjacent revenue and user data streams. Microsoft is a highly profitable software company with many adjacent divisions. Google Apps won't be as profitable as search, but it will be profitable and ties users into the Google platform and monetization engine.

If Google can attract consumers with its apps, gaining entry into small- and medium-size business won't be a huge profit-sucking sinkhole of sales and marketing. The search giant claims that more than 500,000 businesses and schools have signed up for the free and $50 per-user-per-year Google Apps. According to Dave Girouard, head of Google's enterprise division, the Google suite has about 10 million active users. Google can afford to invest in building the the market for Google Apps, and Microsoft will be forced to alter the economics of its Office business as cheap and capable cloud-based suites, with offline capabilities, gain traction.

What does that mean for Zoho? Run faster and hope that Google and Microsoft move slowly.