I retired from personal blogging in July 2008 but you can find me over at blog.xero.com
Follow @roddrury
From Troy …
http://waynesword.palomar.edu/faketree.htm
New “species” of trees are suddenly appearing in San Diego County. Their entire growth cycle is completed within a few days in one of the most unusual examples of urbanization.
For those coming to the ICT function in Tauranga Wednesday, let me know if you have anything in particular you want to cover, otherwise I’m happy to spend the time discussing the artifical surf reef in Tay Street. (Nice video - I wish we could get the Lyall Bay one sorted).
I think we have 60+ people coming so looking forward to hearing what’s going on in the provinces and psyching up to be jealous of the lifestyle.
This came through the email today …
Sales: “You want answers?”
Finance: “I think we are entitled to them!”
Sales: “You want answers?!”
Finance: “I want the truth!”
Sales: “You can’t handle the truth!!!”
Sales (continuing): “Son, we live in a world that requires revenue. And that revenue must be brought in by people with elite skills. Who’s going to find it? You? You, Mr. Operations? We have a greater responsibility than you can possibly fathom.
You scoff at sales division and you curse our lucrative incentives. You have that luxury. You have the luxury of not knowing what we know: that while the cost of business results are excessive, it drives in revenue.
And my very existence, while grotesque and incomprehensible to you, drives REVENUE! You don’t want to know the truth because deep down in places you don’t talk about at staff meetings … you want me on that call. You NEED me on that call!
We use words like comps, migration, discounts, flex licensing, global purchase agreements, butt-fusion. We use these words as the backbone of a life spent negotiating something. You use them as a punch line!
I have neither the time nor inclination to explain myself to people who rise and sleep under the very blanket of revenue I provide and then question the manner in which I provide it. I would rather you just said “thank you” and went on your way. Otherwise I suggest you pick up a phone and make some sales calls. Either way, I don’t give a damn what you think you’re entitled to!”
Finance: “Did you expense the lap dances?”
Sales: “I did the job I was hired to do.”
Finance: “Did you expense the lap dances?”
Sales: “You’re goddamn right I did!”
In the latest Telecom submission to the MED, Telecom has calculated it would take $1.5 billion to provide Fibre to the Node (FTTN).
(Johnnie points out this might be 1.5 billion Ferrit dollars, normal dollars may buy considerably more.)
But for the sake of argument, say $1.5 billion fixes our domestic broadband infrastructure issues. Building another undersea cable might be around $700 million. So say 2.2 billion for NZ Broadband nirvana.
Because there is significant benefit from being able to better trade with the the world we could debt fund this and not have to spend the surplus (though we could). In some cases debt is good, especially when:
- we are building a capital asset that provides other benefits,
- the capital asset earns revenue that can repay itself,
- there is a benefit for future generations.
So lets say we debt funded 2.2 billion to sort out our infrastructure. At 10% the costs to service that debt would be 220 million per year. (We want to encourage savings. I’d certainly like to get 10% on my money on a Government backed bond.) Add another, say, 50 million for running the network at we have a 270 million annual operating cost.
Compared to what must be spent on the Internet each year in NZ that may not be a lot.
Let’s reality check that:
- There are 1m NZ households online. Say they all pay $30 per month. That is 360m.
- There are 300,000 SME’s in New Zealand. Say 100,000 spend $100 per month on the Internet. That is $120m.
- In the 2006 financial year, total government operating expenditure on information and communication technology (ICT) was $1.1 billion, and total capital expenditure was $0.6 billion.
- Telcom’s last annual revenue was $4.5 billion. Data was $438 million. Broadband and Internet $336 million.
- Exports from the New Zealand ICT industry totalled $1.6 billion in 2006, representing 9.1% of locally generated ICT sales of $17.6 billion.
- Apparently the Southern Cross Cable paid for itself in its first year. Southern Cross announced new sales of US$310m for the last 6 months of 2006 and plans for a major network upgrade to cope with a continuing upsurge in the demand for capacity.
New Zealand is therefore already spending considerably more that $270 million annually to connect. So having an SOE or other entity that provides infrastructure on a cost plus basis is quite reasonable. It appears there is a solid business case.
Why don’t we just fix the problem?
Finally, National has commented on Infrastructure.
John Key MP, Leader of the National Party, Speech to the Southern Regional Conference, Invercargill:
… What’s more, we’ll make New Zealand an attractive place for entrepreneurs by ensuring we have world-class infrastructure. National will bring urgency to the task of developing the transport and telecommunications networks that New Zealanders deserve.
This includes upping the country’s game on broadband. It’s shameful that large parts of New Zealand are saddled with second-rate, archaically slow Internet connections. It’s unacceptable that so many businesses, including many in the southern region, find themselves in broadband ‘black-spots’, unable to get the speed of Internet connection demanded by global commerce. How can we expect to compete with First World countries if our Internet network is third-rate?
I think the Internet has the power to do for New Zealand what refrigerated shipping did. Used well, it can bring Kiwi products and services tantalisingly close to huge global markets. It’s a disgrace that prevarication by Telecom and Labour has choked these opportunities. New Zealand has fallen well behind the Internet eight-ball.
Each year of prevarication is another year which New Zealand slips further behind the rest of the world. We can no longer expect our businesses to race in sandshoes while their competitors run in Air Jordans. Every Kiwi business deserves a racing edge.
So today, I would like to send a very clear message; dramatically increasing the speed and coverage of broadband will be an economic priority for National. We are working on policies to achieve this objective and you can expect to hear more about them in future.
John Key is a clever guy, as is David Cunliffe. With the smacking issue and yesterdays discussion on interest and exchange rates there is a degree of cross party discussions going on. I think the electorate likes that. We are seeing a more conciliatory style from Telecom. Time to get around the table. This is too important to be a political issue.
The focus now at Xero is building our operational capability. We’re looking for a number of passionate people for a variety of roles.
One particular role that I hope will appeal to someone reading this is Online Product Marketing.
This would be ideal for someone with a web design background who wants to take their career towards marketing. The role of product marketing is to communicate the features and benefits of Xero to support the sales process. This might include Flash collateral, feature video’s videos, web copy, podcasts … whatever.
This is a key role for us and you’ll have a lot of scope to push the envelope.
Would also help if you are good at bowling.
PlanHQ reviewed on WorkHappy.net
It’s a brilliant bit of software. Intuitive, very well designed, and comprehensive without being overwhelming.
PlanHQ is an example of what I call the ‘0 to 60′ model. A relatively small amount of money thrown at a small amount of very smart people. Starting from 0, designing a product, building a brand, a team and getting to first revenues.
As I’ve been flat out with Xero I haven’t spent a lot of time on PlanHQ since we envisaged the concept so it’s a real credit to the team to have launched, get first customers and good reviews.
Like Xero, PlanHQ is a Software as a Service (SaaS) product. Based on customer feedback it can be continuously improved. PlanHQ has no country specific features so is global from day one. All marketing is web and community based (budget = $0), so reviews are key to the strategy. There is no limit to how big/fast it can go. It’s going to be fascinating to see if/when it takes off.
PlanHQ is an example of a ‘new economy’ company. A few young, passionate and talented people, with a relatively small amount of capital, building a business designed to immediately earn export revenue.
These businesses are the future of New Zealand. A small change of R&D treatment, a small amount of investment, and we could have thousands of these little businesses exploiting global niches.
Congrats Tim, Nat, Koz, Ben, Oliver and Nik.
Some good news yesterday. Xero was selected to represent New Zealand at an event in Wales next month called the Technium Challenge.
The Welsh Development Agency put on the event to encourage inward investment. We’re quite aligned with this program as ours is a very regional strategy.
It’s good validation for us for the UK market. Release from the International Business Wales organisation below.
Haven’t been to Wales before, so that’s exciting.
It feels the goal to promote broadband infrastructure as a major discussion issue has been successful. Over the last few days there have been several articles that cover it.
On Saturday the issue held the front page of the Dominion Post business section. Marta Steeman’s article “how to cut the knot”, got the essence of the option I’ve floated accurately.
…Rod Drury is calling on the Government to split off Telecom’s network and run it as a state-owned enterprise, but essentially as a coordinator, not with an open cheque-book
This morning TelstraClear CEO Allan Freeth issued an opinion piece that was inaccurate and surprisingly low quality given his recent missive. I thought he should have have put a bit more effort into the issue.
- No one is talking about a free public network. Consumers expect to pay.
- The Wellington City Council has not committed to any strategy or spend yet and have been very responsible in seeking consultation from all parties. The stage of the process is that the consultation and request for concepts is just about to start. If I was him I would have congratulated the council and got engaged.
- Talk of duplication or any specific spend is premature, not useful and transparently alarmist.
Clearly the Telstra CEO has a lot on his mind with the Tauranga back down and the new information that Vodafone might kneecap them by stopping the 029 arrangement, but you would expect better quality research and communications from the CEO of a major Telco. In these days of blogging and the emotion around this issue you just can’t throw stuff out there. Don’t drive, email or write an opinion piece angry.
In contrast, Marko is sounding much more like the new Telecom CEO with their follow up: clean split is better for country. They are listening to the industry and being very conciliatory. Still seems strange, but good.
I’m quickly becoming a fan of Marko. He is impressive and his understated style is gradually being unlocked with a clever comms strategy. It’s good to see leadership and logic from Telecom - they are our national provider.
Tom Pullar-Strecker has the 3rd article in this mornings paper and is also on issue.
…Telecom has managed to put investment squarely on the regulatory agenda
He concludes with
…it would be all to easy to create a Netco that, after the initial spurt, had less incentive to innovate or invest in the network than Telecom did a year ago …
I’m excited that the right things are now being discussed. I’m not saying that my model is necessarily the right one but it should be considered. I still argue that it is the most obvious and logical solution.
Again the pressure swings back to Government (and the conspicuously silent Opposition). The industry has begun discussion, the issues are on the table. A workshop is required to nail this important decision for all New Zealanders.
Here are some suggested actions
- Someone from Government needs a clear mandate to move the debate forward towards a solution
- There needs to be a structured process where the issue can be worked on collaboratively. An inital day long forum would suffice as step one
- There needs to be a study to quantify the public good of Broadband. This is a key quantification that will guide decision making
- A number of alternatives need to be put forward and evaluated
While it is great the discussion is happening. Right now we have complete uncertainty. This stops investment. Action is required.
I love what Tesla are doing with their electric car and their communications strategy.
Turns out that reality has set in on their updated prototypes and they have had to add 200lbs of weight which brings the driving range estimates down from the promised 250 miles to (a still excellent) just over 200 mile range.
They front foot the issue with this blog entry: Range Reality
You can tell that they are really passionate and I’m sure their market will forgive them by being up front and communicating the bad with the good.
Been a busy week but finally got time to say congratulations to Mark Thomas and the Right Hemisphere team for landing another marquee investor.
Right Hemisphere receives SAP injection (Ironic given that silly article of last week.)
Hows this for a list ….
“With SAP Ventures joining the ranks of our other investors — Sequoia Capital, Sutter Hill Ventures, and NVIDIA — and our strategic partners — Adobe Systems and Microsoft Corporation — there’s no denying that we have struck a powerful nerve in this industry,”
It’s fantastic that Right Hemisphere are linking in and building relationships with Tier One global companies.
Several New Zealand companies have spent time with the investors around Right Hemisphere and building relationships. So the wider industry is directly benefiting from their activity.
Well done guys.
Bite sized (5 mins) glimpse into Google strategy.
Video: Google’s Schmidt talks DoubleClick deal
Four strategic initiatives in their business
- Supercomputer
- End user access and use of information
- Advertising
- Google internal processes
This UK document circulating today shows that New Zealand is not unique in desiring competitive infrastructure.
Prospects for next generation broadband
This quote is topical:
While the public value of next generation broadband for society and the economy as a whole is potentially high, the large scale of investment combined with a significant number of uncertainties surrounding the prospects for recouping that investment, mean that the potential private value available to investors is comparatively weak.
The recommendations make sense (especially the first one)
- Define the public value of broadband networks
- Monitor demand for bandwidth
- Set a benchmark target for 2012
- Explore alternative commercial models to support network investment
- Develop a regulatory framework for next generation broadband
- Explore options for access to passive infrastructure
- Identify models for efficient public sector intervention
- Remove non-sector specific regulatory barriers
- Review universal service/universal access
I think with Telecom’s statement of last Friday the ball has bounced towards the Government. With the PM and DavidC overseas we can expect a few days grace but there is a lot of uncertainty in the market right now.
The clock is ticking.
Update: I think Ernie nails it:Â http://www.stuff.co.nz/4030379a1865.html
TimJ just flicked me a link to this advert for Joost.
“Check out the joost advert, powerful advertising here… http://www.joost.com/whatsjoost.html (top screen movie)”
I’ve already watched all the 5th Gear episodes. I’m not a huge fan of watching TV on my laptop, but when the iTV arrives next month we’ll see if that changes. Joost is reported to work on AppleTV.
Interesting comment on that link …
Well the whole concept behind Joost is to provide a framework to advertisers with a more accurate read of the demographics and do a better job of target advertising.
I wonder if the local TV bizdev folks are putting their Joost (and other internet TV provider) deals together? TradeMe advertising was the big winner from the Xtra/MSN split. TV3 is reported to be eating TVNZ’s advertising lunch as the eyeballs switch. Sounds to me that there may be another significant planetary re-alignment for traditional broadcast advertising.
I think a lot of people might have fallen off their chairs today on Telecom’s announcement.
TELECOM TO TABLE PROPOSAL TO ACHIEVE REGULATORY OBJECTIVES
Telecom’s proposal includes a structurally separated access network company that would have the ability to earn a commercial rate of return
And in a paper to MED Telecom says …
The Netco does not need to be owned by Telecom. It could be sold outright or could be folded into a partnership with industry participants and/or the Government.
Why are they doing this?
Because it is completely logical.
- The model that MED is suggesting is very expensive for Telecom. They have modelled it internally and are very aware of the costs.
- The model is resource intensive. Telecom, like all New Zealand tech companies, cannot attract enough good resources. This really is a major issue.
- The way the model is evolving is becoming the worst of all worlds for Telecom and possibly the industry.
- Telecom are realizing that there is not a sufficient business case for them to provide the network. New Zealand is a long, under populated country.
- They have other big investments to do as well. Perhaps another cellular network.
What has been missing from the debate to date is the investment equation. That is what is now driving the current situation. It is a huge message that Telecom is sending by suggestion voluntary separation and divestment.
This announcement allows Telecom to start having the discussion with Government and the industry. This is a huge olive branch to get the dialog going. What is needed now is that discussion between Telecom, the Industry, the Government and the Opposition. This can be a tide that raises all boats, but certainty is required quickly.
I believe splitting out the network, funding the massive Capex required with long term infrastructure bonds, is the only way that New Zealand can the exploit the opportunity for transformational economic and social change the Internet is providing.
I applaud Telecom. This new style of management and leadership is exciting.
Bit of cool news from Wellington company SilverStripe (who provide an Open Source Content Management System) who are working closely with Google.
Google is funding another 10 students through the Summer of Code program to work on SilverStripe projects.
Great to see a local company playing with one of big global leaders. Well done guys.
Video from ASB Business this morning where I discuss the ‘People’s Fibre’.
http://tvnz.co.nz/view/page/414443?video_id=105955
Opinon article published in The Independent this week:
Connecting New Zealand to the world through broadband is vital to the future of our economy.
That is what drove me to write a paper recently, proposing the idea that state ownership of our national broadband infrastructure remains our best option.
The incident that converted me to becoming what some might term a “digital socialistâ€, was an experience at my last business, AfterMail, an email software company dependent on global communication links.
We subscribed to a US-based voice over Internet protocol (VOIP) telephony service, which for $US35 per handset, gave us unlimited calling through the US. But even better it meant we could choose US phone numbers. This simple service, used extensively overseas, allowed us to appear close to our customers and sales prospects. VOIP is a fairly low bandwidth application and even this was unusable from here.
We were forced to revert back to standard New Zealand phone numbers.
If we could not have reliable VOIP then what chance do we have for higher bandwidth interaction such as desktop video conferencing or multi-point global meetings? In this simple example, it showed me that New Zealand’s lack of decent connectivity was having detrimental effect on our business.
My view is that the model of a company responsibly to shareholders, but also responsible for the country’s national infrastructure, is fundamentally flawed. Only regulation can pull the disparate needs of the company and country into line. And that’s broken.
It is easy to confuse the call for a State Owned Enterprise to manage our national infrastructure as Telecom bashing, but it’s not. Telecom has probably acted as it should.
But more importantly, I believe Telecom is well placed to benefit from a state managed broadband infrastructure model.
From an investment point of view an infrastructure company is completely different from a retail marketing company. In many countries, infrastructure and retail have been successfully separated, leading to a significant jump in value in the retail company. The owners of the retail company have been big winners as well.
Internet infrastructure is different from drains and roads because it is a direct user pays model. The Internet is already a toll road and no business is expecting free access.
But changing New Zealand’s Internet from a scarce resource to an abundant resource and driving pricing to a cost plus model would significantly change the market forces, and promote investment in the services and content that runs through it.
Government backed infrastructure investments are attractive to a large segment of the investment community.
So this is not a call for significant Government funding. Rather, it’s a call for the Government to act as a coordinator to raise the funding required for this transformational change and to quickly implement it.
Setting a clear charter for the SOE and appointing a strong governance structure should allow this model to deliver.
As part of the Internet generation I take for granted the understanding of how this model could provide transformational change to vastly improve New Zealand. But this needs clear articulation. Broadband is infrastructure that benefits all business and all parts of society.
With big connections between the world and us, New Zealand businesses can communicate better with overseas customers and staff. We can participate better in global supply chains.
It is not only the information and communications technology (ICT) sector that benefits. All businesses are better positioned to export.
Within ICT there are numerous opportunities – specialised consulting, developing compelling digital content for internet-based television, outsourced development work, remote management of desktop infrastructure, to name a few.
In the home we could back up the priceless movies we make of our children. We do more away from the office and reduce the lost productivity of peak hour travel.
Real estate agents can do full screen video tours of property, school children can collaborate with kids in other countries, social workers can meet weekly with global experts, doctors can watch complex operations in real time, movie work can be sent to New Zealand for special effects and rendering.
A website link on a bottle of Syrah allows the wine lover to meet their wine maker and see where the grapes are grown. We can create the digital content to tell compelling stories and build an emotional relationship with the winery, perhaps resulting in additional tourism.
Talented workers from all over the world could base themselves here, able to connect to their employers where ever they are and maintain their networks while enjoying New Zealand lifestyle.
In a bandwidth abundant culture opportunities will open up and innovation will occur that we would never have dreamed of. Could the next YouTube come out of New Zealand?
As the most distant economy in the world, securing our digital trade routes is more important to us than another country. Our small size is our competitive advantage. We can get coordinated.
Through Standards New Zealand, we are one of the few countries objecting to a proposal to fast-track approval of Microsoft’s controversial Open XML file format.
NZ objects to Microsoft Open XML standard fast-track proposal
I haven’t really been across this but stumbled onto a (pro MS) summary from
Steve Clayton.
A comment lead me to the other side of the debate here. http://en.wikipedia.org/wiki/Office_Open_XML#Criticism
My interpretation is that Microsoft took a fantastic (and surprising at the time) step of opening up the proprietary Office binary formats. We asked for this for many, many years. The final motivation I’m sure is the subject of lots of debate but opening them up is good. Very good.
This was a massive amount of work, and I’m sure not a clean sheet redesign (that it’s 6000 pages long is a good indicator). It’s probably therefore compromised (as mentioned in the wikipedia article) but the fact we can generate Office documents from a variety of formats is a very valuable thing.
I think the next step is that Microsoft thought, ‘well let’s get this ratified this as an official standard’. Then the fun began.
The fact is Office is a standard. The binary’s were a standard and Open XML format is a standard - if only because Office is so widely used.
Already tens of thousands of developers are building products over the Open XML Format. Here is a demo of pushing data to Excel from Xero. Another scenario might be generating 1000’s of invoices from a server and the print them using Word. Been wanting to do that for years.
Trying to fit all of the history of Word and Excel into an existing standard is an impossible task. Having two standards is a bit of extra work for those that have to publish into them, but that is not necessarily a big deal.
Of far more importance is that fact that Office files, the de-facto standard, are now open and useable. That is a good thing.
What do you think?
blog